An econ­o­mist and trade union­ist are urg­ing the Gov­ern­ment to pay close at­ten­tion to the Na­tion­al In­sur­ance Sys­tem (NIS), as was stat­ed by the staff mis­sion from the In­ter­na­tion­al Mon­e­tary Fund (IMF).

In its con­clud­ing state­ment fol­low­ing an Ar­ti­cle IV con­sul­ta­tion on T&T on Mon­day, the IMF staff sug­gest­ed rais­ing Na­tion­al In­sur­ance con­tri­bu­tions along with the re­tire­ment age to en­sure the long-term sus­tain­abil­i­ty of the coun­try’s pen­sion sys­tem.

“In the ab­sence of re­forms, the Na­tion­al In­sur­ance Sys­tem’s deficit is ex­pect­ed to widen, de­plet­ing its re­serves by the mid-2030s. IMF staff wel­comes the au­thor­i­ties’ pro­pos­al to in­crease the re­tire­ment age to 65 years. The au­thor­i­ties are en­cour­aged to con­sid­er oth­er mea­sures to en­sure the pen­sion sys­tem’s sus­tain­abil­i­ty, in­clud­ing in­creas­ing the con­tri­bu­tion rate,” ac­cord­ing to the IMF team’s con­clud­ing state­ment.

Giv­ing his per­spec­tive on the IMF’s com­ments, Eco­nom­ics Pro­fes­sor Karl Theodore said the IMF flagged the Na­tion­al In­sur­ance Sys­tem’s deficit, which is some­thing that must be mon­i­tored.

The gov­ern­ment would be well ad­vised to keep work­ing on ways to se­cure the sus­tain­abil­i­ty of the pen­sion sys­tem, in­clud­ing ad­just­ing the con­tri­bu­tion rate, he said.

Trade union­ist and econ­o­mist, David Ab­du­lah, not­ed that in­creas­ing both the re­tire­ment age to 65 and in­creas­ing the con­tri­bu­tion rates will be bur­den­some for work­ers.  

“We pro­pose in­creas­ing the num­ber of peo­ple who con­tribute to the NIS. More con­trib­u­tors equal more in­come in­to the fund and since many of the new peo­ple, who will be in the net, are younger, this will help to sus­tain the NIS,” Ab­du­lah said.

Com­ment­ing on is­sues raised by the IMF, Theodore ex­plained that the IMF state­ment does not in­val­i­date the stress­ful cries that have been com­ing from some quar­ters, but it is nor­mal to have a long lag be­tween an im­prove­ment in the econ­o­my and a pos­i­tive sen­ti­ment at the pop­u­la­tion lev­el.  

“This is how the econ­o­my works: when it goes bad, we feel it al­most im­me­di­ate­ly, and the feel­ing may last for a while. How­ev­er, when the econ­o­my moves in a good di­rec­tion, we feel al­most no change for a long while.”

The truth, the econ­o­mist said, is that as the IMF has stat­ed, the econ­o­my seems to be “un­der­go­ing a grad­ual, sus­tained eco­nom­ic re­cov­ery”.  

Fol­low­ing the on­set of Covid-19, Theodore said it will be re­mem­bered that the gov­ern­ment made arrange­ments to pro­duce a Roadmap of Re­cov­ery and it is to their cred­it that there are min­istries that have tak­en the Roadmap se­ri­ous­ly. In this sense, he said, the IMF as­sess­ment of March 2024 comes as no sur­prise.

 The econ­o­mist point­ed out that the fact that the lev­el of debt and the fis­cal deficit have in­creased on­ly mar­gin­al­ly should not be tak­en as a sig­nal that Gov­ern­ment spend­ing should be in­creased with­out lim­it. It does mean that some in­crease is now fea­si­ble, Theodore ar­gued, but that in­crease should be kept with­in five per cent of the GDP.  

More­over, he said it would be bet­ter if the in­creased spend­ing is on ar­eas that have both short-term and long-term con­se­quences and in this sense, the cur­rent road re­pair pro­gramme and ef­forts to im­prove the wa­ter sup­ply should be pri­ori­tised for in­creased al­lo­ca­tions.  

Al­so, Theodore men­tioned that ef­forts to ad­dress the hor­ri­ble traf­fic sit­u­a­tion should al­so be among the spend­ing pri­or­i­ties and said all of these ar­eas have both short and long-term ben­e­fits.

On the is­sue of the for­eign ex­change short­age, the IMF has come up with its stan­dard rec­om­men­da­tion on for­eign ex­change flex­i­bil­i­ty. The­do­re said this is some­thing that would not find favour with the Gov­ern­ment, main­ly be­cause of the ex­pect­ed im­pact on the low­er-in­come groups in the coun­try. T&T needs to look for al­ter­na­tive ways of deal­ing with the prob­lem, he said.  

