Raphael John-Lall

raphael.lall@guardian.co.tt

Fi­nance Min­is­ter Colm Im­bert faces dif­fi­cult de­ci­sions as he presents the bud­get for the fis­cal year 2022/2023 to­mor­row.

T&T is emerg­ing from a two-year glob­al health pan­dem­ic which led to the clo­sure of many busi­ness­es and an in­crease in pover­ty and un­em­ploy­ment. So­cial prob­lems like crime con­tin­ue to grow and cit­i­zens are clam­our­ing dai­ly for so­lu­tions.

Even be­fore the pan­dem­ic which start­ed in 2020, the coun­try had ex­pe­ri­enced five years of neg­a­tive Gross Do­mes­tic Prod­uct (GDP) growth.

How­ev­er, T&T has been thrown an eco­nom­ic life­line as the war in Ukraine has re­sult­ed in high­er en­er­gy prices, giv­ing the Gov­ern­ment $8 bil­lion (TT) in ex­tra rev­enue, Prime Min­is­ter Dr Kei­th Row­ley in­formed the coun­try in June.

Al­though there is no in­di­ca­tion of the amount al­lo­cat­ed for the 2023 bud­get, last year Im­bert pre­sent­ed a $52.4 bil­lion bud­get. The Sun­day Guardian un­der­stands that Im­bert is like­ly to price the bud­get on high­er en­er­gy prices as the Ukraine/Rus­sia war con­tin­ues and, con­se­quent­ly, high­er com­mod­i­ty prices.

The Gov­ern­ment based last year’s bud­get on US$65/bar­rel and gas on US$3.75 per mmb­tu. Al­though econ­o­mists who spoke with the Sun­day Guardian de­clined to give spe­cif­ic fig­ures that this year’s bud­get could be based up­on, they did say that the Gov­ern­ment should be con­ser­v­a­tive in the price that the bud­get is pegged to.

The Sun­day Guardian un­der­stands that the Min­is­ter of Fi­nance could like­ly run an­oth­er deficit bud­get with high­er spend­ing on in­fra­struc­ture projects like roads, land slips and drainage.

Speak­ing at the Spot­light on the Econ­o­my on Sep­tem­ber 2, Im­bert said a new road re­pair com­pa­ny will be called the Sec­ondary Road and Re­ha­bil­i­ta­tion Com­pa­ny and will be as­signed to the Min­istry of Lo­cal Gov­ern­ment. He in­di­cat­ed that $100 mil­lion (TT) will be al­lo­cat­ed to the com­pa­ny in the 2023 bud­get.

Im­bert al­so said that the Gov­ern­ment wants to cap the fu­el sub­sidy at $1 bil­lion an­nu­al­ly, and this could like­ly lead to high­er fu­el prices in the short run. He may ad­dress the is­sue again on bud­get day.

Econ­o­mists who spoke to the Sun­day Guardian iden­ti­fied crime and na­tion­al se­cu­ri­ty, ed­u­ca­tion and eco­nom­ic di­ver­si­fi­ca­tion as ar­eas that should be dealt with in the bud­get, how­ev­er, lim­it­ed re­sources will stymie the Gov­ern­ment's op­tions.

In his Sun­day Guardian col­umn to­day, CEO of the Arthur Lok Jack Glob­al School of Busi­ness Mar­i­ano Browne not­ed that al­though Im­bert may be out­ward­ly calm, he is "sit­ting on the horns of a dilem­ma".

Browne con­tend­ed that there are many com­pet­ing claims for in­creased en­er­gy rev­enues.

The pub­lic sec­tor wage ne­go­ti­a­tions have been stalled for nine years, he said. High­er in­ter­na­tion­al en­er­gy prices force a choice be­tween a high­er fu­el sub­sidy or high­er prices at the pump, a big­ger elec­tric­i­ty sub­sidy or high­er elec­tric­i­ty prices. The pri­ma­ry and sec­ondary roads are par­lous, de­te­ri­o­rat­ing due to leak­ing sub­ter­ranean wa­ter mains which un­der­mine the road sub­sur­face, he added. "This means big­ger sub­ven­tions to WASA with­out any im­prove­ment in the de­liv­ery of wa­ter."

Browne said, "In­fla­tion­ary pres­sures and the high­er cost of food will al­so re­quire con­ces­sions to those cit­i­zens on fixed or low in­comes."

Im­bert def­i­nite­ly has a tough task on his hand, ac­cord­ing to econ­o­mists.

