Shal­iza Has­sanali

Free elec­tric­i­ty, wa­ter, and fast fer­ry ser­vice to and from To­ba­go to the sick, el­der­ly, dis­abled, and poor by Prime Min­is­ter Kam­la Per­sad-Bisses­sar is like­ly to put the coun­try's econ­o­my in­to a fur­ther tail­spin. This was the view shared by three of T&T's econ­o­mists on Thurs­day, who urged Gov­ern­ment to ad­dress the over­all eco­nom­ic en­vi­ron­ment in a holis­tic man­ner rather than a piece­meal way. Well-known econ­o­mist Dr Dhanayshar Ma­habir, in shar­ing his per­spec­tive on the good­ies an­nounced on Tues­day by Per­sad-Bisses­sar as she cel­e­brat­ed her sec­ond an­niver­sary as leader of the UNC, was quick to point out that the promis­es made will no doubt place an ad­di­tion­al ex­pense on the State. "What the Prime Min­is­ter is do­ing is mak­ing ad­di­tion­al con­ces­sions to the over 60 age group. She is try­ing to cul­ti­vate votes for the next gen­er­al elec­tion."

The PM, Ma­habir said, will try to use the re­sources of the State to en­sure that the vot­ers in the coun­try are kept hap­py. "We are a grey­ing so­ci­ety and more peo­ple are en­ter­ing the 60-plus age cat­e­go­ry on an an­nu­al ba­sis. To be fair to the Peo­ple's Part­ner­ship Gov­ern­ment the PNM would have done the same thing, too." The PM, Ma­habir said, has recog­nised that she has an elec­tion to fight and over the next three years will do every­thing to se­cure an­oth­er term in of­fice. "Is this good pol­i­tics? The an­swer is yes. Is it good eco­nom­ics? The an­swer is...in a stag­nat­ing econ­o­my any ex­tra mil­lions you spend is not good eco­nom­ics, be­cause at some time the eco­nom­ic stress will give way and then it will have im­pli­ca­tions for ex­change rates, in­ter­est rates and pub­lic debt."

Po­lit­i­cal ap­peal vs eco­nom­ic ra­tio­nale

Stat­ing that a lot of con­ces­sions had al­ready been hand­ed out to in­di­vid­u­als over age 60 in the last two years, Ma­habir said: "If we want the econ­o­my to move, we re­al­ly should be giv­ing con­ces­sions to the mid­dle in­come earn­ers and new job en­trants so that per­sons can ac­quire homes, cap­i­tal and land in or­der to mo­bilise re­sources and ac­cu­mu­late as­sets." This, Ma­habir said, would have ad­dressed the over­all eco­nom­ic en­vi­ron­ment in a holis­tic man­ner rather than a piece­meal way. "But re­al­ly, when it comes to a clash be­tween pol­i­tics and eco­nom­ics, eco­nom­ics al­ways los­es and the pol­i­tics will win. What I am see­ing here is that the po­lit­i­cal will is over­whelm­ing the eco­nom­ics once again."

Though Pub­lic Util­i­ties Min­is­ter Em­manuel George said the pro­posed 100 per cent in­crease in the sub­sidy on wa­ter and elec­tric­i­ty for old age pen­sion­ers and low in­come earn­ers should not cost the State more than $11 mil­lion a year, Ma­habir said the cost was not the is­sue. "It is a ques­tion of pri­or­i­ty. I am there­fore hop­ing that while we can­not be­grudge the el­der­ly, their con­ces­sions, de­spite the fact they have been giv­en a great deal, in my opin­ion, I am hop­ing the mid­dle in­come and new job en­trants are tar­get­ed."

Scru­ti­nise $25B trans­fer bill

Ma­habir said the amal­gam of Gov­ern­ment as­sis­tance pro­grammes, trans­fers of monies to WASA, Petrotrin, HCU, Cli­co, el­der­ly, THA and UWI was in the tune of bil­lions. "Gov­ern­ment has to ask how much trans­fers they could re­al­ly af­ford as op­posed to how much in­vest­ments we need. That is tak­ing tax­pay­ers' mon­ey and giv­ing it to oth­er peo­ple with­out giv­ing them any­thing in ex­change. That is what is con­sum­ing half of the 2012 bud­get." In 2009, Ma­habir said, out of a $50 bil­lion bud­get its trans­fer bill was $20 bil­lion. "I am of the view that the coun­try's trans­fers bill to­day could be close to $25 bil­lion."

