There is a sixty million dollar hole in the 2010-2011 budget and the government is expected to announce on Monday how it will raise the cash to balance the shortfall. And there is reason to believe that the prime minister will be forced to impose additional taxes to cover debt financing and recurrent expenditures. At the last House of Representatives meeting, several bills were tabled that will have a serious impact on the economy. These bills will all come up on Monday for House approval. Of the five bills, the Treasury Bills Amendment Act will open the flood gates to an additional two hundred and fifty million dollars added to our national debt. Deputy P.U.P. leader Mark Espat has been keeping an eye on GOB’s finances and he believes that the U.D.P. administration will coerce commercial banks to purchase long term treasury bills and notes which the government desperately needs to keep the country’s finances afloat.
Mark Espat, Deputy Leader of the Opposition
“What the government is doing is making a naked dramatic increase in the amount of money that the government can borrow from local sources. It is doing this in the form of treasury bills and treasury notes. It is increasing by one hundred million dollars the amount that the government can borrow in the form of treasury bills. It is increasing from seventy-five to two hundred and twenty-five million dollars, the amount it can borrow in the form of longer term treasury notes. This is an overall increase of an incredible two hundred and fifty million dollars. We are in the first instance concerned about government going on a borrowing binge locally and crowding out the private sector. Secondly, we are concerned that the government does not expect to borrow this money because would be purchasers of its debt, lenders, have confidence in its economic program. They are in effect using an extremely blunt distasteful instrument which is to allow the Central Bank to force the commercial banks to lend government money. So we see it as a back door attempt to hijack the deposits of businesses and savers and to fund government’s deficits from savings that are currently in the commercial banks. The government will say oh, we’re doing this because that portion of liquid assets that banks hold—out of every dollar I believe they have to hold about twenty-six cents and about ten cents they earn no income on—so the government will say well if they earn an income on that then they will bring down interest rates. But nowhere in the changes are banks being required to bring down interest rates. And secondly, if you have a cohesive and comprehensive and credible fiscal and economic plan, then you don’t need to force anybody to lend you money. They will want to lend you money because you are a good risk; you are a risk worth taking. So in our view the government is indicting its own economic policies by forcing banks, through the Central Bank to lend it money.”