Normally, the spotlight on the budget would take place after the budget speech had been read. But these are not normal times. The COVID-19 countermeasures have complicated an already difficult situation. Earlier this year the Finance Minister indicated that the revenue shortfall resulting from the decline in economic activity arising from the containment measures had been made worse by the further decline in energy revenues.
Difficult times require difficult decisions. The situation is not new. The revenue shortfall started in 2014 with a sharp decline in energy prices and it has continued unabated. Briefly, there was the possibility that gas production would recover and probably rescue the situation. Mr Imbert went so far as to announce, not once but twice, in successive budget speeches, that a turnaround was in sight. Alas and alack, the good news turned out to be a false dawn. Instead of a turnaround, energy prices continued to fall, petrochemical plants closed and then came COVID-19, leading to further closures.
It is an unfortunate turn of events that necessitates a change of direction. As politicians often say, a crisis should never be wasted as opportunities come dressed in working clothes. Since 2015, Minister Imbert has addressed the gas subsidy but reneged on his promise to adjust the pricing regime to reflect changes in international prices at the pump. Instead, he left the pricing mechanism unadjusted, quietly converting the subsidy into a source of revenue. As he said famously “they ain’t riot yet.”
At best, the minister has in the past betrayed a lack of emotional intelligence. His normal arrogant approach, devoid of empathy, will not evoke the cooperation required of a willing and understanding public. The public has understood the difficulties faced by the administration in satisfying the competing demands presented by different interests. This is not a simple task. That is undoubtedly the reason the Prime Minister has entrusted this assignment to the longest-serving and most experienced minister in his Cabinet.
Minister Imbert must now take responsibility for what needs to be done. Tomorrow is an exercise in humility and open communication, two qualities which he possesses in minute quantities. Tomorrow he will tell the country that the revenue shortfall cannot be staunched by a business-as-usual approach. He has already bitten the bullet and suggested that he may implement the Property Tax Act. Necessity has obviously gotten the better of his instinct for political survival. But implementing the property tax at this time is likely to send the wrong message as property tax does not, cannot and was never intended to fill the revenue shortfall.
It is unlikely that Mr Imbert will telegraph the fiscal measures to be adopted to limit the deficit. Many people appreciate that he will need to adjust the VAT rate and income tax. More important are the signals that he will send to the business sector, the unions, and the public, in general, to demonstrate that the nation requires their willing cooperation and support. If Mr Imbert succeeds in engaging public buy-in, he would have completed the most important part of his budget-day exercise.