Ma­habir said Gov­ern­ment need­ed to look at the trans­fer bill with some mea­sure of scruti­ny. Ma­habir said he would have liked to see 40 per cent of the 2012 bud­get go to­wards trans­fers, ten per cent in­ject­ed in­to debt ser­vic­ing, with the re­main­ing 50 per cent go­ing to so­cial oblig­a­tions. "The Prime Min­is­ter keeps mak­ing promis­es and he (Win­ston Dook­er­an), of course, will find the mon­ey to fi­nance the promis­es." With rev­enue fail­ing to in­crease and the trans­fers bill ris­ing, Ma­habir said this was a wor­ry­ing con­cern. "This should be wor­ry­ing. That means that more of your fixed rev­enue is go­ing in­to trans­fers and less is go­ing in­to high­ways, bridges, na­tion­al se­cu­ri­ty and oth­er things that we need to do." In oth­er words, Ma­habir said, the Gov­ern­ment needs to fo­cus a lit­tle more on the frag­ile state of the econ­o­my.

Sage­wan-Al­li: T&T re­gress­ing re­tire­ment age

Mean­while, econ­o­mist In­dera Sage­wan-Al­li said the good­ies an­nounced will place an ad­di­tion­al call on the Gov­ern­ment's rev­enue and ex­pen­di­ture. She said it was un­clear when these good­ies will be im­ple­ment­ed and won­dered if it was bud­get­ed in this year's fis­cal pack­age. "If it was not bud­get­ed, where will the re­sources come from?" If it was not in­clud­ed in the bud­get, Sage­wan-Al­li said, the mon­ey would have to be bor­rowed, which could lead to a re­cur­rent ex­pen­di­ture. "This is not a rec­om­mend­ed kind of ap­proach for Gov­ern­ment. It's like liv­ing be­yond our means. So that one would want to cau­tion the Gov­ern­ment." If the plan is out­lined in the bud­get, Sage­wan-Al­li said, this would mean that T&T would have to sad­dle with an ad­di­tion­al sub­sidy.

"So it seems to be a pol­i­cy po­si­tion of this par­tic­u­lar ad­min­is­tra­tion of in­creas­ing sub­si­dies." Sage­wan-Al­li said this kind of method­ol­o­gy was not rec­om­mend­ed. "A pre­ferred method­ol­o­gy would be on sus­tain­abil­i­ty, grow­ing your econ­o­my on the ca­pac­i­ty to gen­er­ate sus­tain­able em­ploy­ment op­por­tu­ni­ties for in­di­vid­u­als." Sage­wan-Al­li said while coun­tries around the world were in­creas­ing the re­tire­ment age, T&T was re­gress­ing. "From a younger age we are al­low­ing in­di­vid­u­als to be­come more de­pen­dent on State pro­vid­ed fa­cil­i­ties." And while tax­pay­ers con­tin­ue to pay for mount­ing sub­si­dies, Sage­wan-Al­li won­dered when this will stop. "This is some­thing we re­al­ly need to ex­am­ine in a very se­ri­ous way. You can not af­ford to do this when the Gov­ern­ment met an emp­ty trea­sury." Sage­wan-Al­li said the PM needs to ra­tio­nalise the coun­try's en­tire sub­sidy port­fo­lio.

Sel­by: T&T Liv­ing off its fat

For­mer fi­nance min­is­ter and econ­o­mist Sel­by Wil­son said the promis­es were an­oth­er so­cial item of cost added to the econ­o­my in a pe­ri­od of un­cer­tain­ty. "The Gov­ern­ment has to tread very care­ful­ly in how they in­crease the eco­nom­ic ex­pen­di­ture due to glob­al eco­nom­ic cir­cum­stances." Wil­son said this sub­sidy would put a fur­ther bur­den on the econ­o­my and cost to the trea­sury. "The long term is whether the coun­try can bear the cost, es­pe­cial­ly if the econ­o­my does not pick up." With lit­tle or no growth in the econ­o­my, Wil­son said T&T was liv­ing off its fat, which is run­ning thin. "In these par­tic­u­lar cir­cum­stances we have to be care­ful of how we add more dis­cre­tionary ex­pen­di­ture to costs. They have to be weary of this be­cause the eco­nom­ic out­look is not promis­ing. We can face fis­cal prob­lems."