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Former Central Bank governor: Cut fuel subsidy, Gate
If government is serious about fiscal sustainability, it must have the political will to make difficult decisions, such as cutting the fuel subsidy and Gate. Former Central Bank governor Ewart Williams made this point yesterday as he addressed a pre-budget seminar at Guardian Media Ltd’s training room, Guardian building, St Vincent Street, Port-of-Spain, which was attended by GML managing director Lisa Agard, editors and journalists.
Williams said as Finance Minister Larry Howai gets set to deliver the 2014/2015 national budget on September 8, he must consider what are the Government’s priorities and its fiscal policy. He said Gate (Government Assistance for Tuition Expenses Programme) is costing Government $4.5 billion annually and that is “unsustainable.” However, he said, the issue of Gate has now become a major political issue that has to be addressed, but everyone is afraid to address it.
“We have to look at the options; Should it be a loan? Should it cover certain subjects? Should there be a means test? These are the difficult issues we must confront and talk about,” he said. The fuel subsidy, he said, is another issue which no government wants to address and successive governments “keep kicking the can along” to the other. “We all know what needs to be done. We need to get the political will to address it and we need to start talking about it,” said Williams.
Tax reform, he said, was needed. Government, he added, had to do a lot through expenditure reform. “That is where the difficult discussion lies.” Williams said T&T was in a good position to experience more growth in 2014 after recording two per cent growth in 2013 and a four to five per cent reduction in debt which is “manageable.” However, Williams hastened to add, “All that glitters is not gold. The economy still depends disproportionately on the energy sector.”
T&T’s debt to GDP (gross domestic product), he said, is in a better position than most countries in the Caribbean. In 2013 it stood at 33.7 per cent in T&T as opposed to 109.8 per cent in Grenada and 126.4 per cent in Barbados. This percentage, he said, must continue to decline. “The worst economic problem a country could face is a debt crisis and it is in our interest to keep our debt structure manageable,” he said.
He T&T is in a position where “we should be working at fiscal sustainability. We should be moving towards putting our fiscal house in order.” Fiscal sustainability, he said, is where T&T has a system that could carry the economy along when there is no more oil and gas, a system where the revenue side is buoyant (responds to economic growth) and the debt is under control. However, he said strong fiscal and monetary policies are needed to get to that point.
Williams also stressed the need for more transparency in the budget presentation, which should include a debt table. He said citizens deserve to know how T&T is repaying the loans it took to finance public sector projects. “What are all the loans we as a country have to be paying? That is not unreasonable to be asking. Tell us about wages, about the taxes, but what are all the loans we are paying and how much are we paying?” he said. These figures, he said, should be included in the national budget or a supplementary document.
He also expressed concern about the lack of regulation of casinos, which, he said, “are efficient avenues of money laundering and that kind of business must be related to the demand for foreign exchange. “Any business that only deals in cash transactions must be audited on a weekly, even daily basis. Human nature is such that no one is going to report every cash transaction,” he added.