It’s that gun they’re holding to our heads that’s the problem this time. On other occasions, the financial mandarins of our government couldn’t be bothered with the principles of sound fiscal management. But the IMF says if we don’t curtail our fiscal deficit to the level we have specified in the budget, they won’t pay the next tranche of our loan programme.
There’s no use showing indignation here. We’re not being arm-twisted into doing something we don’t want. First of all, the curtailment of the deficit is what the fiscal apparatus of all responsible states strives for; on its own, without being told by outsiders to eat its vegetables. Secondly, far from being a draconian IMF dictate, the previous government had already introduced the fiscal responsibility act much before we entered into a loan program with the Fund. This “condition” is, in fact, our own.
Having established that, how do we go about doing this? For starters, there is the effort to curtail spending. But that cannot happen. The government does not, despite what anybody might say, overspend. True, our defence spending is something that could definitely be curtailed but, at this stage in our political development, that does not seem to be an actionable variable.
Receipts, the other side of the equation, is something that could be worked on. The government has relied upon foreign inflows to a great extent in order to achieve the curtailed deficit. “Putting all its eggs in one basket,” according to a report in this paper. The flaw with that, especially considering the rather fluid international political situation we have on our hands, is that we really cannot be certain of whether we will get the money or not.
The revenue side is, in fact, not only actionable but also endogenous enough a variable to control proactively without wading through the murky international climate. As a nation, we are undertaxed to begin with and the citizens cheat even on these low taxes. The population is a buffet table of missed opportunities for the taxation departments. The present team of financial managers is making all the right noises on the revenue front. It is hoped they back it with reforms and action.
