CATEGORY:NATIONAL BUDGET
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(Excerpt from the Budget speech delivered by Hon. Anthony Boatswain, Grenada's Finance Minister)



*(MEDIUM TERM PROSPECTS)*

With reconstruction well underway the economy is projected to record positive growth of 5.0 per cent in 2007 and 4.0 per cent in 2008, i.e. averaging 4 per cent over the next two years. All the major productive and services sectors of the economy are to contribute to this growth, as the economy returns to pre-Ivan performance levels. Government's fiscal position is expected to be strengthened and sustained with the deficit on the primary balance after grants in 2006 being converted to a surplus of about 2.5 per cent of GDP by 2008. At the same time the level of capital expenditure should return to the accepted benchmark of 10 per cent of GDP.

Inflation is to remain stable averaging 2.0 per cent over the next two years. The deficit on the balance of trade is to narrow with slight growth in export earnings and a reduction in imports. At the same time, huge receipts from travel would account for a smaller current account deficit by 2008. In addition, the expected growth in foreign direct investment in the tourism industry would lead to an overall balance of payments surplus by 2008.


*(ESTIMATES OF REVENUE AND EXPENDITURE FOR 2007)*


a) National Consultation

Mr. Speaker, the preparation and presentation of this 2007 Budget was preceded by a series of island-wide Budget Consultations involving our farmers, teachers, financial institutions, community groups, and the Parliamentary Opposition.

These Consultations are in keeping with Government's policy of Constructive Engagement of its Social Partners on issues of national importance.

I am pleased to report that the Consultations were a tremendous success, not only in terms of participation but also in terms of the quality of recommendations and suggestions that were presented. Many of these recommendations have been incorporated in this Budget presentation.

I therefore wish to place on record, the appreciation of the Ministry of Finance, of all who contributed to making the exercise a success.

Mr. Speaker the 2007 Estimate of Expenditure provides for a total expenditure (including amortization) of EC$632.5m distributed as follows:

Current Expenditure: $350.7m
Capital Expenditure: $225.5m
Amortization: $56.3m

Mr. Speaker, this outlay for 2007 is only 3.4 per cent higher than the EC$611.7m budgeted for last year, as the economy moves from a reconstruction stage to one of stabilization and consolidation.

For the fiscal year 2007, current revenue is budgeted at EC$441.1m, approximately 9.9 per cent higher than the budgeted figure of 2006. This growth is largely due to measures contemplated in the Inland Revenue and Customs Departments to improve administration of tax collection. Mr. Speaker, I will elaborate in these measures later in my presentation.

On the other hand, current expenditure is budgeted at EC$350.7m, approximately 6.9 per cent above the budgeted figure of the previous year. The rise in current expenditure is largely explained by higher anticipated outlays on wages and salaries, interest payments and current transfers. Notwithstanding these increases, the Ministry of Finance will continue its effort to exercise control on discretionary recurrent expenditure on goods and services.

It therefore means that in 2007 Government has budgeted for a current account surplus of EC$90.5m or 5.9 per cent of GDP, which is above the established benchmark of 5.0 per cent of GDP.

This surplus on Government's current operations will be used primarily to finance the country's capital programme of EC$225.5m or 14.8 per cent of GDP. It must be stated that now that the country is on its recovery path, Government can no longer continue to depend fully on donor support to finance the country's development. We have to continue to demonstrate to the international community our own efforts in rebuilding our economy as the basis for receiving their further support. Hence the importance of the current account surplus to be dedicated to financing the capital programmes.

In addition, the capital budget will be financed by capital grants from friendly Governments and institutions amounting to EC$92.5m, leaving an overall deficit after grants of EC$39.8m (or 2.6 per cent of GDP) which is just under the established benchmark of 3 per cent of GDP, and will be financed from external and domestic loans.