The funny thing about numbers

Reading the budget is like reading a good mystery novel.  It is filled with the unknown, however, we want to warn you, up-front, that the search for the solutions is rarely satisfied.  So if you love to read a good mystery at bedtime, do yourself a favour and grab a copy of the “Recurrent and Development Estimates” for 2017, snuggle up and have a read. Start on a Friday, though, because it is a page turner.
The last time we made this recommendation, we were bombarded by people who agreed that they lost sleep but they cursed us for misrepresenting the contents.  Apparently, in their minds, the budget was more horror than mystery and the numbers haunted them every waking and sleeping minute.  So in the interest of full disclosure, we would like everyone to know that reading the budget estimates may be detrimental to your sleep.  Be warned! (But live dangerously, read on!)
For the more timid, and those who just can’t be bothered to read, we figured we would pick a few areas of the document and give you a bit of a summary.  Today, we bring you the world of debt.  It is that thing that we owe to domestic and international institutions.  A necessary evil for small developing states but an evil that must be managed carefully in order to ensure that it does not turn our entire existence into a horror show.  Wait!  We get the whole “horror” thing now.  Good thing that the document designers decided to print in black & white and left out the red.   Yeesh!
In any case, the third line of the estimates (not counting the titles) gives us this unpleasant number: $381,575,000.  It is sandwiched by the estimated recurrent revenue of $935,418,015 and the estimated recurrent expenditure $ 1,151,084,939 and labelled debt service amortisation.   It is presented as a reduction to the expenditure in order to show a surplus $165,908,076.  Funny how you can do that with numbers.  Who would have known that we are expected to produce a $166 million dollar surplus on recurrent revenue and expenditure in 2017.  ‘Tings lookin’ good!  And that follows the estimated $120 million surplus from 2016.
At this point, we are going to pause and make a request. Can someone with far more knowledge in accounting and economics break down some of the terminologies such as “Capital receipts” for us and our readers?  Maybe the association of accountants could do a public service and critique the budget estimates for the benefit of everyone.  That would be nice.  Now back to the topic of debt.
Reading on, we see another unpleasant number in the amount of $476,911,430 and labelled debt service. It consists of $476,911,430 domestic debt servicing and $220,184,490 external.   Those numbers contain about $95 million in interest.  The real meat, however, is contained in two sections.  First, in the Business Plan area for Debt where you will find the “Medium-Term Debt Management Strategy (MTDS)” some nice sounding words like, “The Debt to GDP ratio is on a downward trajectory, however, the indicators reveal that the debt is still unsustainable over the medium term”.
The second area is the appendix for Public Debt.  Here, we learn that our great nation owes almost $3 billion in debt.  $2,915,503,742 to be exact, as at October 2016.  Of that $1,568,362,919 is classified as domestic with the remainder ($1,347,140,823) external.  That is a lot of money and we know that successive governments have boasted of their effective debt management but we seem to be pushing towards even more debt.  In fact, by the government’s own numbers, we increased by $25 million from 2015 to 2106.
The debt portfolio is a fascinating read, both for the details that are there and also for the details that are missing.  Like the many multi-million dollar loans to support the ABI bailout, or the $55.5 million in loans taken from the Caribbean Union Bank; made up of a 2008 $22 million demand loan, for the financing of central government’s fiscal deficit, and a $33.5 million dollar loan to payoff the further capitalisation of LIAT Liquidate overdraft – a loan that matures December 2031.
We wish we had the time and space to delve into the details of each line but that would take, not just pages, but papers to achieve, so we invite you to do some of your own investigations and share with us.
In the meantime, we will share a few titbits from a recent article from Sir Ron Sanders who cited  Cyrus Rustomjee, a leading development economist and former head of the Economic Affairs Division of the Commonwealth Secretariat.  Sir Ron started his article, “There is a real prospect that, in dealing with unsustainable debt, 11 of 13 Caribbean small states will have lost the first three decades of the 21st century and foregone opportunities for poverty reduction, transformation and growth”.
Not a pleasant thought but the key point is “unsustainable debt”. We cannot continue to think that we can borrow our way out of problems.  As Sir Ron points out, “The cost of debt servicing has become so high that it severely constrains the spending capacity of governments to provide goods and services immediately needed by their people and to invest in projects for economic growth.” When we consider that only Guyana and Haiti have a debt-GDP-ratio under the recommended 60% while we hover over 90 per cent, you can appreciate why debt is one of our greatest risks and something that needs serious and constant attention.
Not too long after the election in 2014, the Prime Minister announced that he would take the country to the top of world ranking in debt-to-GDP ratio; second only to Japan which is in excess of 200 per cent.  We hope that line of thinking was before he talked to Sir Ron and got some advice on sustainable debt ratios.  We know that we would appreciate knowing that plan has been shelved.
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