“If you can keep your head when all about you are losing theirs and blaming it on you you’ll be a Man, my son!” is the immortal words of19th/20th century British poet, Rudyard Kipling. Finance Minister Larry Howai could not desire for better advice as he finalises his 2012-2013 budget. Over the last week there has been much political contention going around and there is scheduled to be even more on the weekend. Undoubtedly, there will be many requests, petitions and even muscling of the Finance Minister to meet all kinds of strictly non-economic demands on the fiscal package. He has to be careful and not allow such demands to distort his fiscal package. All of this must be a baptism of fire for the man who has spent his life in the banking industry where political economy is not a criterion listed on the balance sheet. As advised by Kipling in his poem, “If” he sticks to what must be his basic thrust, this budget will make him a finance minister able to stay the course. The thrust of the Minister, whatever the measures he seeks to adopt to achieve the desired ends, must focus around three basics: control and make efficient recurrent expenditure to ministries and state enterprises while taking note of the required social programme; being aware of seeking to achieve social and political stability through for instance, having the Chief Personnel Officer negotiate just industrial packages; and most importantly, doing what his predecessor and indeed several previous ministers of finance have not been able to do over the last two decades, place the economy in a position where growth can be restarted.
Unfortunately, Minister Howai will be attempting to achieve the above three broad objectives and doubtless others in an environment of international economic decline and billion-dollar deficits going back over three years.
What is more, the international economic environment while not being as difficult as it was between 2008 and 2010/2011, has not improved and the large and traditionally powerful economies in Europe and North America continue to experience marginal and or zero growth. In fact, even the new giants, China and India are only averaging four and five per cent compared to the eight and nine per cent of five years ago. In his budget statement of 2011-2012, finance minister Winston Dookeran projected economic transformation with the creation of jobs and investment. He identified five “poles” for economic growth. As is well known, those economic projects the Minister hoped to stimulate into existence in the private have not materialised. Minister Howai has to obviously go beyond the “steady foundation” Mr Dookeran sought to create with bold initiatives to shake off more than three years of lethargy and inject some dynamism in the economy. Adding new initiatives to old ones which have not worked, or not worked as well as expected.
The fact is that investment by the local private sector, notwithstanding ample quantities of funds in the system, has been at best, limp. In the circumstances, foreign direct investment is surely not fighting its way into the economy. Time is right for innovation, there can be no other option. Unfortunately for Finance Minister Howai, his predecessors including PNM finance ministers, have left for him a number of hard and potentially explosive decisions to take; none more so than beginning to cut back on the annual $4 billion subsidy on gasoline. But Minister Howai cannot simply operate with a heavy and unwise hand in dramatically cutting back on the subsidy, it has to be done over a couple of budgets. In addition to which, the Minister has to finesse how he begins to withdraw the subsidy lest the inflation balloon blows up. It’s going to be a real challenge to Minister Howai.