Today marks our final Business Guardian (BG) publication for the year 2020, and as you may have noticed, the front page screams “What a year!”
It is perhaps human nature to overstate events as they occur but there is no doubt that generations will remember and write about the pandemic of 2020 that shocked the world, created chaos in global economies and killed hundreds of thousands of people.
The COVID-19 pandemic is/was an unparalleled event. The world has, in the past, lived through pandemics but the ease of global travel, the inter-connectivity of global economies meant the virus was able to spread quicker and wider than anything ever seen, and the necessary action to save lives brought even the strongest global economies to their knees. In the case of T&T it made a bad situation worse.
At the time COVID-19 seriously impacted the globe, T&T had already experienced five years of continued economic decline. The size of our economy was ten per cent smaller than it was in 2014, our official reserves had fallen from US $11.4 billion to US $6.9 billion according to figures from the Central Bank of T&T. Unemployment remained fairly stable at around 5 per cent, but worryingly, the participation rate had fallen significantly meaning people were dropping out of the workforce and no longer seeking jobs.
By 2020, T&T’s economic indicators were worryingly weak. We continued to perform poorly in the ease of doing business, the main offshore economy that earns most of the country’s foreign exchange was in crisis, plant shutdowns loomed as the monopoly position of the National Gas Company that bought gas and made a 20 per cent mark up was no longer tenable, there were no new successful bid rounds, Petrotrin had collapsed and thousands sent on the breadline as the refinery was shut, private construction was at a standstill, people parked their money, unwilling to invest and forex remained difficult to come by.
Therefore, when members of the Government, who, to their credit, were able to seize upon the pandemic and successfully use their management of the crisis as a selling point in the election campaign, talk about the present economic peril as a direct result of COVID-19 they are speaking with forked tongues.
Add to that the COVID-19 pandemic and it made an already weak economy move from being in the proverbial hospital ward to moving to the High Dependency Unit.
On December 17, Finance Minister Colm Imbert reminded the country how bad things are and how they were likely to get worse next year.
He told a virtual news conference that the country’s economy was still being impacted by the economic fallout from the pandemic and that revenue is down.
The Finance Minister explained, “COVID is still hitting us. When I look, I see corporation tax is down, personal income tax is down, royalties are down, value-added tax is down and this is nothing unique to T&T.”
Imbert was frank in his assessment revealing that last year the total amount of forex injected into the system, based on the straight supply to the commercial banks, the window for state enterprises, and the Exim bank facility for manufacturers showed that the Government put more US dollars into the system in 2020 than in 2019.
“We are trying now, to kind of fashion the way we target the distribution of foreign exchange to the private sector, but it is a problem and because oil prices are down, gas prices are down, production is down, both in oil and gas, and that’s where we get most of our forex...Because production is down and price is down of course the inflows from the energy sector are much less.
“It is very very challenging for us. But we are using a number of different strategies to resolve that issue and we still have very healthy reserves.” Imbert explained.
He said all is not lost as the Central Bank still has over eight months import cover, and the Heritage and Stabilisation Fund is doing “very well.” He said government tends to supplement its forex with money from the Heritage and Stabilisation Fund.
Imbert said even though in the last five years the government had withdrawn almost US $1 billion from the HSF it has recovered to almost US $6 billion.
“So it is challenging, it is difficult, it is going to be a very tough 2021 and in terms of forex it is going to be hard. We will try to use whatever forex we have. As I said supplementing the government’s reserves with injections from the Heritage Fund from time to time and other strategies to see what we can do to increase the availability of US dollars,” Imbert said.
The Finance Minister remained resolute that he will not allow for a depreciation to occur outside of the TT $6.80 to US $1. He said various models had shown there will be little benefit to Government revenues should there be a depreciation and would only lead to pain on those least able to afford it.
So as we go into 2021 we face big challenges. I have over the last quarter spent a lot of time in this space raising the issue of the need for us to recognise the danger we face, focus, steel ourselves and be smart about the way we go forward.
To be sure we have done everything not to achieve our full potential as a country and to a large measure our under-achievement is completely based on the destructive politics that leads to division, winner take all, thumbing your noses in the faces of the vanquished and cronyism that somehow is thought of as loyalty.
In some ways as a country, we may have been able to simply get on with it and ignore the mimic men and women that we seem to turn out as politicians these days but this is not an option when the state controls so much of the economy and where government’s role is not simply regulator, policymaker and enabler. But this is an economy where the state crowds out the private sector for labour and capital.
It is an economy where for both historical antecedence and political expediency the State sees the private sector through the prism of fear and distrust and finds it difficult to accept that the most successful economies are built on the back of private enterprise.
Faced with a crisis, the government and in particular the Ministers of Finance and Trade have said the right things and even committed to improving issues like the ease of doing business and the digitalisation of the state sector.
We have seen a commitment made to agriculture and agri-processing and more focus on what must be a priority, real diversification.
What we have not seen, is the urgent need for inspired leadership; one that articulates a clear vision for the country and is laser-like focused on its implementation. Most people accept that the Roadmap for recovery was another ruse to fool us into believing that the government finally gets it.
We need leadership that can understand that education is an investment and cannot be equated with spend on URP and CEPEP. There must be a leadership that sets goals and respects the society enough to report on a quarterly basis on where we are and what has been done to achieve those goals. One that respects citizens enough to know that shouting at them, bullying them, talking down to them does not get buy-in but diminishes the office of Prime Minister and does not a legacy make.
Pretending to be like Caesar’s wife, thinking like the Pope, you too are infallible, is nothing but a fallacy and if we do not see a catharsis at the very top, a purgation that says leadership is about taking people along even when there is no transaction to take place, then mark my words, we are going to be in real trouble next year.
There is always the possibility of temporary strengthening of energy prices and new discoveries but that will not be enough for those children who the Government wants to re-open school in February for.
We have wasted enough time as a country—we must get it right.
Happy new year everyone.