Budget pains?

As the end of the year approaches, we get closer to our major annual political event. The Chief Executive will present the Policy Address and submit the 2016 budget for approval by the Legislative Assembly. It is time to take stock of the budget execution and what it means or signals about the government’s activity in a period of continuous strain on the gaming revenues front. Gaming revenues are – and will be in the foreseeable future – the ‘cash cows’ of the tax system. Casino revenues are still remarkable by historical standards but their continuous decline changes significantly the expectations under which many investment plans were developed. Let us review some of the main features of the budget execution in the last, say, five years, post-financial crisis. In those five years, taken together, government revenue amounted to more than 630 billion patacas. Taxes from gambling, at more than 520 billion patacas, exceeded 80 per cent of total revenue, and you may wonder, corresponded to some 285 million patacas per day. Expenditure in the same period was chronically executed below the budgeted amounts. Total expenditure reached less than 270 billion patacas, just about 42 per cent of total revenue. That is worth underlining for it is without parallel in our times. Total revenue more than doubled, consistently, year after year, actual expenditure. As a result, in the last five years alone, the government amassed a combined surplus of some 365 billion patacas. How extraordinary that is! It is enough to say that amount would facilitate the running of more than four years of the 2015 expenditure budget! And that would be achieved without collecting a single additional pataca of revenue at all, from anyone. If the average actual expenditure of the previous five years were taken for reference, that surplus would mean almost seven years of free riding on the surplus accumulated just between 2010 and 2014. Given this frame, how bad does the current year look so far? Revenue results up to September, with three-quarters of the year past, do not look too bad. They are certainly below last year’s, but they are in line with the budgeted amount. Up to September, revenue collected represented close to 77 per cent of the budgeted amount. With the usually end-of-year good months still to be accounted for, the actual revenue will very likely exceed the budgeted amount. Expenditure is, as has been the case for years, has been under-executed. The rate of overall execution was just 58 per cent as at September. That value was driven down by the very low level of execution in capital expenditure, which stood below 20 per cent for all its main items. Barring some late, lavish splurge, the year’s expenditure will come in distinctly below budget. That is, even in the most dramatic of years, under threat of austerity measures, the actual surplus at the end of the year may well double the amount budgeted (almost 19 billion patacas) and keep adding to the pile. How about that?