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’10 Budget Passes, Restrictions Augur Tough Year

December 18, 2009

MANAGUA – With the help of $86.5 million in loans from the Inter-American Development Bank, $130 million in public debt and an additional $45 million in expected revenue from a new tax reform, the government last week was able to cobble together a $1.5 billion budget for 2010.

The Sandinista administration says the budget, passed Dec. 2, prioritizes spending on health and education, followed by investment for roads and bridges. The government also notes increases in budget allocations for the Ministry of Forestry and Agriculture (MAGFOR), the Institute of Rural Development (IDR) and the Rural Credit Fund (FCR).

The government stressed that the 2010 budget will also place a greater priority on municipal spending. Some $114 million will be transferred from the national budget to local governments to fund municipal development projects.

“Since its drafting, this budget has been put together in a serious manner, with an understanding of [our income limitations] from tax collection and foreign cooperation,” said Sandinista lawmaker Wálmaro Gutiérrez, president of the National Assembly’s Budget Commission. “In other words, we based the budget on reality.”

The reality, according to opposition lawmaker Francisco Aguirre, is that next year’s budget is the most “conservative” in the past 20 years, including the budgets from the “16 years of neoliberal governments” that the Sandinistas are constantly critizicing.

“This will be the first time since 1990 that the budget has not increased from the previous year,” the vice president of the Budget Commission told The Nica Times.

Aguirre dismissed as irrelevant the government’s claim that health and education will be budget priorities next year. According to the Liberal Constitutional Party (PLC) lawmaker, health and education have been the priorities since the days of the Somoza family dynasty in the 1970s, for the simple reason that the public health and education sectors have the most employees and therefore the greatest overhead. But in terms of actual investment in improving those two sectors, there will be less funding in 2010 than there was in 2009, Aguirre said.

The lack of budget growth in 2010 is due to dwindling tax revenue and the suspension of nearly $100 million in EU quick-disbursement budget funds that were suspended in late 2008 following municipal elections that were alleged by critics to have been fraudulent.

Nicaragua’s economy is also expected to finish 2009 in recession for the first time since the 1990s, registering a 1.5 to 2 percent contraction.

Although some economists are expecting the economy to recover next year (the United Nations’ Economic Commission for Latin America and the Caribbean projects Nicaragua’s economy will grow by 2 percent next year), Aguirre notes that Nicaragua’s economy was expected to grow by 4.5 percent this year, and instead will finish somewhere around -2 percent.

Even Nicaragua’s normally robust export sector, which grew by double digits for several years, is in the red this year, registering a -7.6 percent contraction during the first 11 months of 2009, according to the Center of Export Processing (CETREX).

Aguirre predicts that, “optimistically,” Nicaragua’s economy will get its nose up above the waterline next year, but will have a hard time making it past 0 percent growth.

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