In the last article, we began to discuss the necessary conditions on which a Dominica Freedom Party (DFP) government will work to put Dominica on the path to prosperity and shared growth. In this regard, we have started a discussion on the need to create a stable macroeconomic environment. Let’s continue this discussion in this article. This discussion is part of the overall dialogue we will have over the next few months on the types of sustainable development policies and strategies that a DFP government will pursue if we get the green light to rule this country again.
In the last article, we acknowledged that over the past 25 years Dominica’s economy has been plagued by macroeconomic imbalance – characterized by high unemployment, unsustainable budget deficits and a precarious financial sector. In addition, we note that the lack of resilience of the economy has amplified the imbalances.
It is important to reiterate that in order to attract genuine investors to our coasts, it will be important to create a stable macroeconomic environment and the key elements in this regard are: maintaining sound fiscal operations, encouraging stable operation and healthy financial sector, and build resilience to economic and environmental vulnerabilities.
In the last article, we enumerated a number of fiscal strategies that will be pursued by a DFP government to create the fiscal space necessary to orient the country towards prosperity and we have exposed on the area in relation to measures to improve the efficiency and effectiveness of the tax system. Now let’s explain a bit about another of the areas – better planning and budgeting, including using performance tracking systems to improve results. This involves determining the constraints that prevent the country from reaching its full potential and, based on a good understanding of this, planning appropriate solutions – policies, strategies and actions. But the whole planning process has to be linked to good budgeting. Good budgeting should be about allocating funds to achieve desired sustainable development results that are reflected in good planning documents such as vision plans, medium-term development strategies and sector plans. But for planning and budgeting to be effective, it must be imbued with performance information, and there must be a strong culture of monitoring and evaluation with strong accountability to the nation. When the entire cycle of planning, budgeting and monitoring and evaluating budget execution is done well, public resources are used more efficiently. Right now our country is failing miserably when it comes to effective planning and budgeting, and the main reason is that the current administration is so prone to corruption that it does not want to have planning, budgeting systems. and effective and well-functioning implementation in place as this would help limit their efforts to be corrupt.
As far as the financial sector is concerned, there are risks in this sector that need to be addressed and a DFP government is rushing to do so. One element of the risks introduced over the past decade is the deterioration in the soundness of banks due to weaknesses in the economy and disruptions in economic activity such as the departure from ROSS University. But beyond these issues, the mismanagement of the CBI program as well as the alleged public facilitation of other illicit activities have led to a more in-depth review of Dominica’s banking operations, which is already affecting the capacity of citizens, businesses. and the government to send and receive money abroad. The situation could worsen and affect the country’s foundations for building prosperity.
When it comes to economic resilience, much of a DFP government’s response will be pursued through economic diversification where possible, as well as clear direct strategies to mitigate the impact of climate change and natural disasters. These strategies will be discussed in more detail in future articles.
However, much of the DFP’s approach to improving resilience will be a budget response. An important strategy in this regard will be the constitution of reserves in a resilience fund. The fund will have to accumulate over time to a level of at least 200% of GDP. Building such a large level of reserves will require improving the efficiency of revenue generation and the efficiency of spending, as well as prioritizing the building of reserves, which may lead to some budget reallocations. The DFP government will not simply rely on CBI sources to build up reserves, however, any exceptional opportunity will be capitalized to move swiftly towards the reserve goal. Reserves would be drawn for emergencies according to transparent rules, thereby reducing economic instability. Given the intention to build up tax reserves, the DFP will also pay great attention to optimizing the growth of the economy, as a thriving economy provides the best environment for building up tax reserves. The measures for this purpose are those linked to the other conditions necessary for the construction of prosperity. We will discuss this over the next two or three months.
Dominica Freedom Party.