“One sug­ges­tion that has been made is to use the fis­cal sys­tem to change the ap­proach of the busi­ness com­mu­ni­ty and the pop­u­la­tion to for­eign ex­change. The sug­ges­tion is to low­er the statu­to­ry tax rate on busi­ness­es that are net earn­ers of for­eign ex­change and in­crease the tax rate on busi­ness­es that are net users of for­eign ex­change,” he added.

Ab­du­lah shared his per­spec­tive on what was rec­om­mend­ed by the IMF. He said while macro­eco­nom­ic in­di­ca­tors such as Gross Do­mes­tic Prod­uct (GDP) growth; the bal­ance of pay­ments; fis­cal and cur­rent ac­count bal­ances are im­por­tant for a tech­ni­cal as­sess­ment by econ­o­mists and oth­ers to un­der­stand the health of the econ­o­my, the IMF and oth­er in­ter­na­tion­al agen­cies make no men­tion of the how peo­ple are liv­ing.

“So, GDP growth may be good, but are peo­ple’s lives good? The IMF says that things are look­ing up, but what are the or­di­nary men and women feel­ing? Are their lives bet­ter? The an­swer to that is a re­sound­ing no! Wages and salaries have not kept up with the in­creased prices of food and fu­el. Work­ing peo­ple are worse off to­day than they were five years ago.”  

“GDP growth is there­fore not be­ing trans­lat­ed in­to bet­ter­ment for the peo­ple. One ma­jor rea­son for this is that while the eco­nom­ic pie may be big­ger to­day than say in 2022, it is be­ing di­vid­ed up un­equal­ly. So, the few very wealthy are get­ting a big­ger and big­ger slice of the pie and the ma­jor­i­ty have to do with less. The IMF does not ad­dress that, nor does the Gov­ern­ment,” Ab­du­lah de­tailed.

An­oth­er point he iden­ti­fied is that the IMF is en­cour­ag­ing the Gov­ern­ment to con­tin­ue with its neo-lib­er­al poli­cies, which refers to the need to con­tin­ue to re­duce sub­si­dies and this trans­lates to mean elec­tric­i­ty and wa­ter rate in­creas­es and a fur­ther in­crease in the price of diesel.  

The IMF, he not­ed, is strong on prop­er­ty tax and the rate in­crease on res­i­den­tial homes will put an added bur­den on the or­di­nary work­ing man and woman.  

Last­ly, Ab­du­lah stat­ed while they iden­ti­fy the need for struc­tur­al re­forms of the econ­o­my, cit­i­zens need to en­sure that the re­forms that are im­ple­ment­ed are not go­ing to deep­en the in­equal­i­ty of wealth and in­come be­tween the rich and the poor, which is what IMF neo-lib­er­al poli­cies have re­sult­ed in the world over.  

In­stead, he said the Gov­ern­ment must pur­sue eco­nom­ic trans­for­ma­tion which means re­al di­ver­si­fi­ca­tion of the econ­o­my; a tru­ly just tran­si­tion giv­en cli­mate change; and that T&T achieves what is in the Con­sti­tu­tion of the coun­try, name­ly that “the op­er­a­tion of the eco­nom­ic sys­tem should re­sult in the ma­te­r­i­al re­sources of the com­mu­ni­ty be­ing so dis­trib­uted as to sub­serve the com­mon good, that there should be ad­e­quate means of liveli­hood for all, that labour should not be ex­ploit­ed or forced by eco­nom­ic ne­ces­si­ty to op­er­ate in in­hu­mane con­di­tions but that there should be an op­por­tu­ni­ty for ad­vance­ment based on recog­ni­tion of mer­it, abil­i­ty and in­tegri­ty.”

The IMF in its re­port said T&T’s eco­nom­ic growth is pro­ject­ed to gain mo­men­tum in 2024 af­ter it is es­ti­mat­ed to have fur­ther ex­pand­ed by 2.1 per cent in 2023.  

“Re­al GDP (gross do­mes­tic prod­uct) is ex­pect­ed to ex­pand by 2.4 per cent in 2024, sup­port­ed by the non-en­er­gy sec­tor and new en­er­gy projects com­ing on­stream—which will help off­set the struc­tur­al de­cline in en­er­gy pro­duc­tion,” said the IMF.

The IMF mis­sion not­ed that in­fla­tion de­clined sharply to 0.3 per cent in Jan­u­ary 2024, af­ter peak­ing at 8.7 per cent in De­cem­ber 2022, main­ly due to de­clin­ing food and im­port­ed goods in­fla­tion.

“Banks’ cred­it to the pri­vate sec­tor con­tin­ues to ex­pand and the fi­nan­cial sec­tor ap­pears sound and sta­ble. The cur­rent ac­count is es­ti­mat­ed to have re­mained in a sur­plus in 2023, and for­eign re­serves cov­er­age is ad­e­quate at 8.3 months of prospec­tive to­tal im­ports,” said the IMF.