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The last train

Sunday, September 14, 2014

“Technological changes along with the development of a significant LNG export capacity from the United States could pose a long-term threat if it significantly expanded global natural gas supplies. However, local producers are confident that demand for natural gas will continue to outstrip supply.”
Trinidad and Tobago—Staff Report for the 2014 Article IV Consultation

If one listens to the ongoing national debate, and not just about the budget, there appears no real concern over the fact that our reserves of natural gas, our largest source of income, are depleting rapidly while the markets on which we have usually depended are undergoing rapid changes. And with the oil industry on its last legs, with Petrotrin spilling more oil than it can find, there still does not appear to be any major concern. 

Former Prime Minister Patrick Manning used to be found of quoting press reports predicting the end of T&T’s oil industry from early in the last century. As he spoke in the budget debate last Friday, the Energy Minister, Kevin Ramnarine, feigned the Manning ebullience with our energy fortunes.

Ramnarine was his usual upbeat self, boasting of his accomplishments in meeting and greeting oil industry professionals while downplaying the fact that such accomplishments have not yet been parlayed into higher oil or gas production, even while our list of entitlements is growing.

We have thus far been buoyed by high enough prices to keep us in the manner to which we have become accustomed, but unless there are major new discoveries—and none seem to be on the horizon—by the general election after the impending one, we are likely to be in serious financial straits.

We will be unable to make our transfer payment obligations to the mothers needing their $500 child-rearing funds, for Gate, free laptops, senior citizens’ grants and the other budgetary hand-outs we have come to expect from the State as part of our energy sector dividend.

In a real sense, the largesse being displayed by the Government in the 2015 budget is part of a farewell party. It certainly suggest that the Government needs to continue to furnish the impression that the good times are continuing to roll, even as hidden in the budget are the 52 armoured vehicles to be used against the population when the rioting starts.

For in the unlikely event that the Government were to be returned, there is no doubt that following the next general elections, harsh measures will become necessary. 

We have already begun eating into our savings by circumventing our obligations to the Heritage and Stabilisation Funds, and as we mentioned last week, digging into the reserve funds of state enterprises. But T&T does not have the reserves to sustain $60 billion budgets unless we get a new energy find. And without new gas finds, we will not have the gas to attract new foreign direct investment using our access to affordable gas as our greatest leverage.

Our biggest problem is not just current expenditure, however, but projected ones over which no one seems to be taking notice, although the Finance Minister did pay lip service in the budget presentation. He made a passing reference to the looming pension problems, but still went on to announce unfunded pension increases that are likely to make the matter worse. According to a warning in the latest IMF Article IV Consultation Report, the problem has been growing ever more serious:

“Actuarial reports suggest that the national insurance system is not yet on a sound long-term footing, posing a sizable contingent fiscal liability. While welcoming the proposed expansion of the system to include the self-employed, further parametric reforms of the employee scheme will be needed, whether on contributions or benefits, including possibly phasing in later retirement times as people continue to live longer,” the report said.

The suggestions made in an actuarial review in 2010 included raising the pensionable age. But with a Government elected on the basis of promises to lower the eligibility age (since reneged) for pensions, that would simply have been asking too much of the electorate.

The Government is again touting a plan to include the self-employed under the National Insurance Scheme, but given our experience in enforcing taxation of the self-employed and the fact that the present arrangements guarantee the same basic pension to the self-employed as the lifetime unemployed, it is difficult to see what would be the attraction to becoming a member of the above-ground economy.

The budget debate should therefore help us to focus on the two options which we now face as a country: Finance Minister Howai’s suggestion of ever-more largesse, as if “the party cyar done”; and Dr Keith Rowley’s sober vision based on the fact that the PNM has a history of developing plans and coming to the country’s rescue at critical moments. These are the competing narratives which will take us to the next general elections.

As for me, I will always be on the side protesting the need for the 52 armoured vehicles and the message it sends about how protests will be treated.


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