Raphael John-Lall

Bud­get deficits, low forex re­serves and low eco­nom­ic growth are not new to T&T.

For­mer Plan­ning Min­is­ter Dr Bhoe Tewarie has ar­gued that al­most 40 years ago the coun­try was in a sim­i­lar sit­u­a­tion and T&T was suc­cess­ful­ly able to get it­self out of that eco­nom­ic abyss and it can do so again on the back­drop of the con­tem­po­rary chal­lenges.

“Is our sit­u­a­tion so bad that we can­not get out of it? The sit­u­a­tion in T&T in 2025 is tough fi­nan­cial­ly and eco­nom­i­cal­ly. And giv­en the struc­ture of our econ­o­my and our de­pen­dence on en­er­gy and our de­pen­dence on im­ports, we are faced with some very tough de­ci­sions if we are in­ter­est­ed in the sus­tain­able well­be­ing of our coun­try. The so­lu­tion is dif­fi­cult now,” he said.

Tewarie spoke last Fri­day at the Trade and Eco­nom­ic De­vel­op­ment Unit of the Uni­ver­si­ty of the West In­dies’ (UWI) pre-bud­get we­bi­nar.

He re­mind­ed lis­ten­ers that at one time, T&T was in an even worse sit­u­a­tion in its eco­nom­ic his­to­ry.

“In the 1986/87 pe­ri­od T&T was in se­vere re­ces­sion and in an eco­nom­ic cri­sis be­cause of the col­lapse of oil prices in 1983 which fol­lowed nine years of an oil boom. The un­em­ploy­ment rate at that time was 22 per cent. There was a huge bud­get deficit in 1987 which was 7.1 per cent of the Gross Do­mes­tic Prod­uct (GDP). The forex re­serves were US$331 mil­lion and that was less than three months of im­port cov­er. We were on the brink of fi­nan­cial col­lapse.”

For­tu­nate­ly, the coun­try was able to re­cov­er, he said.

“Then there was an at­tempt­ed coup, but there was eco­nom­ic re­cov­ery. There was a 12-year pe­ri­od of eco­nom­ic re­cov­ery and growth from 1988 to about 2000. So, we have the ex­pe­ri­ence of be­ing in a bad sit­u­a­tion and do­ing things that got us out. In T&T, you can’t say that it can’t be done.”

Tewarie then said to re­turn to a path of eco­nom­ic growth and sus­tain­abil­i­ty, T&T must take some harsh re­forms of the econ­o­my.

“Can we con­tin­ue ex­pen­di­ture at the same lev­els? I think the an­swer to that is no and I want to say it loud and clear. It is be­cause we do not have the rev­enue and the mon­ey. We can­not af­ford it. Sec­ond­ly, there is wastage, in­ef­fi­cien­cy and cor­rup­tion so that if you want to deal with these things, you have to have to make up your mind to cut and prune and be­gin to look at how you can be­gin to get ef­fi­cien­cies and dig out cor­rup­tion from the sys­tem.”

He gave ex­am­ples of the types of ex­pen­di­ture cuts that could be car­ried out.

“One of the eas­i­est things to cut, and it will have con­se­quences, is the state en­ter­pris­es that are not mak­ing a prof­it or that are not man­ag­ing them­selves rea­son­ably and re­spon­si­bly. Be­cause why should you sub­sidise a state en­ter­prise with tax­pay­er’s mon­ey to lose mon­ey when they should be mak­ing a prof­it? You can de­cide you will make a 10 per cent cut to all of them or 20 per cent cut. And then they would have to try with a board and man­age­ment to man­age their busi­ness.”

He al­so gave ad­vice that “pa­tron­age” needs to be weed­ed out of T&T’s cul­ture.

“Pa­tron­age is a nasty lit­tle thing that haunts this coun­try. And we saw over the CEPEP de­ba­cle how hor­ri­ble it is. And out of that CEPEP de­ba­cle, we saw how the cor­rup­tion is root­ed in fam­i­lies, com­mu­ni­ties and some­times in gangs. We saw as well how the con­nec­tions in a so­ci­ety make the cor­rup­tion al­most un­end­able and I think we think we need to have a sys­tem that is fair. If you do it, it should be pa­tron­age with mer­it.”

