Amended budget for 2020 presented for National Assembly consideration | 08 April 2020
It was under the theme ‘New Priorities in a New Reality’ that the amended budget for 2020 – a sum of R10,447,151,547.00 – was presented to the National Assembly yesterday for consideration and approval.
The Minister for Finance, Trade, Investment and Economic Planning, Ambassador Maurice Loustau-Lalanne presented the amended budget – a sum in excess of R1 billion above the originally approved budget for 2020 on December 6 last year which was a sum of R9,230,765,399.
Following the presentation, Assembly members will as from today start debating the different sums being cut from different sectors to be allocated to others so as to have enough money to allow the country to deal with the challenges and demands brought about by the COVID-19 pandemic.
Presenting the budget Minister Loustau-Lalanne said the COVID-19 pandemic situation ravaging economies the world over has not spared Seychelles and at this point in time, the global situation requires that we demonstrate our resilience as a nation. As a result of this, it is also important that as a responsible government, we review our national development strategy for the next five years, taking into consideration the economic reality we are facing.
Minister Loustau-Lalanne said our overview for the original budget presented in December last year was based on a predicted global growth of 3% in 2019 which would improve to 3.4% in 2020. In the context of Seychelles, we expected a 3.9% growth by the end of 2019, in view of a 5% rise in tourism activities by October 20, 2019, compared to the initial prediction which had been 4%.
For 2020, we were expecting that growth would remain positive at 3.5%, due to increased activity in the information and telecommunication sector, and that tourism would remain the principal contributor to GDP, with a growth rate of 5% in general. We were also expecting a rise in tourist arrivals in 2020, in view of new flights by Air France and the increased flight frequency by Qatar Airways which would have risen to 14 flights per week towards the beginning of March 2020.
He went on to explain that the COVID-19 pandemic, which has an adverse effect on health, will also impact directly on our economy.
“According to theOrganisation for Economic Cooperation and Development (OECD) Report, the rate of global growth was fairly low in 2019, but was beginning to stabilise until the arrival of the COVID-19 virus,” said Minister Loustau-Lalanne.
He pointed out that as a result many countries have since closed their borders to try and contain the spread of the virus. This has severely affected the demand for commodities, the production and distribution of commodities, travel and tourism industries across the world.
At this point in time, he said, the world is swamped by uncertainties. According to OECD, it will take most countries many years to recover from the COVID-19 pandemic.
He affirmed that the pandemic is already causing greater damage to the global economy than the financial crisis we experienced in the 2007 – 2009 period.
Thus, the global growth rate for 2020, which was expected to be 2.9%, has now been revised to negative 3.3%. All countries are having to review and re-analyse their macro-economic projections for 2020, as well as their mid-term projections. The future remains uncertain, though we expect a gradual improvement during 2021, with more improvements in the coming years.
He noted that as a result of this virus, we expect reduced economic activities, as people and businesses adjust to the situation.
“The indefinite ban imposed on visitor arrivals in the country by the Public Health Commission will have an adverse effect on our tourism industry, which is the main pillar of our economy. Thus, like other countries affected by the pandemic, it is necessary that our government puts in place unprecedented measures,” the minister explained.
“In view of the crisis, we are acting very quickly to ensure that the main productive actors of our economy remain, as much as possible, intact, and prevent our economic base from becoming eroded and completely destroyed,” highlighted Minister Loustau-Lalanne.
He went on to note that the government has thus acted with efficiency and has put a number of measures in place, which the President announced in his address on March 20, 2020. These measures mostly concern tax policies accompanied by administrative measures in tax management, as well as other types of assistance that will give some relief to businesses in the private sector which will be severely affected.
With the reduction in tourist arrivals, which contributes close to 25% of our GDP, Minister Loustau-Lalanne explained that the amount of foreign exchange that we get from the tourism industry will reduce very significantly. This will also have an impact on our foreign exchange reserve.
Highlights of the amended budget 2020:
- Expected revenue from taxes
The minister said we expect that with the predicted economic recession, government will collect fewer taxes.
“In our worst case scenario, we are expecting a reduction of R1.826 billion in our tax collection this year, compared to what was estimated in the 2020 budget.
We thus expect to collect only R5,903,742,000 in taxes instead of the R7,729,429 which had been predicted for 2020.”
- Expected non-tax revenues
With regards to the collection of non-tax revenues, we are now expecting to collect only R884 million compared to the R 1.477 billion which had been projected in the 2020 budget.
We are also projecting a reduction of R442 million in dividends paid by public enterprises. This is in view of the anticipated reduction in profits in these enterprises, and the expected reduction in visitor arrivals - notably, SCAA and IDC.
- Measures to mitigate the adverse effects of the COVID-19 on our economy
In order to prevent our economy from plummetting, the government has to put in place the necessary measures to ensure its continued functionality as far as possible.
Private sector assistance-tax
The private sector is the driver of our economy and it thus has to have the necessary support to keep it functioning. Those private businesses, particularly in the sectors linked to tourism, will have great difficulty maintaining their liquidity, in view of the fact that they will not be collecting any revenue. The introduction of measures to suspend tax payments related to revenue will help towards maintaining these businesses’ liquidity.
These measures include:
-The postponement of all payments that were due by March 2020 to September 2020
-The postponement of CSR, Tourism Marketing Tax, Business Tax and taxes on Non-Monetary Benefits Income until September 2020.
- Salary guarantee
In view of the reduction in visitor arrivals, and to avoid redundancies in businesses, and thus allow productive sectors to keep up their activity, the government is guaranteeing the salaries of employees in the private sector.
