Max­ie Cuffie

When he de­liv­ers his last bud­get speech to­mor­row, Fi­nance Min­is­ter Lar­ry Howai is like­ly to have much to boast about. Un­em­ploy­ment, for ex­am­ple, reached 3.75 per cent over the last fis­cal year and sat­is­fied the po­lit­i­cal, if not the eco­nom­ic de­f­i­n­i­tion of full em­ploy­ment. Eco­nom­ic growth, pro­ject­ed at two per cent, is in line with some of the ma­jor economies in the world, al­though it has us in ninth place in the Cari­com re­gion.

The nom­i­nal ex­change rate has sta­bilised at a po­lit­i­cal­ly ac­cept­able lev­el of ap­prox­i­mate­ly TT$6.44 to the US dol­lar and the bud­get deficit has been dra­mat­i­cal­ly re­duced, which might even sug­gest the at­tain­ment of a bal­anced bud­get ahead of the min­is­ter's pre­dic­tion of 2016.

The min­is­ter is al­so like­ly to boast that in­fla­tion, as a re­sult of the car­ing poli­cies of the PP ad­min­is­tra­tion, is at the low­est lev­el for some time, with head­line in­fla­tion now at just over two per cent. T&T, he is like­ly to say, is now poised for eco­nom­ic take-off.

Don't be­lieve a word of it. Un­for­tu­nate­ly for the min­is­ter, to­mor­row's bud­get pre­sen­ta­tion is be­ing de­liv­ered fol­low­ing last week's pub­li­ca­tion of the In­ter­na­tion­al Mon­e­tary Fund Ar­ti­cle IV Con­sul­ta­tion Re­port on the T&T econ­o­my fol­low­ing its last vis­it which end­ed in June 2014.

Through­out the re­port, the IMF econ­o­mists ex­pressed their con­cern over the re­li­a­bil­i­ty of the da­ta from T&T. For some in­ex­plic­a­ble rea­son, the Min­istry of Plan­ning has al­lowed the Cen­tral Sta­tis­ti­cal Of­fice to com­plete­ly col­lapse, so that it is now in­ca­pable of pro­vid­ing re­li­able eco­nom­ic sta­tis­tics to guide fis­cal plan­ning and projects. The ab­sence of da­ta meant the IMF was forced to make pro­jec­tions based on num­bers on which it could not tru­ly re­ly. And the num­bers which it did have did not mean what they sug­gest­ed.

The Min­is­ter of Fi­nance is like­ly to boast, for ex­am­ple, that he has been able to sig­nif­i­cant­ly re­duce the bud­get deficit as a re­sult of greater-than-ex­pect­ed rev­enue re­ceipts and the pru­dent fis­cal man­age­ment em­ployed un­der his tenure. The IMF warns, how­ev­er, that the im­proved rev­enue re­ceipts are part­ly due to im­prove­ments in the non-en­er­gy sec­tor, but are al­so due to "ad hoc" in­ter­ven­tions by state en­ter­pris­es which are pay­ing huge div­i­dends to the Cor­po­ra­tion Sole to boost its fis­cal out­come.

"While the Gov­ern­ment should reap re­wards from its own­er­ship of prof­itable en­ter­pris­es," the IMF not­ed, "staff cau­tioned that ex­cess re­liance on such div­i­dends could, in the long run, un­der­mine com­pa­ny fi­nances."And in the most telling para­graph of the re­port, it con­clud­ed by stat­ing: "Staff wel­comed the au­thor­i­ties' in­ten­tion to main­tain dis­ci­pline on cur­rent spend­ing in the run-up to the 2015 elec­tions."

The Gov­ern­ment's fis­cal po­si­tion was strength­ened last year by the First Cit­i­zens IPO which net­ted $1.05 bil­lion and this year the Fund notes: "Div­i­dends from non-fi­nan­cial SOE (State Owned En­ter­pris­es), ex­clud­ing the Na­tion­al Lot­ter­ies, al­ready to­talled one and three-quar­ter per cent of GDP in the first quar­ter of FY 2013/14, com­pared to 0.8 per cent of GDP bud­get­ed for the whole fis­cal year. This in­cludes a div­i­dend from Na­tion­al Gas Com­pa­ny equiv­a­lent to three-quar­ter per cent of GDP."

It may even be tempt­ing to be­lieve that the fis­cal per­for­mance has been so great that it is a good thing we avoid­ed Patrick Man­ning's Prop­er­ty Tax. Well, not re­al­ly. The Fi­nance Min­is­ter has gone ahead and qui­et­ly im­ple­ment­ed the Prop­er­ty Tax. The first phase, orig­i­nal­ly in­tend­ed to be­gin in June this year, will tar­get busi­ness and com­mer­cial en­ter­pris­es and work is al­ready pro­ceed­ing apace ac­cord­ing to the as­sur­ances giv­en to the IMF. The third phase, which tar­gets house­hold­ers, will not kick in un­til 2016, af­ter the gen­er­al elec­tion, and will help the min­is­ter ful­fil his promise to bal­ance the bud­get.

The bud­get is an ex­er­cise in pol­i­tics as well as eco­nom­ics and both need to be bal­anced well if the coun­try is to grow while avoid­ing the so­cial up­heavals that have seen some of the best laid eco­nom­ic plans come to naught. As a fi­nance min­is­ter, Howai has per­haps done a good job in at­tempt­ing to keep the eco­nom­ic fun­da­men­tals in line while pleas­ing the re­al politi­cians at whose be­hest he serves.

The prob­lem is, he re­mains by na­ture a bank­ing CEO. The fi­nan­cial world is re­plete with ex­am­ples of CEOs who earned huge bonus­es from their firms ($11.5 mil­lion is a drop in the buck­et) by en­sur­ing they met and sur­passed every key per­for­mance in­di­ca­tor (KPI) dur­ing their tenure, on­ly for the en­ter­pris­es to crash fol­low­ing their well-timed de­par­ture.

On the face of it, most of the KPIs Howai will an­nounce to­mor­row will sug­gest that we are on the cusp of eco­nom­ic take off. But there will be no mean­ing­ful at­tempt to deal with the most press­ing bud­getary is­sues–like the $5 bil­lion fu­el sub­sidy or the fact that more than 50 per cent of the bud­get is con­sumed by trans­fers and sub­si­dies.

The re­al­i­ty is: un­less there is a dra­mat­ic in­ter­ven­tion, we are head­ed for a slow de­cline as our en­er­gy sec­tor rev­enue con­tin­ues to evap­o­rate and the non-en­er­gy sec­tor strug­gles to com­pete ex­tra-re­gion­al­ly to com­pen­sate for the short­fall.