On the Consequences of Fiscal Profligacy: Drama at the National Assembly
What happened in the chambers of our National Assembly last week was worthy of the box office. Our finance Minister appeared on set for an extraordinary session of the Assembly. The motion involved the reduction of excise taxes on alcoholic beverages after he made the unprecedented fiscal blunder of raising these taxes by 750 percent. The other matter at hand was the ratification of a loan agreement to the tune of 3 billion Dalasis earmarked for projects related to the government’s bid to host the OIC Summit for 2022.
The Finance Minister, who will surely be remembered for his shenanigans in the National Assembly during the debate on the Supplementary Appropriation Bill of 2018, might have pulled off a sequel of getting away with stuff but he lost the plot to some experienced members of the legislative chamber who upstaged him and stole the show.
The Oscar for the best performance in the drama went to Honourable Sidia Jatta of Wulli. Honourable Jatta earned the award for some noble, dignified reasons. One of the reasons was his impassioned plea to the government to get its priorities right by treating real life issues of access to clean drinking water and the plight of victims of natural disasters, as opposed to the cosmetic projects associated with the OIC. Sidia’s submission on the above issue was highly dramatic and rightly so.
Unable to match this great caliber of clear-headedness, the Finance Minister bored the assembly (and by extension the entire nation) with lame comedy. Of all the reasons he could have advanced for his hiking of excise taxes on alcoholic beverages, our finance minister gave us the risible explanation that the move was meant to curb the rise of alcohol consumption by young people.
I was shocked and disappointed to have heard such a deceptive and amateur explanation advanced by someone who is supposed to be one of the most seasoned public finance experts in our country. It is not permissible in our culture to say that what an elderly person said is not true, but, to borrow from our high school literature classic “Gulliver’s Travels,” we can comfortably and euphemistically say that our Finance Minister “has said the thing which is not!”
The minister got the run for his money from the Honourable National Assembly member from Serekunda. The immutable Halifa Sallah challenged the minister’s reasoning, asking him why didn’t government simply ban the production of alcohol if the state believed that alcohol consumption is rising with deleterious effects on the youth.
Misplaced priorities and spurious, if not incredulous announcements seem to be reigning supreme at our Finance Ministry. Having brought us an 11th-hour supplementary appropriation bill last year, the ministry went further to propose and implement a most disingenuous 50 percent increase in salaries of civil servants.
When these fiscal and financial time bombs were being set, I weighed in with op-eds to raise alarms. My first essay, On the Proposed Salary Increment centered on the most crucial question: the where. Where would the Finance Minister find the resources needed to fund his planned quantum jump in salaries? Since no new sources of funds have been identified to pay for this immense spending, the obvious answer is that the Finance Minister banked his hopes on robbing Peter to pay Paul. He would simply take out more loans and incur more debts for the government to finance the salary increase. And tax hikes, too. This is bad economics.
My second op-ed, On The Audacity of Fiscal Profligacy, decried the way and manner in which the supplementary appropriation bill fiasco was handled by the finance ministry.
And when the matter of the most irresponsible and counterintuitive 750 percent tax hike came to pass with a most destabilising effect on our main national brewery, I had to come back with another op-ed, On the Consequences of Fiscal Profligacy.
A debate ensued on this matter that actually culminated in the presentation of a new proposal to the National Assembly by our finance minister. What bothers me is the Finance Minister’s audacity to come to the National Assembly with such a daring false premise of pronouncing that the initial hike in the tax on alcoholic beverages was motivated by the need to curb alcohol consumption? Does this man think that Gambians are fools or that we are all sleeping? Is it not down right disrespectful for him to advance such a laughable reason for what was nothing but a reckless tax hike based on nothing but the desire to fill the gaps created by his voracious fiscal binge in the 2019 budget?
And lest I forget, would the National Assembly ask the Finance Minister where is he going to get the extra resources that would be needed to compensate for the loss of revenue that would be occasioned by the revision of the tax rate approved during this particular extraordinary session of the Assembly.
Fasten Your Seatbelts
Our fiscal spacecraft is flying on some turbulent path and Gambians must brace up for a bumpy ride in our macroeconomic trajectory for the rest of this year and beyond. Unless the authorities cook up the inflation numbers (and I believe they are capable of doing that given the daring overtures of our finance minister), we are sure to see a steady rise in inflation in the weeks and months to come. The potential cover-up should not come as a surprise since a supposedly autonomous institution like the Central Bank is bold enough to mask our fiscal numbers with intent to hoodwink the unsuspecting masses.
Why in the world would the Central Bank omit fiscal numbers from the press releases they issue after their Monetary Policy Committee Meetings? Fine, they backtracked on that and they have now included those numbers after an outcry. But then why are they publishing the budget balance “including grants” rather than the more transparent and more useful aggregate of budget deficit “excluding grants” which is a more useful indicator in the matter of fiscal sustainability.
If word on the street that the IMF and allied partners might withhold budget support this year turns out to the true, then my prediction of higher inflation would be outpaced by the actual outrun. The money market that has been unfairly and unreasonably ‘backstabbed’ by the monetary authorities in crushing the policy rate may go into turbulence as well if the government does the expected — shores up resources to finance the anticipated attendant fiscal gap.
Will our economy be able to weather the storm that is gathering this summer and beyond?
Under these circumstances, the least we deserve from our fiscal authorities is to tell us the truth so that together we can work out solutions for a problem THEY created but the effects of which are going to strike us all.
Former Secretary General, National Budget Director, research economist.