Budget address debates continue |23 February 2021
The National Assembly yesterday resumed with the budget address debates, with members from both political parties – Linyon Demokratik Seselwa (LDS) and United Seychelles (US) – setting out their perspective on the R11 billion plus Appropriation Bill, 2021 presented by Minister for Finance, Economic Planning & Trade, Naadir Hassan, last Tuesday.
Hon. Sylvanne Lemiel, US elect for Anse Royale, kicked off the sitting, expressing her view that the budget is based largely on the presumption that the national immunisation campaign against Covid-19 will be successful by all means, that 70,000 citizens will be vaccinated and have attained herd immunity by April, so as to reopen the economy to visitors. The presumptions, she said, are not well founded, as it is not probable that domestic activities or tourism arrivals will recover soon, as Europe, Seychelles’ key tourism market, still faces lockdowns for the foreseeable future, and lags behind in terms of vaccination.
“If this is the case, the R5.7 billion in revenue, which includes R2.1 billion Value Added Tax (VAT), R1.28 billion excise tax, R1.1 billion business tax, R254 million custom duty and R929 million income tax, which is projected in the budget will not materialise, and it risks being much lower, which will lead to a primary deficit, and generally much higher.
“In addition, the projected R8.26 billion in revenue includes R1.1 billion as donation, which is linked to balance of payments. The minister expects that this sum will be paid into the Consolidated Fund as budgetary support from friendly countries, including the United Arab Emirates (UAE), India and others. This is uncertain, which as a result gives us a budget based on maybe,” Hon. Lemiel said, acknowledging the economic implications, specifically, R1 billion and more of shortfalls in revenue.
Hon. Lemiel continued to note that the budget is more or less the same as that of 2020 despite the present administration emphasising on cutting costs, and a leaner government structure, going further to detail and enquire of the minister’s back-up plan, adding that it is irresponsible to present a budget and projections that are not realistic and feasible.
“How will the government finance over R11.2 billion if it doesn’t collect the same in revenue? By borrowing? The problem with this is that in 2020 government has already borrowed R3.8 billion. If we borrow a further R3.4 million in 2021, it will add up to a total of R7.2 billion in borrowed money over a two-year period. Our banking system does not have the capacity to borrow such an amount, when our economy is on its knees, and the results can be catastrophic,” she added.
Furthermore, Hon. Lemiel proposed that it is irresponsible for government to not have suspended of halted capital projects for the year, to a sum of R1.9 billion, which is expected to be financed by internal and external loans, on account of significantly increased debts and the slowdown in government revenue.
Hon. Andy Labonte, Linyon Demokratik Seselwa (LDS) member elect for English River, on his part, noted that the budget will position Seychelles for a turnaround. While he acknowledged that the allocation is bigger than that of 2020 and prior years, he explained that this is due to the depreciation in Seychelles Rupees, of at least 30 percent over recent months, and the contraction of the local economy by 13.5 percent.
“Minister Hassan has said that government’s priorities is to firstly make the government budget more sustainable by reducing the fiscal deficit, and gradually transitioning to a budget that makes a surplus, to help pay off government’s debt as a sustainable rate. […]. I agree with the minister when he says that citizens should within this coming year review our expenses so as to ensure that we are more resilient towards the challenges we are currently facing,” Hon. Labonte stated.
Similarly, Hon. John Hoareau, MNA for Beau Vallon, echoed similar sentiments as Hon. Labonte, in pointing out that the R11 billion budget is a starting block on which to start rebuilding and to rebuild better. According to him, the Appropriation Bill clearly outlines solutions to problems the country is currently faced with, which necessitates cost-cutting, restructuring of social programmes, as well as incentives to give some breathing space to the private sector, so as to guarantee business expansion and the creation of job opportunities, especially at a time when government revenues are down by at least a third as compared to last year.
Hon. Conrad Gabriel, US member for Pointe Larue, in addition to comments similar to those made by Hon. Lemiel, noted that the budget fails to take into account the important considerations pertaining to the education system, especially as it is likely that the economy will suffer from a “brain drain” in the foreseeable future as state-funded scholarships have been suspended. Still on the topic, he proposed that the budget should have reflected certain allocations towards virtual education, and the creation of virtual platforms to disseminate educational materials, as the case is at Beau Vallon secondary school, who developed their own smart phone application to disseminate resources to students during school closure.
Hon. Chantal Ghislain and Hon. Egbert Aglae’s interventions were fairly similar to those of other members on their side of the table, with Hon. Ghislain saying that the working class are disfavoured with the tightening of social and welfare programmes, and the phasing out of schemes such as the Unemployment Relief Scheme (URS) and Financial Assistance for Job Retention (FA4JR), while large businesses are to benefit from a 5 percent tax reduction, from 30 percent to 25 percent.
Contrarily, LDS MNAs Hon. Doyas Porice and Hon. Sathyanarayan Naidu both strongly defended the budget, asserting that the Appropriation Bill demonstrates how the LDS government has prioritised citizens in drafting the budget and drawing comparisons to previous budgets and allocations under the previous administration, each voicing their own opinions as to initiatives announced by Minister Hassan, towards revitalising the economy.
Counterpart Hon. Terrence Mondon, directly elected LDS MNA representing Takamaka, during his response justified as necessary certain decisions over which there has been public outcry such as the phasing out of certain programmes, as Seychelles, like many other countries around the world, is grappling with the destructive effects of the Covid-19 pandemic.
“The minister has presented to us, a budget with a total deficit of 15.3 percent GDP for this year, which represents a sum of R3,417,000,000 that the government needs to borrow to cover the country’s expenses. This means that our debt to GDP will go from 99.4 percent for 2020, to 108.4 percent for 2021, which is equivalent to a sum of R18, 85,000,000. These economic indicators are indicative of the gravity of the economic and financial situation that our country is facing. When debt to GDP surpasses 100 percent, it means we have to take some serious decisions to fix our economy for the year, and I appreciate the government is attacking the situation in an honest and direct manner,” Hon. Mondon stated.
LDS MNAs Desheila Bastienne, member for Perseverance and Hon. Clive Roucou also presented to the assembly their responses, in support of the budget.
Hon. Naddy Zialor concluded yesterday’s sitting, also taking the opportunity to note the differences between the budget appropriations under the previous administration, and the present administration who assumed power merely a few months ago. In concluding, he spoke about the opportunities that should be put at the disposal of the youths and other subgroups within society, calling on all citizens to rally and take heed of President Wavel Ramkalawan’s plea for citizens to work together and remain focused on the target to rebuild the country and domestic economy.
The National Assembly resumes this morning, whereby it will continue with members’ responses to the budget.