Editorial

STOP THE ROLLER COASTER BEFORE DISASTER HAPPENS

The news that the Government is plunging our country into more debts must be the concern of every Seychellois. For, it is not James Michel or Danny Faure who will have to pay back the debts. It is all of us, especially our children and grand children.

How are we, the people, to pay back the debts of the government you may ask? The simple answer is in a reduction of the future incomes of those who will be in work and a reduction in retirement benefits for those who can no longer work. In other words, the younger generation whose working life will span the next 15 to 30 years, will shoulder the biggest burden to repay the debt made on our behalf by President Michel and the SPPF. The consequence is that we will have to make do with a lower standard of living than it could have been if Michel and Faure had not indebted the country today.

Unlike everyone else, Government is an economic agent that does not generate its own revenue. To get money to spend, Government must tax the people. Whenever Government borrows money, it is spending today and tomorrow’s earnings. Whatever government borrows, it does so on the universal understanding that it has the power to raise money through taxation to repay its debt. Only the government enjoys this privilege in the economy. The more debt our government accumulates, the more it needs to take from us, from the income that we will earn through work, to repay those debts. Debts have to be repaid.

Government taxes our income either directly or indirectly. The more government taxes us, the less remains for us to spend on ourselves, unless the income we earn grows. For income to grow, their must be increased economic activity. Only a well-balanced economy succeeds in increasing economic growth and therefore, the income of its citizens. An economy heavily burdened with debt grows more slowly than one that does not have such encumbrances. The best example is Singapore.

According to Seychelles In Figures 2007 (a booklet issued by the National Statistics Bureau), the government paid out SR 256.3 million in social security benefits to 13,748 beneficiaries in 2006. In other words 16% of the population received a direct transfer of income (wealth) from the salaries and wages of those who work. This figure is equivalent to a deduction of SR 6,478.60 on the declared salary of every person who was in work in 2006.

The Social Security Fund gets its money on a tax on wages. It does not matter how much you earn, you have to pay social security. It does not matter if the wage you earn is inadequate for you to live on and you, in turn need social security assistance, you are obliged to pay security tax on your salary. Employers pay more, but what they pay is based on your salary. In other words, they pay a tax on jobs.

The latest statistics emanating from the government, before the latest junk bonds, show that total government debt (domestic as well as external) has reached a record (7,000,000,000 rupees) seven billion rupees. This calculates at 83,000 rupees for every man, woman and child in Seychelles. Since only 41,000 of us are in work so far this year, that level of debt represents 149,000 rupees per working man and woman. On a monthly basis, this represents about SR 12,000 a month for everyone in work. Yet the average wage in Seychelles is only 3800 rupees a month.

Assuming that we have to repay the government debt by 2017, the year our gross domestic product is expected to doubled according to president Michel’s Strategy 2017, the government will need to put aside (700,000,000) seven hundred million a year just to repay existing debts. That figure surpasses the total wage bill of the government by a staggering (SR200, 000,000) two hundred million and is almost 50% of the annual recurrent expenditure of the government. That is before interest.

Mr Michel and his mentor, former President Albert Rene, have created a society over the last 30 years, where most families need a direct government cash subsidy in one form or other in order to survive. In addition, many have been sold a house to live in which they would not be able to afford in their lifetime with their current level of income. On top of that, they have to repay the debts Michel continues to pile up in their name and children’s name.

The irony is that last week during his rumination on SBC, President Michel exhorted the people of Seychelles to save money for their future needs. In other words, our President is exhorting us to be frugal. This is sensible advice, except that Mr Michel – and his party, does not live by this principle when it comes to government finance. With 16% of the population dependent on government handouts and prices rising astronomically almost every day, where will they find the money to save without depriving their family of daily essentials? Is Michel exhorting us to save money so we can pay the debts that he and his party, the SPPF, has created up to now?

This roller coaster of living off debts must stop or it will crash and cause serious casualties.