He al­so called on the Gov­ern­ment to ra­tio­nalise the way in which sub­si­dies are dis­trib­uted.

“I think we should ra­tio­nalise so­cial trans­fers as not every­body who gets a hand­out in this coun­try, de­serves one. And I think it is fair to say if that is the case then maybe we could ra­tio­nalise it so we could re­duce the bur­den on the tax­pay­er as all the state’s mon­ey is from the tax­pay­er.”

Eco­nom­ic strat­e­gy

Econ­o­mist Dr In­dera Sage­wan who al­so spoke said that the bud­get should be a strat­e­gy that guides the coun­try’s eco­nom­ic de­vel­op­ment.

“It an im­por­tant tool of Gov­ern­ment’s eco­nom­ic pol­i­cy. It is not just an ac­count­ing ex­er­cise where we hear about rev­enue and ex­pen­di­ture but it is re­al­ly a strat­e­gy doc­u­ment and there re­al­ly should be con­sis­ten­cy from one bud­get to a next. The new Gov­ern­ment lay­ing out its strat­e­gy and by the time the next bud­get comes, we should hear the Gov­ern­ment telling us what are the key ar­eas against the strat­e­gy and how it is tak­ing us go­ing for­ward.”

She then lament­ed that the coun­try’s econ­o­my has been on a wrong path for some time now.

“I find it very vex­ing where this econ­o­my of T&T is. We re­al­ly should have been in a much bet­ter place. When you con­sid­er the amount of mon­ey that has passed through suc­ces­sive gov­ern­ments, we should be not on­ly con­cep­tu­al­ly be the mec­ca of the re­gion but em­ploy­ment should not be a prob­lem, forex should not be a prob­lem.”

She added that this bud­get should be about repo­si­tion­ing the coun­try’s growth tra­jec­to­ry to­wards non-en­er­gy di­ver­si­fi­ca­tion.

“It is now over 25 years that I have been say­ing we need life af­ter oil and gas. If we had start­ed to do this 25 years ago...we would have been in a much bet­ter place but we didn’t.”

She then point­ed out that agri­cul­ture, agro-pro­cess­ing, man­u­fac­tur­ing, tourism and the cul­tur­al in­dus­try are “low hang­ing fruit,” which are ar­eas that should be fo­cused on when at­tempt­ing to di­ver­si­fy the econ­o­my and gen­er­ate new rev­enue.

Pro­fes­sor of Eco­nom­ics Roger Ho­sein, who al­so spoke at the pre-bud­get fo­rum, warned that the “sit­u­a­tion is bad” and the Gov­ern­ment must come up with rev­enue-gen­er­at­ing meth­ods quick­ly.

“If you look at the S&P Re­port yes­ter­day, yes there is the rat­ing prob­lem but the sit­u­a­tion is so bad…un­less we run this fis­cal year in a man­ner and form that puts the econ­o­my back on a sta­ble growth path and that gen­er­ates for­eign ex­change.”

He added that the eco­nom­ic growth that T&T needs must come with the gen­er­a­tion of for­eign ex­change and the coun­try should not tap in­to lim­it­ed re­serves to fu­el con­sump­tion.

“If we go in­to the Her­itage and Sta­bil­i­sa­tion Fund (HSF) which I am very hes­i­tant to agree with, it must be strong­ly tied with widen­ing sup­ply space that could gen­er­ate for­eign ex­change. Oth­er than that we can­not take the HSF to fu­el con­sump­tion. We can­not take the HSF for re­cur­rent ex­pen­di­ture. The ter­ri­ble er­ror that the last Min­is­ter of Fi­nance made is that he bor­rowed heav­i­ly to fu­el re­cur­rent ex­pen­di­ture.”

He said the coun­try has to move away from that strat­e­gy and change its course.

“What­ev­er bud­getary out­lay the cur­rent Gov­ern­ment comes with it is go­ing to get scru­ti­nised and we are go­ing to look at it. It is go­ing to work if it is part of a plan. It can­not be dis­joint­ed, it can­not be one off. It has to have a se­quen­tial log­ic and strat­e­gy that is aimed at in­creas­ing the stock of re­serves while si­mul­ta­ne­ous­ly re­duc­ing ex­ter­nal debt all of that while im­prov­ing the labour force par­tic­i­pa­tion rate.”