Finance Minister: Govt needs to cut expenditure

The 2012/2013 budget will contain revenue-generating measures, allowing for slow and steady growth of the economy, says Finance Minister Larry Howai. “There are measures aimed at getting value for money out of the expenditure patterns of the Government. It is a challenge. “Very clearly, we are going to have to deal with expenditure. It has been growing and we need to cut back on some of that. We need to be careful how we do that,” he said.

“The intention is to keep the economy stimulated and if there is significant contractions in government expenditure, it will create an issue as far as expansion of the economy is concerned.” Howai said there is a “general level of confidence” in T&T’s financial system at this time, but added: “Growth will not be as it was five years ago.” He said the US dollar remains a major currency and there are no immediate plans to link the T&T dollar to a basket of currencies, such as the euro and Japanese yen.

“It will take some time before we migrate to that. The US dollar remains a major currency in the world today and will continue to do so for some time to come. My last look at the numbers, we had $9.8 billion in foreign-exchange reserves in US dollars, and that should increase to over US$10 billion by the end of this year,” he said. Howai was speaking yesterday on CNC3’s Early Morning Show on what T&T can expect when he presents his maiden budget on October 1.

He said personal income tax will not be touched, but the Government will be examining other parts of the tax regime. “While there is no intention to deal with personal income tax, we still are looking at the rest of the taxation regime to see where there is room to continue to raise revenue, while not doing anything that would dampen the expansion of the economy.

“We have not completed the full review of the tax regime as yet. We have dealt with income tax, so that is out of the way, but the other tax measures are still under the review. There will be at least one initiative that deals with tightening the tax incentive,” he said. There will be incentives for the energy sector, he said. “We need the energy sector to expand exploration and production. That has been one of the big drawbacks that we face in terms of expanding the downstream sector.”

Asked if the Government is willing to take politically difficult decisions likely to result in reducing transfers and subsidies, Howai said yes. “Yes, we will do it judiciously and wisely. We have to cut out some of the waste and inefficiencies in the Government and put new programmes in place that will help us achieve that. The good thing is we do have fiscal space.

“We intend to wean the population off a number of programmes for transfers and subsidies on a gradual basis rather than doing it one shot, which will have serious dislocation on the economy,” he said. Howai spoke about the importance of unions and the Government working together to enhance productivity.

“The industrial-relations climate is very important in ensuring there is economic growth. Barbados has been able to do it successfully. As a people, we tend to demand more because of the oil and gas wealth. We have to pull ourselves together in the same way Barbados has done.”