The government has ordered its various ministries and departments to cut back on spending by 5 percent, underscoring a growing response to economic uncertainties arising out of a possible U.S.-led war with Iraq.
On a $1 billion budget, this cutback would represent a reduction in expenditure of $50 million.
The order to reduce spending came in the form of a circular as a dark cloud of uncertainty continues to hover over the economic climate. It is the latest step the government has taken to better position the country to deal with the blow of war and minimize the fallout.
“If there is a war, there is likely to be, at least in the short term, increases in energy prices and this would affect, I think, tourist arrivals, and it could be a compression of the entire economy and consequently adjustments would have to be made,” Minister of State for Finance James Smith said in an interview with the Bahama Journal last night.
“We thought that in anticipation of it, we would start making those adjustments right now in a very sort of controlled way,” he said.
An earlier step announced by the government was to tighten revenue collection. Officials had reported that revenue collection was behind by about $60 million up to the end of October. But between November and January, collections were up.
Minister Smith said that revenue collections have since “flattened out.”
He said that while continuing to improve the revenue collection system, the government is curtailing expenditure as it notes a softening in the economy.
With stronger signs pointing to a war in the Middle East, the government is concerned that potential investors may be holding off while more tourists put off travel plans.
“We are aware that many decisions are being deferred – investment decisions and even travel decisions pending the outcome of the Mid East crisis,” he said. “And so as a precautionary measure, we thought we’d better attack it from two ends – the expenditure side by trying to have expenditure curtailed, while at the same time we have increased the revenue effort with more vigilance…To try and contain a growing deficit, we thought we’d look at it from both ends.”
Minister Smith said he expects no interruption in service from government ministries and departments as they tighten their purse strings and reduce wastage.
He said there is a lot of wastage in government offices and it need not be hard to cut back.
“Cutting back ought not be a big thing for them if they really work at it,” Minister Smith said. “[There is] a lot of wastage in government expenditure and a lot can be done – little things, medium things and big things – to curtail expenditure.”
He said the government expects offices to practice better conservation of energy.
“You look at any government building and lights are burning all night, day and night, air conditioning,” he said.
Minister Smith said public servant are also expected to cut back on their use of supplies.
He added that they are also expected to “be a bit more aggressive in getting bids on contracts. There are many ways in which I think one can make savings and not undermine service.”
The Ministry of Finance, meanwhile, is holding back on approval of releases applied for by the various ministries. Without these releases, none of the ministries or departments could pay their bills.
It’s one way of practicing control from the centre, he said.
“Until we know what is going to happen in the Mid East, I think we need to keep an eye closely on what’s happening there because it is likely to have some impact on our lives,” Minister Smith said. “So I think one way of arming ourselves is to be armed with information then we’d be in a position to respond.”
Minister Smith noted that even in good economic times, cautious spending and public sector-wide conservation should continue to be practiced.
“I don’t think that anyone should, whether it’s a time of war or not, be sort of fast and loose with [the taxpayers’ money], ” he said. “So we are urging them to be a bit more careful in the expenditure of government funds.”
By Candia Dames, The Bahama Journal
