Interview: Charles Abel
What is being done to help spur economic growth?
CHARLES ABEL: One of the most important decisions in 2013 was the introduction of a deficit budget in order to stimulate the economy, as we predicted an economic slowdown due to the completion of the liquefied natural gas project. It was also a deliberate choice to set an investment path for the next five years, with further investments in infrastructure, health and education. Luckily the economy grew faster than we had anticipated, and it has also not translated into higher inflation, therefore confidence in the market remains high.
The government’s performance has not been equally satisfactory though, especially in effectively executing the budget. Service delivery and implementation needs improvement and this can only be done through partnerships, especially in health and education. That is why we are reaching out to non-governmental institutions like the church, which enjoys a capillary network throughout the country, but also by engaging with major resource developers through tax credit schemes and infrastructure grants.
How will you be financing the budget in 2014?
ABEL: There has been sufficient liquidity internally to finance the debt so far, but we are reaching the outer limits of this, especially because we will continue a deficit budget in 2014. However, I am reluctant to borrow more. I think it is wise to stick to financial discipline instead, especially by improving tax collection, as our system is lagging behind our economic growth. We have to resist the temptation to borrow beyond what is affordable to us, as we do not want debt to cover living expenses, but to be an investment drives instead. That is the way to retain confidence in our economy.
In what ways can the private sector participate in fostering economic growth?
ABEL: There is great potential for investment here, but the system lacks sufficient instruments to channel this potential into the market. We have issued government treasury bills in the past, mainly inscribed stocks, but there isn’t a great variety of products available. We have to free up land so that additional capital can be spent on developing properties and generating growth.
We are trying to move away from an exploitationbased economy, and to structure our development plans in a more responsible and sustainable way through private sector involvement. I believe that public-private partnerships, for example, will be instrumental in delivering infrastructure and services by utilising private sector capital, management and other resources.
What is being considered in terms of establishing a sovereign wealth fund (SWF)?
ABEL: The surplus generated over the last 10 years, mainly driven by commodities exports, often faced capacity constraints in entering the system, especially at the sub-national government levels. That is why we decided to create an SWF, and we will be basing this on the Santiago Principles, which set best practices for fund operations. The idea is to redirect part of gas revenues instead of channelling them all into the system. The fund will be established under the Treasury, although it will be administered by an independent board and subject to its own legislations. Lately we have refined its structure, how it will filter into the budget and what portion of it will be set aside for future generations.
Where do you want to see this country in 10 years?
ABEL: We are laying the foundations for a proper sustainable future, one that is not entirely reliant on mineral extraction. We are trying to design a new type of economy that is based on pursuing global solutions to climate change. Of course we would need the input of the international community in managing our natural resources in a sustainable way, especially our forests and fisheries, but we would like to indicate that we are willing to be part of this movement. We have also taken some hard decisions about population growth, as we would like to keep our population under control.
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