There is one word that has become synonymous with the financial crisis in Europe: austerity.
As such, it has become a buzzword when referring to current economic conditions locally. Austerity typically involves severe reduction of government expenditure, usually in an effort to address their budget deficits and can be coupled with an increase in taxes.
Though Minister of Finance and the Economy Larry Howai has since clarified his statement that the public can expect some austere measures in the upcoming budget, the chamber would like to reiterate the words of economist John Maynard Keynes, who stated: "The boom, not the slump, is the right time for austerity."
Only in the 1980s did we require such drastic measures following the bust cycle of 1983-1989 after the oil boom of the 1970s. During this period in our history, we experienced a reduction in wages and salaries and transfers to state enterprises and an increase in taxes in order to maintain revenues. The Central Bank at that time became more concerned with the stabilisation of the balance of payments rather than inflation control.
As mentioned previously, austerity measures include reduced spending and usually would affect the lower income brackets of society. In Europe and other countries, these measures were necessitated by budget deficits that attained record levels because of actions these countries took to stimulate their economies following the massive credit crisis and global recession of 2008.
T&T, though not immune to the effects of the current global financial crisis, has maintained a desirably low debt to gross domestic product (GDP) ratio. While this is a favourable position, we do acknowledge that our nation is in a budget deficit position. It has therefore become necessary, against the backdrop of declining energy revenues, for us to seek ways to reduce recurrent expenditure, develop new revenue streams and reduce dependency on social programmes.
The Central Bank in its Monetary Policy Report released earlier this year stated that for 2012, the economy is expected to grow by one per cent, which is a reduction from the previous expectation of 1.5 per cent. Given that the private sector is behaving rather cautiously and not spending, we look to the Government to fill this gap.
The chamber has been for the last three years calling for the commencement of capital projects under the Public Sector Investment Programme. This would provide the much needed economic activity to stimulate the economy. Further, we have recommended that they do so under a public/ private/partnership arrangement, for example, to commence construction of multi-fuel gas stations to allow for sale of compressed natural gas (CNG).
From dependency to independence
On the other hand, the chamber believes that the Government must embark upon a programme to gradually reduce the gas fuel subsidy which has reached unsustainable levels of $4 billion. Social programmes, such as the Community-Based Environmental Protection and Enhancement Programme (Cepep) should incorporate business development activity and the eventual graduation of cohorts from the stage of dependency to independence.
Other funding programmes, such as Government Assistance for Tuition Expenses (GATE) should be offered upon evaluation. We are pleased to see that they are considering the implementation terminating funding to students that do not achieve an acceptable grade.
While the objectives of GATE are laudable, and the programmes has contributed to the strengthening of human resource capacity of the country, it is clear that the budgetary allocation for the GATE cannot be sustained on a long-term basis.
The expenditure on the programme has increased dramatically since inception, but the question remains whether those who benefited from the programme has given back service to contribute to the sustainable development of the country. There are measures that were mentioned in the last budget, such as the divestment of state enterprises, which can raise funds to finance government expenditure, thereby reducing the budget deficit. Unfortunately, we are approaching the end of 2012 and these public offerings and listings on the stock exchange have not taken place.
We have also noted it is not uncommon for the administration to go to Parliament for a supplement to the appropriation that is additional funding to finance expenditure. It is therefore necessary that we move towards a results-based budgeting system where achievements are matched to payments.
No doubt, Minister Howai has the weight of the country's future on his shoulders as he prepares his maiden budget. The chamber would like to emphasise that now is the time to take action to avoid us returning to such drastic measures as happened in the 1980s.
We believe this can be partially achieved by finally implementing some of the measures announced in recent budgets and other policy documents developed by the Ministry of Planning and Sustainable Development.