GEISHA KOW­LESSAR-ALON­ZO

With the 2024 mid-year bud­get re­view ex­pect­ed to be de­liv­ered next month, three lead­ing econ­o­mists ex­am­ined the cur­rent state of the econ­o­my, tak­ing in­to con­sid­er­a­tion key fac­tors such as crime, the en­er­gy sec­tor, the de­vel­op­ment of non-en­er­gy ex­ports and more fun­da­men­tal­ly whether the TT dol­lar should be de­val­ued.

Up to Tues­day, Fi­nance Min­is­ter Colm Im­bert had not yet an­nounced a date for mid-year bud­get re­view.

Econ­o­mists Dr Mar­lene Attzs and Dr Vaalmik­ki Ar­joon spoke against a move to de­val­ue while Dr Ronald Ramkissoon, said he was “nei­ther here nor there.”

Attzs told the Busi­ness Guardian that while a de­val­ued cur­ren­cy will make T&T’s ex­ports more com­pet­i­tive, the more sig­nif­i­cant im­pact will make im­ports more ex­pen­sive.

“We im­port prac­ti­cal­ly every­thing we con­sume. The im­me­di­ate im­pact of a de­val­ued TT dol­lar, there­fore, would be a fur­ther in­crease in the cost of liv­ing in­clud­ing on es­sen­tials such as med­i­cines and food­stuff. Many cit­i­zens are bare­ly mak­ing ends meet now so a de­val­u­a­tion would be close to the fi­nal straw for many. And then there are the domi­no im­pacts as busi­ness­es pass on their high­er costs (from spend­ing more for for­eign ex­change) to con­sumers,” she said.

Ar­joon, who shared sim­i­lar sen­ti­ments, said avoid­ing a TT dol­lar de­val­u­a­tion is pru­dent, de­spite the low in­fla­tion, to pre­vent fur­ther price es­ca­la­tion, es­pe­cial­ly amid prospects of high­er prices from in­ter­na­tion­al sup­pli­ers in the short term.

Ramkissoon agreed that de­val­u­a­tion in “some sense” would help T&T be­come more com­pet­i­tive well as bring re­mu­ner­a­tive ben­e­fits to small busi­ness­es.

How­ev­er he ad­vised, “If we go­ing to con­tin­ue to im­port at the cur­rent rate and pref­er­ence then we must al­so think about how we are go­ing to earn the for­eign ex­change to pay for those im­ports. And if we are not earn­ing that in the short term then what do we as house­holds have to do?

“My po­si­tion is I am nei­ther here nor there, at this time, but I think there are ben­e­fits to be de­rived from a de­val­u­a­tion that we can­not ne­glect. I un­der­stand the Gov­ern­ment’s po­si­tion...I know the Gov­ern­ment has in­di­cat­ed time and time again that it wants to avoid the in­creased pres­sures es­pe­cial­ly on those less able to af­ford and I ap­pre­ci­ate that. how­ev­er, it is more a short-term kind of con­sid­er­a­tion. The fact that we have not de­val­ued has not pre­vent­ed a fair amount of suf­fer­ing in the econ­o­my,” Ramkissoon said.

Eco­nom­ic per­for­mance

As it re­lates to how the Gov­ern­ment has per­formed with­in the last year, Attzs said mea­sur­ing this ought not be on the ba­sis of a grade, es­pe­cial­ly when there are so many ex­ter­nal and in­ter­nal risk fac­tors that can im­pact per­for­mance.

A more use­ful ap­proach, she ad­vised, would be to as­sess per­for­mance on the ba­sis of in­di­ca­tors, in­clud­ing eco­nom­ic in­di­ca­tors such as eco­nom­ic growth, un­em­ploy­ment and fac­tors that im­pact qual­i­ty of life.

“I think we need to ask whether they have de­liv­ered on, or demon­strat­ed a com­mit­ment to de­liv­er on, what was promised in bud­get for fis­cal 2024. Gov­ern­ment’s abil­i­ty to de­liv­er on its bud­get com­mit­ments is based, among oth­er things, on what rev­enues they earn, pri­mar­i­ly from the en­er­gy sec­tor. The rev­enue chal­lenge is re­al - nat­ur­al gas pro­duc­tion has de­clined and there gen­er­al­ly is low­er out­put from the en­er­gy sec­tor which trans­lates in­to low­er rev­enues from the en­er­gy sec­tor,” she said.

Re­gard­ing some of the spe­cif­ic bud­get mea­sures that should be re­port­ed on dur­ing the mid-year re­view, Attzs said these should in­clude for­eign ex­change, not­ing the busi­ness com­mu­ni­ty and reg­u­lar cit­i­zens con­tin­ue to face chal­lenges to ob­tain it.

She al­so asked whether there was any up­date on Gov­ern­ment’s com­mit­ment in bud­get 2024 which stat­ed to “… move ag­gres­sive­ly to de­vel­op strate­gies to in­crease the repa­tri­a­tion of for­eign ex­change earned over­seas by lo­cal and for­eign busi­ness­es op­er­at­ing in T&T, as this is key to an in­creased lo­cal sup­ply of for­eign ex­change...”

