The pre-budget debate has started and recent experience raises a number of questions to consider. How do we budget in a country like ours when we do not know what coming costs we have to bear from the crisis of climate change, specifically rain, wind and flood damage to the economy, social sector and infrastructure and considering that we are still paying for the damage caused in previous years?

How can we know what our dollar will pay for if we cannot predict inflation and manage the sliding exchange rate, which in turn is a function of the costs of climate change, unexpected food price increases, energy price upward fluctuations, economic conditions, speculation, etc., all of which are crises of their own?

Revenue collection

How can we know how much we will have to spend if our revenue collection continually falls short of projections, either because of the crisis of the revenue collection system itself, the culture of tax evasion and tax avoidance or the weak state of the economy, which is costing us more to stimulate than it is stimulating employment and revenue?

How can we budget when the credibility of the budget rests on our ability to raise international loans, which because of the global recession, is getting scarcer at higher interest costs and subject to the vagaries of credit ratings, and we have to pay back those loans, such as the US$250 million we just paid back, before we spend on anything else.

For these kinds of reasons, last April's budget had become largely meaningless by September. We are going to go through the same exercise again this year. GDP growth, unemployment, and inflation rate predictions will only be educated guesses. This is true whether it is our own expert national statisticians or those of international organisations like the International Monetary Fund making the predictions. The idea of 'managing the economy' becomes merely a term of art. There is no science in it.

Governments can only set rough estimates and broad parameters and leave room for much adjustment, which it will almost certainly have to make during the fiscal year. It is not easy for any government to make a budget under the circumstances. What government should not do is make the country believe that budget making is an exact science, which it is not, because many things are unknowable or beyond our control, and many things within our control are not being done, or are not being done timely or sensibly.

Tropical economy

The Jamaican economy is operating very differently and in a very different world compared to the world of 60 years ago when budgets were more credible. Its budgeting cycle made sense then because we were operating, not as just any economy, but as a tropical economy. For instance, from the 1950s, the winter tourism market of December to April brought in vital foreign exchange upon which to build the budget in April/May. The 1951 Commonwealth Sugar Agreement guaranteed additional foreign exchange when the sugar crop ended in June/July to take us through the high import pre-Christmas season, especially from September so that we could maintain a stable currency. For much of this period we were lucky to avoid direct hits from hurricanes because climate change had not yet started to produce powerful and frequent hurricanes and we could take low energy prices for granted.

Today's economic cycles do not necessarily match production seasons and seasonality is not what it used to be anyway. The world economy does not favour our tropical economy. Our sugar markets are virtually gone. Our winter tourism season is subject to the scare of international terrorism, high energy and transportation costs, economic recession, and we can expect new competition from Cuba in coming years. To make matters worse, the recession has struck a serious blow to our bauxite earnings. There will be a brittle foreign currency platform for this budget. The US$300 million received from the multilaterals is not for budget support but for commercial loans at interest rates that few can afford.

Strategic budgeting

The budget doesn't make any sense by itself. It can only make some sense if there is a strategy to it, a strategy for economic transformation and social protection. The strategy must be to support the pillars upon which the economy rests. One of these is safety and security. The World Bank and USAID say that crime costs the country five per cent of GDP; that it costs firms 17 per cent of total costs to make their businesses safe and secure, which is very high; and that Jamaica ranks 63 out of 182 countries for doing business. The budget must conceive of a strategy to fight crime effectively. One can hardly sensibly stimulate the economy when people are afraid of investing

Another pillar of economic growth is human resources. We must invest in a healthy and knowledgeable people. Cutting the budget for HIV/AIDS, as the supplementary budget signals, will create more problems than it solves. If economic growth is to create employment then cutting support for AIDS can have the effect of leaving those needing care in order to work and help their families without that care. Many of these are single parent, low-income mothers, on whom their families depend. HIV erodes the human capital that produces wealth. A study by the University of the West Indies estimated that HIV/AIDS cost Jamaica six per cent of its GDP each year.

Transforming the economy

As for the economy itself, a consensus has emerged over the last 20 years that what we mean by 'the economy' cannot be reduced to the state of the firm. A healthy economy needs a supportive ecology, the trust of people, and fair outcomes for all. An economy that destroys the environment, exploits people, and creates inequality is self-destructive and that is what is behind the present economic recession. Economic recovery should not mean recovering that kind of economy. We should be aiming for transforming that economy into a new and more sustainable one that addresses people's human needs.

It won't be easy. Many people won't be willing to give up their privileges and comforts. But government must have the will, capacity and vision to transform the economy rather than merely reinvent the old one. The budget debate should therefore talk about and plan for agriculture, land reform and rural development if we are going to reduce food dependency and repair the damage to rural life. This becomes even more salient considering the fallout in the sugar divestment plans and the thousands of Jamaican families that have been left in great uncertainty. It must, as a companion measure, have a strategy for managed trade that protects our local agricultural and other industries in the search for some modicum of self-reliance.

We must debate bringing in more property taxes by making more of the propertied pay and talk about getting more progressive effects from our tax policies to achieve greater equity. Our finance ministry might also want to manage inward and outward capital flows against risks. We must broaden our narrow economy by stimulating the small business sector. We must invite foreign investments to operate in more socially responsible ways. Let us hope the strategies for transformative budgeting will get more debate.

Robert Buddan lectures in the Department of Government, Mona Campus, UWI. Email: Robert.Buddan@uwimona.edu.jm or columns@gleanerjm.com.