A sum of R1,090,531,200.00 has thus been proposed in the 2020 budget amendment to guarantee salaries. As announced by the President, salaries will be guaranteed for three months, although provisions have been made to cover salaries for at least six months should the situation worsens.
- Allocation of R30m in the budget for the Social Protection Agency
A sum of R30 million is being proposed in the budget of the Agency for Social Protection (ASP) to ensure that other individuals in need are also assisted. ASP will also assist individuals in the informal sector who are affected, to ensure that no one is left behind.
- Assistance for the agriculture and fisheries sector
During this pandemic, it is also a priority for government to support the agriculture and fisheries sector. The interest rate in the Agricultural Development Fund will change from 2.5% to 1% for the duration of the pandemic only. This is to assist farmers with resources to continue investing in this sector.
With regards to the fisheries sector, as President Faure announced, the interest rate will be reduced from 3% to 1% under the Fisheries Development Fund.
- New priorities in the 2020 budget
The second measure that government is taking is to review the 2020 budget allocations with respect to ministries, departments and agencies.
However, these revisions will not be adopted in the case of the Ministry of Health, the Health Care Agency, the Public Health Commission and other agencies that provide essential services.
“It is thus important that in this challenging period, we review our priorities and not implement certain programmes that are not necessarily essential, to enable government to divert these resources to other agencies, and also to finance these very important measures that have already been announced,” Minister Loustau-Lalanne said.
- Reducing all activities which require grouping
“In view of the fact that we have invoked a force majeure, we have decided that there will be no assembling of large groups of people this year, such as those for cultural activities and national events.
Thus the following activities will be cancelled for this year, and the accompanying sums will not be disbursed as had been budgeted:
-National Day events - R11m
-Creole Festival - R5m
-250th Anniversary of First Settlement - R2.5m
And all other activities such as the Francophonie, Jazz and Blues Festival, and the Arts Biennal.
In total, this is a reduction of R20m.
The organisation of and participation in sports activities will also be cancelled. This includes particiption in the Olympic Games, Zwe Lespwar, Jeux de la Francophonie, Table Tennis and the regional sailing competition.
The FINA events scheduled for May and July at a cost of out R5 million will also be cancelled. The census scheduled for this year by the National Bureau of Statistics at a cost of R6.2 million will also be postponed to next year.
This means that the budget being proposed in the 2020 Budget Amendment is now R2.736 billion compared to R2.920 billion which had been approved in the 2020 budget.
- Budget for Capital Projects
With regards to the budget for capital projects, it is important that government continues to execute these projects as much as possible.
Economic activity is necessary, especially in the construction industry, to help create jobs and economic growth. We do recognise the fact that everything will depend on how the situation develops, and there might be impediments to implementaion of projects in spite of everything.
The government however, has been obliged to make certain adjustments to Capital Projects, as follows: it is proposed that the 2020 budget, which had allocated R 1,113,799,520 to this vote is revised to R 1,219,548,903.
This is because of the expected impact of devaluation on foreign exchange rates, which will affect the cost of projects, particularly those financed by loans.
- The health sector
An increase of R50.6 million is being proposed for the Health Sector in this amendment, compared to the 2020 budget. This is because a sum of R25m is being proposed to build an isolation centre. The cost of this centre, estimated at R40m, is expected to be completed in 2021.
R4m is also being recommended for the renovation of the barracks at Ile du Swet, which will be used to increase the country’s present quarantine capacity.
A sum of R21.6 m is also being recommended to complete other projects which were not completed in 2019, or which are in progress, or which have to be realised as soon as possible. These include the renovation of the Baie Lazare health centre, the construction of the La Digue Hospital, and the conversion of the Diagnostic Centre in the Seychelles Hospital.
In his budget presentation Minister Loustau-Lalanne also talked about other sectors such as land transport, education, infrastructure, among others.
Following an analysis made by government, Minister Loustau-Lalanne said it has been found necessary to propose certain new allocations in the 2020 Budget Amendment. These are as follows:
Nurses and health care assistants scheme
Provisions have been made for the nurses and health care assistants’ schemes to be revised, and this will take effect as from July 2020. A sum of R 13.68 m is being proposed for this.
A sum of R60 m is being proposed under the Contingency vote to cover the costs related to the procurement of medicine and equipment, and for operations and logistics for prevention measures against COVID -19.
Subventions for Air Seychelles
In view of the suspension of Air Seychelles flights due to the ban on visitors to the country, a subvention of R109.469 m is also being proposed for the Air Seychelles company, to cover the salaries of its employees for the next three months. However, provision has been made for 6 months, in case this situation persists.
Subventions for Seychelles Trading Company (STC)
A sum of R20m is also being proposed as advance payment for the Seychelles Trading Company (STC). This is just in case the STC needs government’s support to maintain its liquidity as well as its ability to ensure the stocking of essential commodities.
Other Policies -Measures on the price of fuel
The government is proposing certain measures with regards to the price of fuel at petrol stations, particulary Mogas, better known locally as “benzin”. The actual price today is R 15.76. If the price on the international market continues to go down, this number will also go down.
This measure will not apply to diesel. Diesel is used mainly by pick-up trucks, buses and other heavy industrial vehicles. These heavy vehicles enable us to keep on the construction projects, transport people and generally keep people employed, without the companies involved needing financial assistance.
(More details about the various announcements in the amended budget 2020 can be found in the full text which is published in our centre pages. Meanwhile the National; Assembly resumes today where the leaders of both sides of the House will give their replies to the budget speech followed by those from the other members).