Finance Minister Karen Tesheira faces a steep uphill climb in her quest to modernise the Public Service, achieve the budget’s revenue projections and sell her new proposals to an increasingly skeptical public, says Opposition MP Kamla Persad-Bissessar. The former attorney general said there were several tasks that are impossible to achieve in the budget, and the minister has to level with us about how she is going to deal with them and the implications for the deficit.

“If you look at her agenda, there are at least 25 new pieces of legislation that needs to be brought to Parliament for approval before you can begin collecting revenues—from land regularisation and valuation, to seatbelt legislation and the breathalysers. “This government could hardly get through ten pieces of legislation over the course of a year, but the Finance Minister wants to send through at least 25 bills as well as launch a nationwide land and property census by December,” Persad-Bissessar said. “To make matters worse, she is depending heavily on property taxes and the non-oil sector to generate the kinds of revenues she needs to run the Government over the next 12 months. “With a track record such as this one I will not be surprised that the deficit will be a lot higher than the eight billion dollar projections she expects by the end of the year.

“Last year we saw oil and gas prices around US$65 and $70 with gas prices around US$3.15. Despite these prices the deficit was much larger than her initial projections,” she said. Coming back for funding. “Today with an oil price projection of US$55 and a gas price of US$2.75, I am not convinced that she will have enough financial resources to fund the Government for the year. She will be coming back to the Parliament for additional funding long before the end of the fiscal year seeking more money, as her tax revenue projects will fall far shorter than her projections.”

According to Persad-Bissessar:
“She has indicated her intention to continue her aggressive public sector investment programme as well as invest heavily into the Government’s mega projects such as the Sporting Facilities in south Trinidad, the Rapid Rail, the attack helicopters, expansion of the highway network to Pt Fortin and Sangre Grande, as well as new ferries and facilities for the water taxi service. “She is adamant that her expenditure programme will not be contained, but she has not convinced the national community that she will have the revenues to keep up this level of spending without sending us into a debt spiral.”

Persad-Bissessar said close to 60 per cent of Government revenues come from the energy and petroleum processing sector. With lower revenues coming from this sector, the Government has to present us
with a budget that accommodates this lower revenue projection with a comparative reduction in spending. “They are acting as though nothing has changed on the international market, and it is business as usual for the Government,” she added.

IMF in two years
Opposition Senator Wade Mark, on the other hand, said the level of spending being undertaken by the Government was unrealistic and they will run out of money by 2012. “It will be a tragedy, but I am seeing that we will be facing the IMF again within two years,” he said.
“This is a political budget. It has very little monetary or economic policy in it—it is an election budget,” Mark added, “and Manning might be using the opportunity being presented with the extension of the local government reforms, the split in the Opposition and easy access to the little savings in the treasury to shore up his position and call an early election.

“This assertion is not far-fetched as the nationwide tour he made in his Monday night meetings, leading up to the budget, had very little to do with the budget and talking about the economy and how they intend to deal with it.” “When the money in the treasury is depleted over the next two years, Manning will be going back to the IMF. By then, the structural adjustment programme articulated by the IMF will be a very difficult remedy for us to bear.

“I cannot see how they intend to raise all of this money when key companies in the energy sector are in trouble. Petrotrin is in a loss position. The National Gas Company (NGC) will soon be facing a loss, and both companies as well as other state companies are approaching the international and local capital markets to raise huge loans for project without the proper feasibility studies outlining how these loans will be repaid.” Mark noted there has been a softening of all petrochemical prices, even iron and steel, urea and methanol prices have been down.

“When you combine that with falling local production from oil—now put at less than 110,000 bpd, you see the real possibility of the Government getting involved in further borrowing will result in a much steeper fiscal deficit than predicted in 2010. “Rather than making the same error of judgment as his predecessor, George Chambers, he will call election earlier when times are still good, so he could extend his term and achieve his agenda of becoming an executive president within that term. Strategically, it is better to call an election now rather than later.

The Finance Minister is using the guise of a stimulus package to try to give out some goodies to garner the support they need to take them through this crisis, Mark said. “Maintaining the payouts on old age pensions, smart card and the expansion of the entire social programme costing billions, are all part of the strategy. In the end the fiscal hole can grow to as much as $15 billion in 2010.” Mark was also disappointed by the US$2.5 billion saved in the Heritage & Stabilisation Fund, saying the fund should now be in excess of US$20 billion when you consider the huge sums of money that passed through the Government’s hands over the past ten years.

“Saving was never a priority with the Government. The money in the Heritage fund is just a residual from the Government spending. This will be the first time in 17 years that the country will record negative growth and we are not in a strong enough position to apply adequate resources to deal with the situation. “We should have been further along with saving for the Heritage Fund as well as in diversifying the economy so when the revenues from oil and gas run low it should not have such a great impact on the economy,” he added.