Random thoughts on 2010 government budget

I’m still not very much convinced that we’ve formed all these independent institutions with their fat salaries, at the right time. I know, we need political reforms, we need to protect human rights, we need to maintain police integrity, all this and that. But first of all, we should be able to afford all this. Looking at the 2010 budget, we are spending about Rf 12 million on human rights commission, Rf 14 million on anti-corruption commission, and a combined Rf 10 million on police integrity commission and the employment tribunal. A grand total of Rf 463 million for the budget of all the independent institutions. On the other hand, a mere Rf 14 million for teacher training faculty, Rf10 million for training nurses, Rf 5 million for faculty of tourism.

From an economic point of view, the latter expenses will definitely directly contribute to the productivity of the labor force, and GDP of the country. What we spend on teacher training, nurse training, and even training for tourism personnel are future investments with high economic returns. But, Rf 12 million for human rights commission?? I’d like someone to explain to me, or justify why we should spend that much money on that institution. And Rf 14 million on anti-corruption? I’d definitely would like to conduct a study to find out how corruption is decreasing in our country, and how much corruption money is ‘saved’ as a result of the efforts of this commission. Then it’d be easier for us to justify spending that money.

I think we need an effective system that can measure, or determine the productivity or the effectiveness of all these independent institutions. At the moment, it seems that most of these institutions are just a means of providing employment, with ‘fat’ salaries and allowances. The end result is that we end up with a wage bill of almost Rf 4 billion for 2010.

Recurrent Expenditure

Even the 2010 budget has an extremely high percentage of recurrent expenditure (70 percent), just like the past years. Tragedy is, out of the Rf 11.9 billion budget proposed for 2010, Rf 4.6 billion would be the deficit, that has to be financed mostly through loans. Which means, our children will pay for our salaries, as these debts will be repaid in the days to come. I say, if we are taking loans, or incurring debt now, such funds should be spend on capital investments that will be beneficial even for our children, especially if we are asking them to pay part of it. Our recurrent expenditures should be financed through the revenue that we earn now.

Dhiraagu shares

The shares we own in dhiraagu, I’m sure it’s a capital investment, as we earn dividends every year. And the company pays well. Last year, the company paid the government over Rf392 million as dividends, this year we expect it to be over Rf 447 million. However, according the proposed budget numbers, in 2010 we are expecting only Rf 166 million. Meaning, Rf 280 million less than this year. I’m sure that this is partly because the government has sold part of its shares recently for a sum of $40 million. By selling these shares, we’ve reduced our share of future dividends. If so, I’d like to find out, HOW DID THEY SPEND THAT $40 MILLION?? If this $40 million is also spent on recurrent expenditure, then it’s a pretty stupid thing hu? But, if we invest that $40m on something productive, its completely a different story.

Revenue estimates

It’s a good move by the government to go towards business profit taxation and having an ad valorem tax on the tourism sector. That’s the ultimate and the most sustainable form of government revenue. But the Rf 300 million revenue from business profit tax in 2010,, I don’t know how realistic it is, as there are many legal and administrative pre-requisites for it to become a reality.

The Rf 1.3 billion to be raised from privatization; I would want to know the details of how they plan to obtain it.

Final thoughts

Government needs to figure out ways to reduce its recurrent expenditure, including those of the independent institutions. And these recurrent expenditures have to be covered only through the revenue that is earned. Definitely not through selling shares of revenue earning corporations.

So many mistakes have been made in the past; like collecting advance lease payments from resorts, and they have been spent on recurrent expenditure. In order to avoid reliance on ‘once-off’ extra ordinary revenues, a good tax system needs to be put in place. Working towards introducing business profit tax, and having a GST on tourism is also a good thing.