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?