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Sunday, July 13, 2025

Fit for purpose 9: Managing for outcomes

by

Mariano Browne
280 days ago
20241006

Last week we not­ed that even if there is an over­ar­ch­ing plan like Vi­sion 2030, the an­nu­al bud­get should be the in­stru­ment through which the Cab­i­net ex­er­cis­es its man­date and through Par­lia­ment.

S75 of the Con­sti­tu­tion re­quires the Cab­i­net to ex­er­cise its “gen­er­al di­rec­tion and con­trol.” In prac­tice, this is ex­er­cised through its an­nu­al bud­get. Hence the bud­get speech is a gen­er­al state­ment of in­tent and pre­scrip­tion.

What steps are re­quired to achieve Vi­sion 2030? Is the coun­try pro­gress­ing? What are the weak­ness­es that must be ad­dressed? What prob­lems will it help solve? Or will it main­tain the sta­tus quo?

Long-term is­sues are about po­si­tion­ing the coun­try to com­pete and sur­vive in a dy­nam­ic and dis­rup­tive world. This means en­sur­ing that the na­tion’s cit­i­zens, its true nat­ur­al re­source, are ad­e­quate­ly trained to sur­vive in the glob­al world. Cit­i­zens must be re­spon­si­ble and do their part too.

How­ev­er, the State must en­sure the ed­u­ca­tion and health­care sys­tems are ad­e­quate. The State must al­so ad­dress the de­mo­graph­ic is­sues caused by a rapid­ly age­ing pop­u­la­tion and the ac­com­pa­ny­ing so­cial se­cu­ri­ty and health chal­lenges.

The bread-and-but­ter task is to keep the econ­o­my mov­ing in the right di­rec­tion. This re­quires a re­al part­ner­ship be­tween the pri­vate and pub­lic sec­tors to en­sure that it is easy to do busi­ness and that peo­ple have the con­fi­dence to in­vest. Safe­ty and se­cu­ri­ty, an ef­fec­tive jus­tice sys­tem, and the de­vel­op­ment of an ef­fi­cient pub­lic sec­tor that fa­cil­i­tates the process are the bedrock for pub­lic con­fi­dence.

There­fore, the key con­cern is not how much mon­ey will be spent, but spent on what and what change the ex­pen­di­ture will cause. What will change for the bet­ter? This re­quires both qual­i­ta­tive and quan­ti­ta­tive analy­sis.

A re­view of the out­comes and re­sults of the pre­vi­ous year’s ex­pen­di­ture de­ci­sions and the cor­rec­tions made to keep pub­lic pol­i­cy on track to its long-term goals. For ex­am­ple, in the 2025 bud­get speech, the Fi­nance Min­is­ter re­count­ed many in­fra­struc­tur­al projects by con­stituen­cy. The “soft­er” in­fra­struc­tur­al projects like up­grad­ing the CSO and the Na­tion­al Sta­tis­tics In­sti­tute were ig­nored.

How can the min­is­ter sup­port the vul­ner­a­ble if he does not know how many are vul­ner­a­ble or who they are? He could not know be­cause the CSO op­er­a­tions are still chal­lenged, al­though this was a pol­i­cy im­per­a­tive iden­ti­fied in the first bud­get in 2015. How do we know if the grants are ap­pro­pri­ate since the last bud­getary sur­vey was com­plet­ed in 2011? Are the var­i­ous gov­ern­ment grants ad­e­quate­ly de­signed and tar­get­ed? What is the pover­ty line in­come and the num­ber of peo­ple who are in this cat­e­go­ry? In this con­text, what does rais­ing the min­i­mum wage of gov­ern­ment em­ploy­ees to $22.50 an hour mean?

The min­is­ter point­ed to pos­i­tive de­vel­op­ment in the non-en­er­gy sec­tor as ev­i­denced by growth in the man­u­fac­tur­ing sec­tor. He not­ed that the econ­o­my had re­turned to growth and that the coun­try was pro­gress­ing notwith­stand­ing the chal­lenge cre­at­ed by falling nat­ur­al gas pro­duc­tion and weak en­er­gy prices and con­clud­ed that this was due to pru­dent man­age­ment of the econ­o­my and the coun­try’s fi­nances.

The ev­i­dence of a pru­dent­ly man­aged econ­o­my, the ev­i­dence of progress, is the size of the na­tion­al debt and its for­eign re­serves. When a coun­try’s bud­get po­si­tion is con­tin­u­ous­ly neg­a­tive (deficit), its na­tion­al debt will rise and be fi­nanced by bor­row­ing or by de­plet­ing re­serves like the HSF.

Ex­cept for a small sur­plus in 2022, GORTT deficits have been con­tin­u­ous for the last 16 years. There­fore, the na­tion­al debt as a per­cent­age of GDP has been ris­ing con­tin­u­ous­ly.

(Fig­ure 1) Deficits are ex­pan­sion­ary and stim­u­late growth, as did high­er en­er­gy prices in 2021-23. The pos­i­tive eco­nom­ic growth iden­ti­fied by the fi­nance min­is­ter should trans­late in­to in­creas­ing net of­fi­cial re­serves.

In­stead, Fig­ure 2 shows that the net of­fi­cial for­eign ex­change re­serves are in con­tin­u­ous de­cline. Shouldn’t eco­nom­ic growth al­so lead to a health­i­er for­eign ex­change po­si­tion? The two key is­sues are time and lead­er­ship. Do we have enough time to re­verse the de­cline, and who will pro­vide the lead­er­ship? Which comes first, the po­lit­i­cal in­ter­est or the na­tion­al in­ter­est?

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al School of Busi­ness.


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