The time has come for this country to take off the “blinkers”, recognise the economic realities facing us and make the necessary structural adjustments, economist Dr Marlene Attzs has said.
And if as citizens we do not accept that then we are doomed to fail, she warned.
“As politically unsavoury as it may be, GORTT has to prioritise and make hard and possibly unpopular decisions,” Attzs said.
Attzs made the statements in response to the recent press conference held by Finance Colm Imbert where he painted a grim picture of this country’s economic position.
While some cuts need to be made Attzs said there is some expenditure that people would not question despite the difficulties being faced.
“No one will question the paramount urgency of funding for the health sector, we all want this pandemic under control so that some level of ‘normal’ domestic economic activity can resume. Appropriate stimulus packages and attention to the vulnerable (via social assistance) also will not be questioned. Attention to the education sector – especially dealing with unequal access that has become evident during the pandemic also will not be questioned,” Attzs said.
On the other hand, there are some cuts that need to be made, she said.
In Thursday’s Business Guardian magazine economist Dr Terrence Farrell outlined several measures he believes need to be undertaken, including cutting the size of the public service and increasing utility rates.
“So absent a miracle, there is no way that the level and composition of government expenditure cannot not now be addressed; and that will involve reducing head-count in the public service, closing state enterprises, and increasing rates for water, electricity and transportation,” Farrell stated.
Attzs was asked if she agreed with Farrell’s assertion.
“To Dr Farrell’s point, I agree there is need for greater efficiencies in those agencies that benefit from GORTT funding. It simply is not feasible to continue to provide subventions and subsidies in some cases where there has been no tangible change to the previously used business models,” she said.
“We have lived in a ‘covidised’ economic environment for almost a year and it is reasonable to ask what, if anything have public sector organisations—across the board —done differently to reduce their costs? Have there been any efficiency gains or are organisations simply relying on ‘d government’ to continue with subventions? Additionally, there also should be a re-thinking and re-prioritisation of some of the capital projects earmarked by GORTT,” Attzs said.
Attzs said there was nothing surprising about T&T’s current economic position.
“There’s nothing secret about the ‘current’ situation facing the country. The situation with respect to the energy sector has been evident for several years now. The only variable of recent vintage has been the state of the economic affairs as exacerbated by the COVID-19 pandemic. The GORTT has had to find resources to treat with the pandemic in a situation where revenues have significantly declined,” Attzs said.
“In its recently released Economic Bulletin the CBTT indicated that there was deficit of $1 billion on the fiscal accounts for the first quarter of FY2020/21 (October-December 2020) “compared with a deficit of $386.8 million in the corresponding period of the previous fiscal year”—this is not insignificant. When you add to this scenario the increasing non-energy fiscal deficit that we have had since about 2010 the future economic prospects are even more daunting. These are economic realities we must collectively confront,” she said.
Former finance minister Prof Winston Dookeran said T&T is in a “financial crunch and it’s quite grave.”
Dookeran said the country will therefore need to get some support beyond what Imbert suggested which is borrowing and using reserves, particularly from the Heritage and Stabilisation Fund as a stop-gap measure to bring about some financial stability.
“Beyond that there will be the need to open discussions with international financial institutions including the IMF (International Monetary Fund) on a larger programme of support,” Dookeran said.
Dookeran added that discussion should also be held with the World Bank, the Inter-American Development Bank (IDB) and the Development Bank of Latin America (CAF).
Attzs said she does not see any reason why T&T should not approach the IMF for assistance at this time.
However, she said an oversight committee should be established if we do approach any multilaterals for assistance.
“In the late 1980s T&T, among other Caribbean countries, faced severe economic difficulties and turned to the IMF for support with economic stabilisation programmes. I see no good reason why we should not seek help in restructuring our economy – it is part of confronting the reality we face,” Attzs said.
“What I would however hope on this occasion, should the IMF or any of the other multilaterals be engaged to assist with an economic programme, is that T&T commits to an oversight committee such as the Economic Programme Oversight Committee (EPOC) in Jamaica,” she said.
The EPOC comprises 11 people from the private and public sectors, and civil society.
“They receive and assess information from the Government of Jamaica (GOJ) to track the progress of the targets under the three-year Precautionary Stand-By Arrangement (PSBA) which was signed in 2016,” she said.
Imbert said the official budget estimate of revenue for the period October 1, 2020 to January 31, 2021 was $13.823 billion.
However, primarily as a result of the adverse effects of the pandemic, the actual revenue collection for the four months was $12.020 billion.
This was a negative variance of $1.803 billion, or 13 per cent less than the estimates.
While revenue is a problem, Attzs said she believes at this time the focus should instead be on cutting expenditure.
Imbert said, “mandatory payments” including the payment of salaries for the approximately 90,000 workers in the public sector cost the country $3.5 billion every month.
“Our focus now should be on reducing expenditure and consequently the fiscal deficits, particularly the non-energy deficit given the sharp declines in energy sector revenues which acted as a buffer. Those buffers have dwindled,” Attzs said.
“This is an unprecedented reality facing the Government and people of T&T which calls for, among other things, collective responsibility to address and rebalance our economy. If we, the people, do not accept that a structural adjustment of both the economy and our mindset is required, then we are all doomed to fail,” she said.