Tony Rakhal-Fras­er

Moody's down­grade of the in­vest­ment at­trac­tive­ness of the econ­o­my from sta­ble to neg­a­tive is far more a con­clud­ing analy­sis on the long-term fail­ure of suc­ceed­ing gov­ern­ments to di­ver­si­fy the econ­o­my from its mono-crop re­liance on high in­ter­na­tion­al oil and gas prices than it is on the po­ten­tial neg­a­tive im­pact on T&T's abil­i­ty to bor­row on the in­ter­na­tion­al mar­ket.

But it is not on­ly a com­ment on gov­ern­ment fail­ure, the state­ment should al­so be seen in the con­text of the pri­vate sec­tor al­so be­ing un­able to wean it­self off gov­ern­ment spend­ing of the en­er­gy rev­enues for the pur­chase of con­sumer goods and ser­vices.

There­fore, the re­liance by Fi­nance Min­is­ter Lar­ry Howai on "strong" macro­eco­nom­ic fun­da­men­tals as a de­fence against the down­grade is ir­rel­e­vant. That the for­eign re­serves in the Her­itage and Sta­bil­i­sa­tion Fund and the of­fi­cial re­serves are high, that im­port cov­er is in place for over one year, that the debt ser­vic­ing ra­tio is man­age­able and un­em­ploy­ment is low at 3.5 per cent are all ir­rel­e­vant to the three ma­jor points raised in Moody's state­ment:

n Per­sis­tent fis­cal deficits and chal­leng­ing prospects for fis­cal re­forms;

n De­cline in oil prices and lim­it­ed eco­nom­ic di­ver­si­fi­ca­tion to weigh neg­a­tive­ly on eco­nom­ic growth prospects; and

n Weak macro­eco­nom­ic pol­i­cy frame­work giv­en lack of a medi­um-term fis­cal strat­e­gy; and in­ad­e­quate pro­vi­sion of vi­tal macro­eco­nom­ic da­ta.

The rel­a­tive­ly large quan­ti­ties of re­serves (and there is an ar­gu­ment that they should have been dou­ble the present lev­el) a low un­em­ploy­ment rate etc, are where they are to­day as a re­sult of high oil and gas prices over the last 15 years.

The more in­sight­ful read­ing of the Moody's state­ment would lead to the re­al­i­sa­tion that be­yond the de­ci­sion to mon­e­tise and com­mer­cialise the nat­ur­al gas re­sources, suc­ceed­ing gov­ern­ments have done pre­cious lit­tle to strate­gi­cal­ly utilise the bil­lions of dol­lars col­lect­ed in rents from the multi­na­tion­al cor­po­ra­tions, from Petrotrin and the Na­tion­al Gas Com­pa­ny, to es­tab­lish a base for the long-term trans­for­ma­tion of the econ­o­my.

But the Moody's state­ment goes fur­ther and in­dicts the man­agers of the econ­o­my for not us­ing at least a por­tion of the Sta­bil­i­sa­tion el­e­ment of the HSF to strate­gi­cal­ly and pro­duc­tive­ly af­fect the econ­o­my:

"It has not been used as a counter-cycli­cal pol­i­cy tool, thus lim­it­ing its abil­i­ty to com­pen­sate for neg­a­tive im­pact of ad­verse shocks in the econ­o­my."

But the Gov­ern­ment, with an elec­tion fac­ing it and fear­ing an elec­toral back­lash from the Moody's state­ment and down­grade, set off on a spin-doc­tor­ing cam­paign. Per­haps aware of and "jumbied" by the prospects of the Moody down­grade and state­ment, Prime Min­is­ter Kam­la Per­sad-Bisses­sar jumped the gun and pro­nounced great man­age­ment of the econ­o­my through a short-term bal­anc­ing of the bud­get. In the process, she ig­nored com­plete­ly the over­all re­al­i­ty of eight years of bil­lions of dol­lars in deficit.

Clear­ly aware that his Prime Min­is­ter had by her state­ment giv­en too pos­i­tive a pic­ture of the per­for­mance of the econ­o­my and this based on one small sta­tis­tic, Fi­nance Min­is­ter Howai sought to bal­ance off the po­lit­i­cal en­thu­si­asm of the PM with some eco­nom­ic re­al­i­ty.

How­ev­er, as Min­is­ter Howai was set­ting about to bal­ance the com­mu­ni­ca­tion sleight-of-hand, the Moody's down­grade state­ment forced him and oth­ers in­to de­nial and the usu­al tac­tic of at­tack­ing the mes­sen­ger.

For in­stance, min­is­ters Tewarie and Mooni­lal have adopt­ed the line of here is an in­ter­na­tion­al agency at­tempt­ing to have the Gov­ern­ment re­duce ex­pen­di­ture on so­cial wel­fare pro­grammes. Sure Moody's com­ment­ed on "the rigid struc­ture of pub­lic ex­pen­di­ture, where wages, sub­si­dies, and trans­fers ac­count for more than 65 per cent of to­tal ex­pen­di­tures, lim­its fis­cal flex­i­bil­i­ty."

But that must be tak­en in the con­text of the in­creas­ing ex­pen­di­ture in an econ­o­my that re­mains de­pen­dent on high oil and gas prices and with­out a plat­form of oth­er for­eign ex­change earn­ers.

The at­tempt at con­vey­ing that all is well and the Gov­ern­ment is man­ag­ing the econ­o­my far bet­ter than oth­er oil and gas pro­duc­ing coun­tries, which have suf­fered from the shock of oil price col­lapse, is not new and unique to this Gov­ern­ment.

Back in 2008-2009 when the fi­nan­cial dis­as­ter spread from the Unit­ed States to Eu­rope and through the rest of the de­pen­dent world, Prime Min­is­ter Patrick Man­ning and his then PNM fi­nance min­is­ter, Karen Nunez-Tesheira, sought to per­suade the na­tion­al com­mu­ni­ty that the Gov­ern­ment was on top things and T&T would not be af­fect­ed in a ma­jor way; and this was notwith­stand­ing the fact that the coun­try's ma­jor trad­ing part­ners were in fi­nan­cial and eco­nom­ic tur­moil.

On the like­ly im­me­di­ate im­pact of the in­vest­ment down­grade by Moody's, if the Gov­ern­ment is able to place bonds on the in­ter­na­tion­al mar­ket, in­ter­est rates will sure­ly be high. As to the prospects of for­eign di­rect in­vest­ment in the en­er­gy sec­tor be­ing scared-off by Moody's down­grade, fdi to T&T and the rest of the de­vel­op­ing world in the ex­trac­tive in­dus­tries is al­ways as­sured once the trans-na­tion­als have been able to strike a deal.

What we are see­ing and hear­ing is the tri­umph of elec­toral pol­i­tics over eco­nom­ic log­ic and hon­est com­mu­ni­ca­tion with the pop­u­la­tion.