To­day's Ed­i­to­r­i­al

There is a the­o­ry that is pick­ing up some trac­tion that one of the rea­sons for Prime Min­is­ter Patrick Man­ning's de­ci­sion to call a snap gen­er­al elec­tion is that it might be bet­ter for him to lose the poll and al­low the Op­po­si­tion to in­her­it the bit­ter chal­ice of an emp­ty Trea­sury. This is one of the more im­plau­si­ble ex­pla­na­tions for what is as yet a dif­fi­cult de­ci­sion to com­pre­hend. It is im­plau­si­ble be­cause whichev­er po­lit­i­cal par­ty forms the next Gov­ern­ment af­ter the gen­er­al elec­tion will pre­side over a Trea­sury which, while not burst­ing at the seams, is a very long way from be­ing emp­ty. T&T's net of­fi­cial re­serves in De­cem­ber 2009 amount­ed to US$8.7 bil­lion. This was the equiv­a­lent of ap­prox­i­mate­ly 12.4 months of prospec­tive im­ports of goods and non-fac­tor ser­vices.

While this is a long way from the US$9.8 bil­lion in net of­fi­cial re­serves that the Cen­tral Bank record­ed in De­cem­ber 2008, the coun­try should be clear that T&T's re­serves have de­clined be­cause it is earn­ing less mon­ey to­day from its en­er­gy ex­ports than it did in the hal­cy­on days of 2008. The sta­tis­tics al­so mean that while this coun­try is ex­port­ing less than at the peak, its de­mand for im­ports has al­so de­clined sub­stan­tial­ly as a re­sult of the siege men­tal­i­ty that many peo­ple in the coun­try have adopt­ed. Peo­ple who are fear­ful that the new ad­min­is­tra­tion will in­her­it an emp­ty Trea­sury should al­so be as­sured by the fact that T&T's for­eign re­serves ex­clude the US$3 bil­lion that is be­ing held in the Her­itage and Sta­bil­i­sa­tion Fund (HSF).

It would seem that this Gov­ern­ment has opt­ed to em­pha­sise the her­itage el­e­ment of the fund rather than the sta­bil­i­sa­tion el­e­ment, al­though one of the spe­cif­ic pur­pos­es for which the HSF was es­tab­lished was to "cush­ion the im­pact on or sus­tain pub­lic ex­pen­di­ture ca­pac­i­ty dur­ing pe­ri­ods of rev­enue down­turn whether caused by a fall in prices of crude oil or nat­ur­al gas." The rules of the HSF al­low the Gov­ern­ment to with­draw monies from the fund when the pe­tro­le­um rev­enues col­lect­ed in any fi­nan­cial year fall be­low the es­ti­mat­ed pe­tro­le­um rev­enues for that fi­nan­cial year by at least ten per cent. Ac­cord­ing to the Jan­u­ary 2010 Eco­nom­ic Bul­letin, a doc­u­ment pro­duced by the Cen­tral Bank, the Gov­ern­ment col­lect­ed $15.9 bil­lion in oil rev­enues in the 2009 fis­cal year–from Oc­to­ber 2008 to Sep­tem­ber 2009. This was about half as much as the $30.2 bil­lion that it col­lect­ed for the 12-month pe­ri­od end­ing Sep­tem­ber 2008. The rules of the HSF al­low a gov­ern­ment to make with­drawals from the fund of ei­ther 60 per cent of the amount of the short­fall of pe­tro­le­um rev­enues for that year or 25 per cent of the bal­ance in the fund at the be­gin­ning of the year, whichev­er is the less­er amount.

The Gov­ern­ment could have tapped the HSF for $4.5 bil­lion (which would have been 25 per cent of the to­tal in the fund). In­stead, the Gov­ern­ment chose to fund the $7.5 bil­lion fis­cal deficit large­ly by ac­cess­ing the lo­cal cap­i­tal mar­ket–which is starved of ac­cess to high-qual­i­ty, TT dol­lar in­vest­ments–and by draw­ing down on some of its TT dol­lar bal­ances with the Cen­tral Bank. In oth­er words, even de­spite the per­ceived ex­cess­es of the Gov­ern­ment dur­ing the pe­ri­od of the so-called nat­ur­al gas boom, with pru­dent man­age­ment of its re­sources T&T in 2010 is a long way away from 1986 when the rul­ing PNM was swept away by the Na­tion­al Al­liance for Re­con­struc­tion, led by then Prime Min­is­ter ANR Robin­son. This is not to say that whichev­er par­ty forms the Gov­ern­ment af­ter the up­com­ing gen­er­al elec­tion will have an easy sail­ing. It is sim­ply to make the point that any com­par­i­son be­tween 1986 and 2010 is bound to floun­der on the sharp rocks of the facts of T&T's re­cent eco­nom­ic his­to­ry.