An­tho­ny Wil­son

On March 1, Min­is­ter of Fi­nance, Win­ston Dook­er­an, pre­sent­ed the fi­nal of­fer of a five per cent in­crease for the pe­ri­od 2008 to 2010 to the 33,000 pub­lic ser­vants rep­re­sent­ed by the Pub­lic Ser­vices As­so­ci­a­tion. Ac­cord­ing to Mr Dook­er­an: "The new of­fer was made tak­ing in­to con­sid­er­a­tion the cur­rent eco­nom­ic re­al­i­ties which face Trinidad and To­ba­go and the need to sta­bilise the econ­o­my and en­cour­age growth." Ten days lat­er, the Min­is­ter of Fi­nance re­in­forced his point about the in­abil­i­ty of the Gov­ern­ment to af­ford more than a five per cent retroac­tive in­crease for pub­lic ser­vants by re­fer­ring to the need for "mea­sures to sta­bi­lize the na­tion­al fi­nan­cial bal­ance sheet, trig­ger a new mo­men­tum for growth and con­front the fis­cal chal­lenges that will sus­tain the growth mo­men­tum while faith­ful­ly ad­her­ing to a strong so­cial sup­port pro­gramme." That state­ment, which was car­ried as a paid ad­ver­tise­ment in all three dai­ly news­pa­pers, in­clud­ed the sen­tences: "We are in a pe­ri­od of fis­cal deficits that emerged since 2009 and in 2011 we project an over­all fis­cal deficit of $7.7 bil­lion or 5.5 per cent of GDP...Our pri­ma­ry fis­cal chal­lenge is to re­turn to fis­cal bal­ance by 2013/2014."

Most peo­ple read­ing the min­is­ter's state­ments would come to the con­clu­sion that T&T is cur­rent­ly spend­ing more than it earns (is in a fis­cal deficit sit­u­a­tion) and that a de­ci­sion to of­fer the 33,000 of­fi­cers of the civ­il ser­vice and statu­to­ry au­thor­i­ties a salary in­crease of more than five per cent would have ru­inous con­se­quences on the econ­o­my. This con­clu­sion is but­tressed by the fol­low­ing state­ment in the min­is­ter's March 11 re­port to the na­tion: "The re­vised com­pen­sa­tion, if it were to be ex­tend­ed to the rest of the pub­lic ser­vice where ne­go­ti­a­tions are still on­go­ing, will cost the Trea­sury $1.251 bil­lion, plus an ad­di­tion­al cost for al­lowances of at least $761 mil­lion in 2011. "The wage bill for the pub­lic sec­tor will now be ap­prox­i­mate­ly $8 bil­lion an­nu­al­ly which rep­re­sents 19 per cent of our gross rev­enue." Is the con­clu­sion that T&T can bare­ly af­ford a five per cent in­crease for pub­lic ser­vants jus­ti­fied by the facts? To an­swer that ques­tion, one would have to form a judg­ment on T&T's cur­rent eco­nom­ic po­si­tion and make some rea­son­able as­sump­tions about the coun­try's fu­ture prospects. When for­mer Fi­nance Min­is­ter, Karen Tesheira, de­liv­ered the 2010 bud­get, in Sep­tem­ber 2009, she pre­dict­ed that T&T would record a fis­cal deficit of $7.703 bil­lion with rev­enue es­ti­mat­ed at $36.644 bil­lion and ex­pen­di­ture at $44.347 bil­lion. The es­ti­mat­ed deficit of $7.7 bil­lion rep­re­sent­ed 5.6 per cent of the coun­try's gross do­mes­tic prod­uct, which was record­ed at $136 bil­lion. That was the es­ti­mate. The re­al­i­ty is that while

T&T an­tic­i­pat­ed a deficit of $7.7 bil­lion, the ac­tu­al deficit out­come was $308.2 mil­lion with the coun­try col­lect­ing $43.212 bil­lion and spend­ing $43.520 bil­lion. While the an­tic­i­pat­ed deficit was es­ti­mat­ed to be 5.6 per cent of GDP, the ac­tu­al deficit was 0.22 per cent of GDP. Those are the facts sourced from the Min­istry of Fi­nance and are con­tained in the Cen­tral Bank's Jan­u­ary 2011 Eco­nom­ic Bul­letin. It's the last col­umn in Ta­ble 14 of the bul­letin. Does the fact that T&T record­ed a deficit of 0.22 per cent ($308 mil­lion) for the 2010 fis­cal year square with Mr Dook­er­an's as­ser­tion, de­liv­ered on March 11, that "We are in a pe­ri­od of fis­cal deficits that emerged since 2009 and in 2011 we project an over­all fis­cal deficit of $7.7 bil­lion or 5.5 per cent of GDP?" Most coun­tries and most econ­o­mists around the world would con­sid­er a mi­nus­cule deficit of 0.22 per cent of GDP to be an ex­tra­or­di­nary achieve­ment. Clear­ly, though, that is one achieve­ment that our Min­is­ter of Fi­nance does not choose to share with the pop­u­la­tion when de­liv­er­ing his re­port on the na­tion's busi­ness. Why would the min­is­ter as­sert that fis­cal deficits emerged in 2009, that he ex­pects a deficit of $7.7 bil­lion in 2011 and not men­tion that the deficit was a minis­cule 0.22 per cent in the 2010 fis­cal year? Is it that a deficit of 0.22 per cent of GDP does not sup­port his con­tention-and that of Prime Min­is­ter Kam­la Per­sad-Bisses­sar as re­cent­ly as Mon­day night at Pi­ar­co Air­port-that the coun­try sim­ply can­not af­ford more than five per cent? Does the

