After reviewing the budget I must say I was pleasantly surprised. Like most people I expected a bitter pill to swallow that could rival the taste of any cocktail Campari could come up with. From my initial read it seems as if the government decided that the economy was in v-fib (wife made me watch plenty Grey’s Anatomy) and needed the economic paddles to shock it back to life much like Jim Carey in the movie Cable Guy…”prepare to defibrillate! clear!”
Don’t get me wrong, this wasn’t a “massage you down with cocoa butter and make you feel good” type budget but it seems like one definitely geared toward providing the country with a “happy ending” in the long term. You can check the interwebs for a breakdown on every single item, I plan to focus on the more interesting initiatives.
I’m definitely liking the $500M increase in the allocation to agriculture and the guaranteed State-purchase of local content in agriculture. I’m not even sure why this wasn’t a thing in the past. This is how futures markets are formed, especially for products that are raw materials for other products. There’s no way we should be importing ground provision or zaboca (even though I’m not a fan).
From January 2021 there will be an increase in the personal tax threshold from $72,000 to $84,000. This directly puts money in people pockets, kinda like a stimulus cheque in the USA. The hope here is that people use their increased income to help stimulate the economy. I’m not sure how successful that would be given that consumer confidence remains low given the ongoing pandemic and the related lockdown measures. If people are like me, they will be sticking that money somewhere safe, just in case.
I’m not surprised by the removal of tax concessions on the importation of private motor vehicles. According to the “All Powerful Tax Lord”, this has resulted in a leakage of US$400 million each year. This along with restoring VAT of 12.5% on luxury imported foods is definitely designed to conserve forex and raise revenue. I’m sure the car dealers done making their bristolboard signs for the protest. I’m just upset that they consider apples a luxury good, when eating one a day keeps the doctor away, whose fee definitely is luxury ish.
Transfers and subsidies are always a huge part of the country’s expenses. If you didn’t expect the removal of the fuel subsidy then frankly you buried your head in the sand like the Emu from the Liberty Mutual commercials. However, the surprise to me was the privatization of gas stations who would now be able to set their own prices. So when world prices are low, the cost will be lower but once world prices rise, gas prices will rise as well. Demand and supply right.
How is that gonna work in terms of pricing? That’s going to affect everything from food prices to taxi fare to the price of fish at Easter (because everything affects the price of fish at Easter). Are we going to have a floating taxi fare based on some formula or relationship to gas prices? Are the gas stations going to form a cartel and regulate their own prices? Allyuh remember that whole Unipet vs Paria Telenovela where the gas stations were complaining about profit margins? Brace allyuh self.
While the Minister was playing with we hair and breathing in we ears he slip in the reviews of WASA and T&TEC and the potential for higher rates in the future. Yeah, he slide that in like a pro, I almost didn’t even feel it. Cheeky bastard!
First time homeowners even get a bligh on stamp duty as they raised the threshold from $1.5m to $2m. Apparently this will save first-time homeowners up to $28,000 in stamp duty but if they are cigarette smokers they might spend it out in the 20% increase in “cancer sticks”.
All in all I found it was a balanced budget. There were measures included to provide relief and stimulate the economy as well as measures to reduce the burden on the state and match expenditure with revenue. Of course there is plenty to like and plenty to complain about and those inclined either way will do so.
My concern is always how are we paying for the incentives and how manageable is our debt load. Debt is a crushing weight that could impact a country for generations. At around 80% debt-to-GDP, this leaves us with very little wiggle room in case “too-doo” hits the fan in the future. The deficit in 2021 is expected at $8.2 billion which is an improvement from the $16.8 billion deficit in 2020 but we need to be careful. Right now I wouldn’t be surprised if the credit rating agencies watching our bumsee from across the room looking to jam us in a corner.
As always we wait and see.