GEISHA KOWLESSAR-ALONZO
From laptops for all school children to its commitment to restoring prosperity to the working class, the United National Congress made a number of promises to the nation as it swept to a huge victory in Monday night’s general election.
However, with dwindling oil and gas reserves amounting to a structural reduction in this country’s potential future revenue, how will the new administration financially transform such pledges into tangibles for citizens?
The Business Guardian reached out to former Minister of Finance Selby Wilson as well as leading economists Dr Ronald Ramkissoon and Dr Marlene Attzs to garner their perspectives.
Wilson said it is still too early to determine whether the new administration would be forced to dip into the Heritage and Stabilisation Fund (HSF) or turn to the International Monetary Fund (IMF), but at the same time he noted that going into the HSF is a possibility, stating that the “PNM used the HSF to the max.”
“If they have a lot of expenditure they would have to find a way to finance it...but I think it is too early to judge as you have to see what is the actual implementation programme,” Wilson said.
On the issue of the IMF, Wilson, who was appointed as Minister of Finance and the Economy in 1989 in the National Alliance for Reconstruction administration, explained that this was dependent on certain developments like if the country was in a position where it could not repay its external debt and it wanted certain accommodations then it would have to consider a fund programme.
“It’s a lot of variables. It’s not black and white. People on the campaign say anything but when they get in they would have to face reality,” Wilson added.
Ramkissoon advised the incoming administration to take stock and examine carefully what the expenditures would be as implied by those manifesto and election promises.
Then, he said, it has to look on the revenue side and see what is doable in terms of what the country currently earns from exports, primarily of oil and gas, as well as what revenue is earned through taxation of individuals and of companies.
“Governments have options in respect of existing resources and sources of income and along with possible sale of assets and otherwise maximising the incomes from existing state assets, as well as foreign borrowing.
“...So I think an assessment would have to be done, and I’m sure it has begun of our revenue position and our expenditure promises. I strongly suggest and suspect that there is going to be need for some negotiation of what was promised,” Ramkissoon added.
Therein, he added, said lie certain challenges as Ramkissoon noted it was going to take great leadership skills and a lot of work to reason with interest groups and even the population if those promises could not be met.
On turning to the IMF, Ramkissoon said, “Economies globally who are members of the IMF, and they become members of the IMF voluntarily, if they find themselves in a position where they cannot manage prudently the fiscal side, the macroeconomic side of the economy, they then turn to the International Monetary Fund.
“I don’t know that we are there, but what I do know is that the present circumstance that would have faced any government coming into office. It would have had to deal with our low revenue position, the fact that we have not as yet been able to increase production substantially. We have not had particularly high prices, so our revenues have taken a hit, and I think we have always had to be very careful about the expenditure side, which we have historically not done very well about in that we have run deficits for over a decade,” Ramkissoon further explained.
High Upfront Capital-Attzs
Attzs, a development economist, in giving her take on where would the new government obtain financing, said many of the campaign promises made by the PM designate, Kamla Persad-Bissessar and the UNC such as restarting the Petrotrin, removing property tax and expanding social welfare programmes, represent high upfront capital or high recurrent costs. Those may widen the fiscal deficit unless there are accompanied by immediate and robust revenue-raising measures. The latter (new revenue raising measures) is unlikely to happen in the foreseeable future given the incoming government’s concern for the rising cost of living on an already economic-weary population, Attzs stated.
Going to the IMF, she noted, is always politically sensitive, and also unlikely to be a consideration for the new government since an IMF programme would involve structural reforms, austerity, public sector rationalisation – all of which are politically unpalatable.
“A UNC government would likely try to avoid this route at all costs, at least initially,” Attzs said.
To fund its campaign promises, Attzs said the HSF is the most likely and least painful option for the population, at least in the short term.
“The HSF has already been tapped during the COVID-19 pandemic and could be used again under the rationale of stimulating the economy. I don’t suggest that the Government fund the reopening of the refinery, which is likely to cost millions/billions of US$, (from the HSF) but rather find a private investor to bear those costs if that (reopening the refinery) remains one of its priorities,” Attzs suggested.
That said, she recommended it must be cognisant that the HSF is a finite source of funds and, more importantly, not designed for routine budget support, emphasising that it is meant to buffer against energy-price volatility or be preserved for future generations.
“The incoming government should focus on fiscal discipline even as it tries to fulfil some of its commitments to the people of T&T,” Attzs said.
Creation of 50,000 jobs
Job creation is a crucial aspect of any economy and it plays a vital role in providing employment opportunities to individuals.
In her victory speech, Persad-Bissessar advised that one of the new government’s key pillars was the creation of 50,000 jobs for citizens.
Dianne Joseph, president of the T&T Coalition of Services Industries (TTCSI), said this would be an attraction to those who have been unemployed or underemployed, noting the data on the unemployment rate (percentage of total labour force) (modelled ILO estimate) reflected 4.5 per cent in 2024 and the Central Statistical Office –(CSO) 5.5 per cent in 2024 as at quarter four.
In 2023 the CSO reported a rate of four per cent.
Joseph said this initiative for job creation would require additional people to adequately fill these positions and thus create a higher level of employment.
Stating that the TTCSI understood that the creation of jobs may be a complex process that may involve various factors such as economic policies, technological advancements and demographic changes, Joseph suggested to the new government to collaborate with stakeholders such as the TTCSI to build out on its strategies, assess any inherent risks, the potential for success, along with the need for strong implementation teams.
“Many governments have had what may be classified as beautiful plans for employment, revenue generation, social services and others. Sadly, each term, we are left with several of them on the ‘back-burner.’
“This for the simple reason that they may not have had the right mix of talent or the right implementation teams. Implementation seemed to lack the critical attention that it deserved for past governments to be successful in execution of their plans. Not to add, that there seemed to be a lack of any form of reprimand for those who would have failed to perform their roles well or to efficiently and effectively implement the tasks assigned to them,” she added.
Emphasising that job creation is critical for economic growth, Joseph noted, however, that the strategies would require a level of funding as many of the areas to be implemented in the manifesto would require significant financial resources.
“It will therefore, require a thorough review and analysis of the country’s financial resources and a studied approached to prioritisation of which may be first and which may be later,” Joseph added.