There must be a speedy resolution of the issue with the Auditor General and the Minister of Finance to forestall serious concerns about the credibility and accuracy of T&T’s reported fiscal performance in 2023 and national accounting practices, economist Dr Vaalmikki Arjoon said yesterday.
“If there was indeed an error and the reported revenues were understated, especially by the significant magnitude of $2.6 billion, it is possible that stakeholders may question the veracity of our reported fiscal performance in previous years and whether there were errors preceding this one—are the fiscal balances and even our current account balances, among other things, in prior years also inaccurate,” he said.
Arjoon said these questions will crop up, not only for investors and the private sector but multilateral and credit rating agencies. Questions might be asked about the credibility of the government’s financial management and reporting, he added.
“For instance, disputes about the validity of the fiscal data could raise concerns for credit rating agencies as they could view this as governance risk and question the quality and accuracy of government reporting, potentially harming future ratings. It must also be corrected quickly to avoid multilaterals questioning the integrity of our fiscal reporting, which in turn, can hamper our ability to raise financing from them, especially at attractive rates,” he said.
If the issue is not addressed at the earliest, Arjoon warned, trust in public fiscal institutions could be undermined.
He explained: “Since the Ministry of Finance must adhere to the highest standards of financial reporting and transparency, it is only natural that the Auditor General would require supporting documentation to verify, within reason, the accuracy and completeness of the new revenues reported, which the Ministry should have little difficulty in providing going forward, given that they successfully received an extension from Parliament.
“If, however, they fail to provide adequate documentation, it could further call into question the authorities’ commitment to good governance, and create an unfortunate perception among certain stakeholders, however misleading it may be, that someone was being disingenuous with the figures. This must be avoided at all costs.”
Arjoon said if the $2.6 billion revenue understatement is proven to be valid, this significantly narrows the deficit for the last fiscal year from $3.411 billion to $811 million. From a credit ratings perspective, the credit quality of the state may then be viewed as better than what was previously reported in the last rating exercise.
“But again, this is only if there is adequate evidence of an error,” he said.
“Indeed, funds of this magnitude ought not to have slipped through. To ensure the accuracy of the new electronic cheque-clearing system, which was blamed for the error, a more effective approach might have been to initially run it parallel with the old system. This would allow for thorough verification of the new system’s performance. Once confident in its reliability and functionality, the full transition could then take place, potentially averting the reported errors,” he advised.