“I do not envy the task that befalls the Minister of Finance.”
This was the comment made by former energy minister Kevin Ramnarine on his Facebook page yesterday, as he lamented the difficulty facing Finance Minister Colm Imbert ahead of the 2021 National Budget at the House of Representatives on October 5.
“The seriousness of the 2021 budget and the task that befalls the Minister of Finance and his public servants must not be underestimated. In times of crisis, great nations pull together like Japan did after World War II,” Ramnarine stated.
As a result Ramnarine, said now is the time for the country to come together to face the challenges.
“This is not a time for political posturing or immature politics. This moment in our history calls for us to rise above the cauldron of politics and work together to steer the ship of state away from the brink. The country is facing serious economic conditions made more protracted by the COVID-19 pandemic,” Ramnarine stated.
“Our GDP has contracted by 10 per cent in 2020 (the biggest annual contraction since 1983), our industrial base has taken a big hit and our revenue is likely to be around $32 billion or 45 per cent less than 2014’s figure. We cannot afford the lifestyle we once did. There will be pain and anyone who says otherwise is being political at a time when economics must trump politics.” He added, “What must we do? It cannot be business as usual in Trinidad and Tobago. We cannot kick the can down the road and hope for energy prices to recover. At the same time, we cannot take decisions that will cause hurt to the most vulnerable. There must be balance at a time when finding balance is hard.” Economist Dr Marlene Attzs said the budget will have a “number of intercepting issues that are going to have to be carefully managed.”
The greatest challenge facing Imbert, Attzs said, is balancing expenditure in the face of declining revenue from traditional sources.
“One of the things that the Government is probably going to have to pay attention to in the budget is looking at its level of expenditure. Government has boasted that it has not had to lay off any public sector workers but the reality is that we have had declining revenue and something is going to have to give in terms of expenditure,” Attzs said.
She said devaluation may also be an issue to address.
“The economists have been saying for a long time that we have this managed float and it may be better to put the exchange rate closer to something like 10:1. Now that has two implications, one is it can serve as a fillip for the manufacturing sector, meaning it can give the manufacturing sector a boost to produce more for the export market because it means our exports are going to be cheaper et cetera. The catch of that, of course, is that we import some of the inputs into the manufacturing sector, so the net impact may not be as positive in terms of the impact on the manufacturing sector,” she said.
“But more importantly from a social perspective, a lot of what we consume in Trinidad and Tobago, including basic things like medication, for example, is imported, so depreciation of the exchange rate means an almost immediate impact on persons who depend on things like medication. Now we all eat imported food but there is going to be an immediate impact on the prices of these goods that we import and we consume and that is going to affect the people who can ill afford to be affected by it.” Imbert will also have to deal with the issue of expenditure concerning the COVID-19 pandemic going forward, she said.
“We know that COVID is going to be with us for some time to come and there is going to be a need for expenditure for the health sector. So within the confines of the fiscal space, the government now has to decide from where it is going to get funding to support the health sector and the education sector,” Attzs said.
Attzs said while a call has been made for corporate T&T to support the education sector, the Government will also have to “dig deep” to ensure the most vulnerable are given a fighting chance to access basic education.
“And then there is another elephant in the room, the extent to which the Government can go out on to the market and borrow. You have to manage your debt to GDP ratio,” she said.
“It is really going to be a combination of issues that the Minister of Finance is going to have to face at a very delicate time in Trinidad and Tobago’s economic space, where we are trying to live off of declining revenues but we also have to try and manage some expectations in terms of those levels of expenditure that the Government has engaged in over the last couple of years.”