The current world economic scenario is difficult and becoming increasingly so. The optimistic IMF forecast for the post-pandemic era has been replaced by a more sombre mood of caution if not pessimism. The IMF’s 2023 World Economic Outlook suggests a difficult decade ahead. All countries have been affected but more so emerging and developing countries. By the end of 2024 GDP in emerging and developing countries could be six per cent lower than the income levels prior to the pandemic as pointed out in its report.
The effect of the pandemic and the knock-on impact of the war in Ukraine has led to a rise in energy and food prices and a worldwide surge in the inflation rate. To counterbalance the inflationary impact, rich countries, especially the US, have adopted a high-interest rate strategy which has led to an upward trend in the value of the dollar. A ‘rising dollar’ will affect countries and businesses with US dollar-debt exposure. The World Bank’s preoccupation is described in the title of its publication: “Falling Long-Term Growth Prospects”. It warns of “a lost decade in the making” and that the meagre growth of the 2010s “could extend into the remainder of the next decade.”
The staff at the IMF and the World Bank are highly rated, professional economists who have no incentive to be pessimistic. We need to remember that prior to COVID and in the post-2008 financial crash the developed countries have been pursuing a decade of easy money and cheap fossil fuel. Given the implication of climate change and the poor adherence to carbon emission targets, the window of opportunity to invest in renewables is shortening. This means that the pace of investment in renewables will be affected if the investment climate is stagnant or made too expensive by higher interest rates.
The domestic situation will be affected by these international events. One of the key takeaways of the 2023 IMF Article IV consultation was the IMF’s labelling of the Government’s increase in tax revenues derived from the energy sector as a ‘windfall’, a warning that the revenue improvement was not self-sustaining and depended on the vagaries of international energy markets. This year to date, the price of ammonia is approximately 50 per cent lower than the average price achieved in 2022. Whilst no 2023 production numbers have been published by the Energy Ministry, we know that the volume of natural gas being produced is already 36 per cent below peak production. Without any new finds, we can conclude that natural gas production is in secular decline.
The implication of the foregoing is that even as the world economy shows signs of stagnating, the natural gas sector and the petrochemical sector will be seriously challenged and with it the national economy. It is inevitable that the energy sector will remain the country’s main growth engine in the near to medium term and will continue to be a major contributor to the country’s tax revenue. However, there is scope to diversify its export products and markets, and this must be done pragmatically.
The period 2014-21 clearly demonstrates the knock-on effect of a depressed energy sector. This partly explains the IMF’s advice to look for export alternatives and to manage the deficits carefully while caring for the vulnerable. The road ahead is challenging and as we have looked back on the performance of the country and the importance of the role of the civil service over the last series of articles it should be clear that if the country is to develop, it needs a more efficient civil service. There is never a good time to be inefficient, but the impact is worse when resources are scarce.
A country’s success revolves around the strength of its civil service structures. It operates the regulatory environment which allows everything to work. Therefore, the Civil Service matters and explains the perennial call to improve the ease of doing business to create a more conducive business environment for every citizen to invest and work towards diversifying the economy. The IMF language on this point is bland but compelling. “In addition to a sound and stable macroeconomic environment, the authorities are encouraged to step up their efforts towards improving the business environment by delivering on measures (eg, infrastructure, governance, trade policy, education) laid out in the Vision 2030.”
This has been the challenge since independence in 1962. Plan implementation will always be weak and inconsistent unless the Civil Service is appropriately reformed to address the task. The people who make up the Civil Service are as talented as people anywhere in the world. The difference in the performance levels is to be found in its organisational structure and the way it is currently managed. There have been piecemeal attempts at civil service reform. But these efforts have been jerky and inconsistent. Part of the reason for this is that no government has stayed in office for a long enough period since 1986 to make the reform of the Civil Service a national bipartisan agenda.
To move Trinidad and Tobago along a progressive development path requires a comprehensive overhaul of the Civil Service. It is long overdue and cannot be avoided if we are to survive.
Mariano Browne is the Chief Executive Officer of the UWI Arthur Lok Jack Global School of Business.