Attzs al­so not­ed that Gov­ern­ment spoke of a “…new SME forex fa­cil­i­ty with­in the next six months, which should re­duce the de­mand for sales of for­eign ex­change us­ing cred­it cards…”

Re­gard­ing crime, she said as there is an al­most dai­ly di­et of mul­ti­ple mur­ders, the psy­choso­cial and eco­nom­ic im­pact of do­ing busi­ness is be­com­ing more and more oner­ous.

“What progress has been made re­gard­ing the en­hanced crime-fight­ing tools, in­clud­ing tripling of po­lice re­cruits?

“How much of the ‘ad­di­tion­al al­lo­ca­tion to­talling $80 mil­lion …2024 for new ve­hi­cles and equip­ment for the po­lice, over and above the al­lo­ca­tions in 2023…’ has been al­lo­cat­ed to date?

“What, if any, has been the im­prove­ment in de­tec­tion, re­duc­tion of crime giv­en these mea­sures, if they have been im­ple­ment­ed. What is the re­turn on in­vest­ment?” she said.

Attzs fur­ther ad­vised some clar­i­ty is need­ed on what is the cur­rent sta­tus of prop­er­ty tax be­cause af­ter much pub­lic push­back, the res­i­den­tial tax rate moved from three per cent to two per cent.

Ze­ro­ing in on da­ta, Ar­joon cit­ed that de­spite growth at 1.48 per cent in 2022 and 2.56 per cent in 2023, the econ­o­my is still 6.4 per cent short of pre-pan­dem­ic lev­els and con­tin­ues to be fi­nan­cial­ly stressed.

For in­stance, he not­ed fis­cal health has weak­ened, with a six-year ex­pen­di­ture of $37 bil­lion above rev­enues, push­ing debt to $137 bil­lion.

Low­er hy­dro­car­bon ex­ports, cap­i­tal flight and re­duced for­eign di­rect in­vest­ment have helped shrink forex re­serves to US$5.6 bil­lion, ar­ti­fi­cial­ly propped up by ex­ter­nal bor­row­ing and HSF with­drawals, Ar­joon said.

This he said, un­der­scores the im­por­tance of de­vel­op­ing sec­tors with sta­ble, sus­tain­able rev­enues un­af­fect­ed by glob­al geopo­lit­i­cal and eco­nom­ic fluc­tu­a­tions, which in turn, will cre­ate added pro­duc­tive jobs op­por­tu­ni­ties, lim­it the need for ag­gres­sive tax­a­tion that in­hib­it eco­nom­ic ac­tiv­i­ties, cre­ate more pro­duc­tive jobs and low­er in­equal­i­ty lev­els.

“We earned a sur­plus of $416 mil­lion for the first four months of this fis­cal year. For the same pe­ri­od last year, the sur­plus was $793 mil­lion – this is $376 mil­lion high­er than this year. In­deed, this is large­ly be­cause of last year’s ex­tra­or­di­nary price hikes for oil and gas, but more so for LNG, due to the Rus­sia-Ukraine war. That led to en­er­gy rev­enues of $10.6 bil­lion for the first four months fis­cal 2022/2023, sig­nif­i­cant­ly sur­pass­ing the $5.1 bil­lion earned for the cor­re­spond­ing pe­ri­od this year. De­clin­ing pro­duc­tion in oil and gas of ap­prox­i­mate­ly 7,400 bpd and 166 mcf/d re­spec­tive­ly al­so ac­counts for some of these low­er rev­enues,” Ar­joon fur­ther ex­plained.

He not­ed that de­spite the low­er sur­plus, sig­nif­i­cant re­duc­tions in spend­ing, par­tic­u­lar­ly in ar­eas such as cap­i­tal ex­pen­di­ture, are un­like­ly.

Say­ing Gov­ern­ment is keen to avoid un­der­min­ing fur­ther eco­nom­ic ac­tiv­i­ty, a stance that be­comes even more per­ti­nent as the coun­try nears an elec­tion year, Ar­joon said in­stead of cut­ting spend­ing, to com­pen­sate for some rev­enue short­falls, it’s like­ly ad­di­tion­al debt tap­ping in­to both do­mes­tic and in­ter­na­tion­al mar­kets will be need­ed to ful­fil its fis­cal com­mit­ments. He not­ed that the lo­cal mar­ket may of­fer more at­trac­tive bor­row­ing rates, while any funds bor­rowed in­ter­na­tion­al­ly will ar­ti­fi­cial­ly prop up the for­eign re­serves.

Re­gard­ing in­fla­tion, Ar­joon said this has now slowed to 0.8 per cent from a high of 8.3 per cent a year ago.

“This high in­fla­tion last year was not due to ag­gres­sive pri­vate sec­tor ac­tiv­i­ties and con­sumer spend­ing, but due to high in­ter­na­tion­al prices of raw ma­te­ri­als used for man­u­fac­tur­ing and goods im­port­ed for re­sale in the re­tail mar­ket. The Feb­ru­ary 2024 low rate of 0.8 per cent is not re­flec­tive of any mean­ing­ful pol­i­cy to slow in­fla­tion but large­ly due to slug­gish eco­nom­ic ac­tiv­i­ties lo­cal­ly,” he ex­plained.

Al­so, Ar­joon said de­spite in­fla­tion falling, food prices are still high.

Ramkissoon on the oth­er hand called for greater in­vest­ments, say­ing this would gen­er­ate the over­all econ­o­my.

He scored Gov­ern­ment at ei­ther a C plus or B mi­nus for its eco­nom­ic per­for­mance thus far.