Min­is­ter of Fi­nance feel that if it were wide­ly known that the ac­tu­al deficit for 2010 were 0.22 per cent, which is a frac­tion of what was orig­i­nal­ly es­ti­mat­ed, that his ne­go­ti­at­ing po­si­tion with the pub­lic sec­tor unions would be se­vere­ly weak­ened? The main fac­tor con­tribut­ing to T&T achiev­ing a fis­cal per­for­mance that would have made us the en­vy of 90 per cent of the coun­tries in the world was the fact that en­er­gy rev­enues in the 2010 fis­cal year were 45 per cent high­er than an­tic­i­pat­ed. The orig­i­nal es­ti­mate of en­er­gy rev­enue was $15.556 bil­lion while the ac­tu­al rev­enues amount­ed to $22.597 bil­lion-$7 bil­lion more. Both the for­mer and the cur­rent ad­min­is­tra­tions al­so con­tributed to keep­ing the coun­try's to­tal ex­pen­di­ture low­er than es­ti­mat­ed with the ac­tu­al spend­ing com­ing in at $43.5 bil­lion, which was about 2 per cent low­er than the es­ti­mat­ed spend­ing of $44.4 bil­lion. In sup­press­ing ex­pen­di­ture, T&T was suc­cess­ful in low­er­ing wages and salaries (by $310 mil­lion), goods and ser­vices (by $621 mil­lion) and in­ter­est pay­ments by $491 mil­lion. How­ev­er, trans­fers and sub­si­dies were high­er by $2.181 bil­lion, while cap­i­tal ex­pen­di­ture and net lend­ing was $472 mil­lion high­er than the bud­get. Most of the high­er trans­fers and sub­si­dies would have been the re­sult of the sharp in­crease in the gaso­line sub­sidy, which is di­rect­ly linked to the high­er price of oil. The high­er oil prices go, the more mon­ey the

Gov­ern­ment spends on sub­si­dis­ing gaso­line prices. Ac­cord­ing to the doc­u­ment 2010 Draft Es­ti­mates of Re­cur­rent Ex­pen­di­ture at page 271, the Gov­ern­ment spent $2.16 bil­lion on the sub­sidy re the sale of pe­tro­le­um prod­ucts in 2008, the re­vised es­ti­mate for 2009 was $1.2 bil­lion and the es­ti­mate for 2010 was $960 mil­lion. The 2011 es­ti­mate of the gaso­line sub­sidy, con­tained on page 288 of the doc­u­ment 2011 Draft Es­ti­mates for Re­cur­rent Ex­pen­di­ture, is for $1.18 bil­lion. The fact that the Gov­ern­ment spent close to $1 bil­lion on gaso­line sub­si­dies in 2010-and $310 mil­lion less on the salaries of pub­lic ser­vants-should be an in­di­ca­tion of where the re­al prob­lem lies. In ef­fect, while T&T earned $7 bil­lion more from en­er­gy rev­enues, close to $1 bil­lion of that went right back to the coun­try's gas-guz­zling SU­Vs. Can it not be ar­gued that if the Gov­ern­ment were to re­duce the gaso­line sub­sidy to­mor­row it could more eas­i­ly af­ford salary in­creas­es high­er than five per cent for pub­lic ser­vants?

The fact that the Gov­ern­ment has not opt­ed to go the route of re­duc­ing the gaso­line sub­sidy in or­der to set­tle the pub­lic ser­vants dis­pute, it seems to me, is based on a choice to al­low the stan­dard of liv­ing of pub­lic ser­vants to de­cline as a re­sult of the de­bil­i­tat­ing im­pact of in­fla­tion. (We will dis­cuss the im­pact of a gaso­line price in the near fu­ture). But giv­en that the 2010 deficit of $308 mil­lion (0.22 per cent of GDP) was a frac­tion of the $7.7 bil­lion orig­i­nal­ly es­ti­mat­ed, is the min­is­ter in a po­si­tion to tell the na­tion what is the cur­rent fis­cal po­si­tion for 2011, for which he es­ti­mat­ed an iden­ti­cal deficit of $7.7 bil­lion? His an­swer, of course, should be in the con­text of the fact that world oil and petro­chem­i­cal prices are sig­nif­i­cant­ly high­er this year than he bud­get­ed and nat­ur­al gas prices are like­ly to be in line with the bud­getary es­ti­mates. And can't there be an agree­ment that if the fi­nan­cial sit­u­a­tion de­clines in the fu­ture, that what the Gov­ern­ment gave in 2011 can be tak­en back in 2013 or 2014?