Governor: Be careful of your independence

There’s the likely chance of T&T having another “small deficit” for the next year, said outgoing Central Bank Governor Ewart Williams. “Chances are for the next year you are likely to have another small deficit. What’s important, however, is that the Minister of Finance has said you can’t be running deficits for too long, and that his medium-term strategy involves moving towards fiscal balance over the next three or four years, and I think that’s the right policy, so as not to crowd out the private sector, and to provide the necessary confidence to private sector activity,” Williams said.

“The deficit can simply be justified because private sector activity continues to be slow, and at least having some ‘government’ in policy is going to maintain demand in the economy, and is going to maintain employment, and some element of growth, or at least to prevent another year of no growth,” he said. Williams’ statements were made at yesterday’s sod-turning ceremony for the construction of the official residence for the Governor of the Central Bank, at Lot 47, Ellerslie Park, Maraval.

Asked about comments about T&T having to go to the International Monetary Fund for help, Williams said, “From my vantage point, I really hate at this late stage of my career to be getting into a sort of political debate, but you go to the IMF when you have a balance of payments need, when the economy is such that you can’t pay your external bills.

“Larger economies and emerging markets go to the IMF when they are not able to get private sector financing from capital markets. “We are certainly not in a position where we can claim balance of payments need. Our reserves are now $9.5 billion and, in addition, we have savings in the Heritage and Stabilisation Fund, so I’m trying to stay away from the political dialogue, but I don’t think going to the IMF is an issue at this stage.”

Asked about his definition of success in managing the economy, he said, “Every economy defines the indicators that are considered evidence of success. Over the years, we have defined (three):
• the rate of growth
• the level of inflation
• and, unemployment as the critical success factors

“I think now, we need to add: the extent to which we have made progress on diversification in order to ensure medium-term sustainability.

Aiming for fiscal balance
“The new (Finance) Minister has already indicated that his medium-term fiscal policy will be the movement towards fiscal balance. I think that’s necessary as a medium-term objective, and he has also recognised and he has said that diversification of the economy is one of his priorities.

“If he can deliver on these three indicators, I think he will be extremely successful, and I think he has the kind of mindset, the drive, the energy. His success at First Citizens speaks for itself, and he’s going to bring those same competencies to his new job. I think he will be successful.”

Williams said: “I am writing a note for my incoming governor and I’m sure that we would have some discussion, but what my advice would be? It’s difficult for me to be offering advice and I don’t know who the person is. I don’t know what his plans are. I don’t know what his monetary policy philosophy is. I don’t know.

“What I know and what I would tell him is, listen, you have a competent, loyal, devoted team. Make use of that team. You know, do not try to do it on your own. You have lots of help from your deputies and from your senior management and from the staff. Make use of them.

“And every Central Bank Governor gives one standard bit of advice to his successor: be careful of your independence. The Central Bank’s success is highly correlated with the degree of independence that the leadership is prepared to exercise.”