Two protective measures in Fiscal Responsibility Act activated to legally finance 2021 Budget

by Linda Straker

• Covid-19 has caused 2020 to be worst economic downturn on record for island
• Section 10, the Escape Clause, and Section 8 (3) (f) of the Fiscal Responsibility Act to be invoked
• The EC$1,232,670,049 Estimates of Revenue and Expenditure is first budget presented by Bowen

Grenada Government will be activating 2 sections of the Fiscal Responsibility Act (FRA) that provide the latitude to effectively administer the affairs of the country in the event there are local and global factors that will hinder normal operations of the economy.

Finance Minister Gregory Bowen announced the measures on Wednesday, 2 December, while presenting the 2021 Budget. He said that Government will be invoking Section 10 otherwise called the Escape Clause, and Section 8(3)(f) of the Fiscal Responsibility Act.

“The road ahead will be extremely difficult as we seek to reshape and renew our economy as well as our society in this new and uncertain environment. While we are proud of our work in this pandemic, much work lies ahead. We must therefore remain steadfast in our efforts to protect our people and rebuild our economy. Rising from the ashes of this pandemic will require bold and decisive leadership,” Bowen informed the sitting which was broadcast via television, radio and social media platforms of the Government Information Service (GIS).

“We will be invoking the Escape Clause under the Fiscal Responsibility legislation.” Bowen reminded the House that Covid-19 measures have impeded the growth and development of the economy since lockdown measures were implemented in March 2020.

Section 10 of the FRA provides for the Minister of Finance by Order to suspend, for a period not exceeding one fiscal year, fiscal rules, targets and corrective measures under sections 7 and 8, where– (a) a natural disaster, public health epidemic, or war as a result of which a state of emergency Receipts and expenditures excluded from fiscal rules and targets. An order in accordance with Section 10 received Parliamentary approval in April and expires on 31 December 2020.

Section 8(3)(f) of the Fiscal Responsibility Act mandates that 40% of the monthly inflows into the National Transformation Fund (NTF) shall be saved for general budget financing purposes including contingency spending, natural disaster and debt reduction.

Bowen said EC$172 million are projected to be available from the NTF which is linked to the Citizenship by Investment (CBI) programme. Persons who applied for citizens through the CBI can either pay a sum to the NTF or invest a real estate development. Most of the applications are opting to apply through the NTF. That Fund is managed by an advisory body.

The EC$1.232,670,049 Estimate of Revenue and Expenditure is the first presented by Bowen who was assigned the Finance Ministry as of 5 October 2020. No new taxes were announced, and he assured citizens that Government will be strengthening its collection measures.

With Tourism negatively affected by Covid-19 measures, Construction is the priority area for reviving the economy with Government announcing a number of public sector initiatives which involves road and other infrastructural projects throughout the island, especially roads classified as farm and feeder roads.

“The 2021 Budget has been prepared against a backdrop of extraordinary uncertainty facing the global economy,” said Bowen, while announcing that Covid-19 has caused 2020 to be the worst economic downturn on record for the island.

The theme for the 2021 budget presentation was “Toward Vision 2035: Recovery, Transformation and Resilience.”