At a post-budget forum on Tuesday, the CEO of the Neal & Massy group, Gervase Warner, expressed alarm at the sharp increase in spending over the last seven budget cycles. Warner said he could not understand what happened between 2006 and 2013, when Trinidad and Tobago went from having a $37 billion budget to a $58 billion budget. “Things were good in 2006. Ahhh, but now we feel it necessary to spend $58 billion. I don’t know about you,” he told the audience, “but I don’t know what happened, how we went from being able to spend $37 billion and we were OK, to now needing to feed $58 billion of expenditure, with an $8 billion deficit.” Warner’s numbers indicate that the spending by the government has increased by 56.75 per cent between 2007 and 2013. Over the same period, the revenue collected by the Government increased from $40 billion in 2007 to the estimate of $50.7 billion that the Finance Minister predicted that the country would collect during 2013. That’s an increase of only 27 per cent, which means that the country’s expenditure is growing at a much faster rate than its revenues on a consistent basis.
In its first three budgets, the People’s Partnership allocated for expenditure or proposes to spend $164.2 billion: $51.5 billion in 2011; $54.4 billion in 2012 and the $58.4 billion that the Finance Minister proposed to spend during 2013. The Government collected $47.5 billion in 2011, $47.6 billion in 2012 and it expects to collect $50.5 billion in 2013. That means that the Government spending between 2011 and 2013 would amount to $164.2 billion while its revenue would be $145.9 bill, leaving a deficit of $18.3 billion. The deficits that the country reported in 2011 and 2012 is causing a sharp increase in public sector debt stock. Budget documents indicate that public sector debt is anticipated to increase by nearly one-third from $54.09 billion in fiscal 2011 to $71.5 billion by the end of the 2012 fiscal year. Payments and commitments to the Clico bailout also contributed to the rise in T&T’s debt. As a percentage of GDP, gross public sector debt is also expected to increase from 36 per cent in fiscal 2011 to 46.6 per cent in fiscal 2012, according to Howai.
Howai made it clear that he proposes to record deficits until the 2016 budget, when he expects that T&T would report a balanced budget. In justifying the need to record a deficit in the 2013 fiscal year, Howai said during Monday’s budget speech: “My focus in this budget will be to provide a strong stimulus boost to the economy aimed at accelerating the growth momentum.” Howai called balancing the budget “central to our economic and financial programme” and said that the Government expects to return to a balanced budget by 2016. Howai said: “We have taken the deliberate decision to operate this year with a deficit. This is required to provide the needed stimulus at a point when the economy is emerging from a difficult period. We recognize also that to seek to achieve a balanced budget in a shorter time-frame would risk destabilizing the incipient recovery.” He said the Government proposes to achieve its target of a balanced budget by establishing a reduction in the equivalent of a minimum of 1.0 per cent of GDP per year over the next four years.
With the GDP at around $160 billion, a 1 per cent reduction in expenditure would amount to $1.6 billion. But cutting expenditure by $1.6 billion may be difficult in the run-up to the next general elections. While Warner is concerned about the deficit trend, Nigel Romano, sector head, financial services at ANSA McAL said the Finance Minister was correct to focus on stimulus as opposed to austerity says “At this time the country is in reasonable good financial health and should be able to use that strength to jump start the economy. However, we need to drill down on the details to ensure that the numbers, especially the revenue projections, are supported by credible assumptions,” he said in an email statement on Tuesday. In the budget on Monday, Howai had said that the country would run on fiscal deficits for the next three years. The budget caters for a fiscal deficit of $7.669 billion or 4.6 percent of Gross Domestic Product (GDP). Romano also called for the implementation of procurement legislation.
Howai, in the budget said that there would emphasis on construction as part of his plan to stimulate growth. He proposed a three year exemption from income tax for the gains or profits derived from the initial sale of some newly constructed houses costing up to $1.5 million. “I would also urge the Minister to push hard for the implementation of public procurement legislation and the introduction of a national corporate governance code. These initiatives are needed to promote transparency and accountability and should yield significant improvements in the performance of state owned enterprises (SOEs). They are also critical to the success of the various private public partnerships since they should increase transparency and therefore reduce the incidence of corruption,” Romano said. Warner, who was speaking at an event of the T&T Chamber of Industry and Commerce yesterday at the Crowne Plaza, also said he welcomed government’s intention to gradually eliminate the gas subsidy. “We are enjoying these low gas prices and driving lovely, big cars that guzzle (gas), nice diesel vehicles etcetera, and we are mortgaging our children’s and grandchildren’s future. We have to cut it this out,” he said to much applause.