Rapheal John-Lall

Gov­ern­ment's chal­lenges in deal­ing with falling oil prices are not on­ly eco­nom­ic but po­lit­i­cal in an elec­tion year, econ­o­mist Dr Ronald Ramkissoon said yes­ter­day.

"Once the Gov­ern­ment takes the nec­es­sary mea­sures to ride out this pe­ri­od, it can have an ef­fect on the out­come of the gen­er­al elec­tions. Specif­i­cal­ly it is like­ly to make it very dif­fi­cult for the Gov­ern­ment to get a sec­ond term in of­fice.

"In oth­er words, the kind of mea­sures that are re­quired in this econ­o­my with falling rev­enues, can se­vere­ly test the cred­i­bil­i­ty of this Gov­ern­ment. It is re­al­ly a test just like a test for the PNM in 1986. The chal­lenge is not on­ly on eco­nom­ic man­age­ment but al­so on po­lit­i­cal man­age­ment," Ramkissoon told the T&T Guardian.

His com­ments came ahead of an ad­dress to the na­tion on Thurs­day by Prime Min­ster Kam­la Per­sad-Bisses­sar when she is ex­pect­ed to out­line mea­sures to be tak­en by her ad­min­is­tra­tion in re­sponse to falling oil prices. Yes­ter­day, West Texas In­ter­me­di­ate oil, which trades on in­ter­na­tion­al mar­kets with­in the range of the light sweet crudes pro­duced in T&T, fell be­low US$50 a bar­rel for the first time since April 2009.

Ramkissoon said: "Clear­ly the Prime Min­is­ter needs to talk to the pop­u­la­tion about where the coun­try is in terms of pub­lic fi­nances. Sec­ond­ly, to in­di­cate what mea­sures are go­ing to be tak­en in the light of the rev­enue de­cline. For econ­o­mists there are stan­dard mea­sures that are nec­es­sary."

He said the Gov­ern­ment al­so needs to look at the macro eco­nom­ic is­sues: "One needs to take in­to ac­count the is­sues of for­eign re­serves, the ex­change rate and wages. In oth­er words, they need to look at the crit­i­cal di­men­sions of the econ­o­my and how they will ad­just to the de­cline in rev­enue which is like­ly to be with us for a few years. We can­not be cer­tain but I think it would be good prac­tice for mea­sures to deal with the fall in in­come.

"What is re­quired is a dif­fer­ent way in en­gag­ing the pop­u­la­tion than we have had in the last 50 years. It is the way in which the Gov­ern­ment en­gages the pop­u­la­tion to get its un­der­stand­ing, to get it to un­der­stand we are fac­ing se­ri­ous chal­lenges and there are mea­sures that will hurt but which have to be tak­en in the best long term in­ter­est of the coun­try. That is what the prime min­is­ter needs to do. Whether they can do it or not is up in the air. It is un­cer­tain."

Ramkissoon said it would be dif­fi­cult to at­tain the gross do­mes­tic prod­uct (GDP) growth the Gov­ern­ment has pro­ject­ed be­cause of a cut back in ex­pen­di­ture.

"The Gov­ern­ment had fore­cast­ed a 2.5 per cent on av­er­age for the next three years. The Cen­tral Bank Gov­er­nor gave his fore­cast of 0.7 per cent, which is very low growth.

"Over the last few years growth has been neg­a­tive or mar­gin­al in the econ­o­my. If you take mea­sures like cut­ting ex­pen­di­ture, it can bring an ad­verse ef­fect on growth which we need to put out there. Cut­ting back pub­lic ex­pens­es can have an ad­verse ef­fect on growth but in the short term it is nec­es­sary if we are go­ing to fo­cus on the coun­try's for­eign re­serves which is the life blood of the econ­o­my or what econ­o­mists call the ex­ter­nal bal­ance.

"We are in a pe­ri­od where the fo­cus has to be on sus­tain­ing or hav­ing a de­cent ex­ter­nal bal­ance," he said.

Mooni­lal Lalchan, pres­i­dent of the T&T Cham­ber of Com­merce, said 2015 will be a chal­leng­ing year for the coun­try.

"We do not see any im­me­di­ate signs of prices go­ing back up as now the prices are de­pressed. The coun­try will have to do some belt tight­en­ing and some of the cap­i­tal projects will have to be de­ferred or even stopped al­to­geth­er," he said.

Dr Roger Ho­sein, se­nior lec­tur­er in Eco­nom­ics at the Uni­ver­si­ty of the West In­dies (UWI), St Au­gus­tine, said Gov­ern­ment will have to re­vise some its sub­si­dies in 2015 to deal with falling oil prices.

"The gov­ern­ment will al­so at some point have to con­sid­er mod­i­fy­ing its 'dole like make work sys­tem' so that more labour be­comes avail­able to the pri­vate sec­tor rather than be­ing locked in­to ar­eas of un­der­em­ploy­ment as oc­curs with our var­i­ous make work pro­grammes," Ho­sein said.