The denials notwithstanding, the Office Memorandum (OM) on rationalisation of expenditure that has been issued by the Finance Department is a clear admission that the State’s finances are, to use a mild explanation, strained. There is nothing new in issuing such a memorandum, it comes annually, but it usually surfaces in the month of January, with just about two months to go to the end of the financial year, and when the purse strings have to be tightened a little. This year the memorandum has been issued in October and also includes guidelines for financial expenditure during the third quarter of the financial year, besides restrictions on expenditure in the last quarter.
Though the memorandum states that it plans to achieve targets and standards set out in the Goa Fiscal Responsibility and Budget Management Act, 2006, and also to provide adequate funds for developmental activities under the capital account and curb unnecessary expenditure on revenue account, the curbs in expenditure indicate the financial precariousness of the State.
Sample some of the guidelines that have been issued. It asks that expenditure for each month of Quarter III and Quarter IV be based on a monthly expenditure plan vis-à-vis the liquidity position of State treasury, and all department have been asked to draw up this plan, besides also a monthly revenue plan. Interestingly, while finalising the monthly expenditure plan, departments have to bring into effect a 25% cut in revenue expenditure, including interest payments, repayment of debt, payment of salaries and pensions. Further, in February and March 2019 the expenditure has been limited to 8 percent of the budget estimate, and departments have been directed to ensure it does not exceed this. Also, from January to March 2019, payments can be made only for goods and services actually procured and other related expenses and not for new items. Any excess expenditure can be undertaken only with the prior concurrence of the Finance Department, and a proposal has to be made by the department, justifying the expenses.
With all these restrictions now in place, does any doubt remain that the State is facing a severe financial crunch? Who and what is responsible for the cash-strapped situation that the State faces?
There has been a veil of secrecy draped around the State exchequer, so can the government clarify on the ‘liquidity position of State treasury’ upon which it tells the departments to base their expenditure and revenue plans? For, unless there is clarity on this, how will the department go about making the monthly expenditure and revenue plans? This would indeed turn out to be a futile attempt at an unachievable task. Besides, the people of Goa would like to know just how liquid is the cash flow, or if the State is facing a severe cash crunch. There are indications of the latter.
It is common knowledge that government bonds have been sold during the year, including in recent weeks, to meet some of the State’s financial obligations. Borrowings too have increased. With mining stalled, tourism staring at a drop in charter landings, it is a matter of debate on how many, and not if, more bonds will be sold before March 2019, when the financial year, that has another five months to run, comes to an end. The State needs to be open about its financial situation. The tone of the office memorandum putting in place spending restrictions does suggest that there is an economic strain on the government and the State. What the people don’t know is how stretched is the financial situation. It is time that the State needs to look at other areas of earning money. It cannot depend on borrowings, selling bonds and curbing expenditure. It needs a revenue plan that fills the government coffers.