Pover­ty al­le­vi­a­tion

Uni­ver­si­ty of the West In­dies (UWI) econ­o­mist Dr Vaalmik­ki Ar­joon said that giv­en the in­creas­ing cost of liv­ing cit­i­zens are fac­ing, the Gov­ern­ment has "se­ri­ous de­ci­sions" to make on how it will solve some of these so­cial and eco­nom­ic prob­lems.

"It is es­sen­tial that this bud­get has a strat­e­gy to be im­ple­ment­ed dur­ing the year to pro­mote the eco­nom­ic wel­fare of the coun­try and our over­all qual­i­ty of life by con­trol­ling the cost of liv­ing, and cre­at­ing a more com­pet­i­tive pri­vate sec­tor."

Ar­joon ad­vo­cates in­creased so­cial pro­grammes to help al­le­vi­ate some of the so­cial ills as a re­sult of pover­ty.

"Giv­en that we have an im­proved fis­cal space, it is al­so im­por­tant for the State to mit­i­gate the ef­fects of the high cost of liv­ing by tem­porar­i­ly in­creas­ing its so­cial safe­ty net for vul­ner­a­ble house­holds to pre­vent them from falling deep­er in­to pover­ty, such as more cov­er­age for the food card and school feed­ing pro­gramme, tem­po­rary cash trans­fer pro­grammes, util­i­ty bill dis­counts etc.

"The util­i­ty and fu­el cash cards which were pre­vi­ous­ly pro­posed to help low­er the cost-of-liv­ing bur­dens should be pro­vid­ed this year with ur­gency. While they pre­vi­ous­ly re­moved VAT on sev­er­al food items, they could con­sid­er broad­en­ing the ze­ro-rat­ed items list, and tem­porar­i­ly ad­just­ing im­port du­ties paid, while tak­ing care that it does not fur­ther dis­ad­van­tage the fis­cal space."

On the sub­ject of en­er­gy prices, he said that af­ter the ini­tial rise ear­li­er this year en­er­gy prices are al­ready falling and the Gov­ern­ment has to be care­ful of the oil and gas prices that the bud­get is pegged to.

"Al­ready we are see­ing oil prices start­ing to fall, where Brent has moved from $122 per bar­rel at the end of May to now $86.15–a 29 per cent drop, large­ly due to the in­crease in in­ter­est rates by many cen­tral banks glob­al­ly to curb glob­al in­fla­tion and the strength­en­ing of the US dol­lar. We are al­so fac­ing the high­est cost of liv­ing ever ex­pe­ri­enced for gen­er­a­tions, es­pe­cial­ly since we im­port much of what we use on a dai­ly ba­sis and prices in­ter­na­tion­al­ly are high!"

Econ­o­mist Dr Vanus James, based in To­ba­go, said the Cen­tral Gov­ern­ment and the To­ba­go House of As­sem­bly (THA) must fo­cus on crime re­duc­tion, pover­ty and how to di­ver­si­fy the econ­o­my in the bud­get.

"Once you have so­cial prob­lems you al­ways have to ad­dress them as a con­di­tion for ini­ti­at­ing any pro­gramme or else there will be no de­vel­op­ment. If crime is out of con­trol, prop­er pro­grammes are need­ed for that. These pro­grammes would fit in­to the in­sti­tu­tion­al frame­work which is nec­es­sary for the econ­o­my to make progress. The Gov­ern­ment must al­so look at ex­cess pover­ty. The Gov­ern­ment has to know the liv­ing stan­dards of the low­er end of the in­come dis­tri­b­u­tion. In the ab­sence of those peo­ple be­ing able to sur­vive, the Gov­ern­ment will run the risk of se­ri­ous so­cial un­rest."

Speak­ing about en­er­gy prices, he said that the Gov­ern­ment has al­ready de­cid­ed on what prices it will base the bud­get.

He ex­plained how econ­o­mists work the for­mu­la out.

"The Gov­ern­ment has been mon­i­tor­ing oil prices and nor­mal­ly what they do is they take a range and they will study and track the prices and try to use a pro­jec­tion that fits in the mid­dle of a range. Then they peg the bud­get on the bot­tom of that."

He al­so called on the THA and Cen­tral Gov­ern­ment to do more to di­ver­si­fy the econ­o­my.

"The THA and the Cen­tral Gov­ern­ment are the biggest con­trib­u­tors to the econ­o­my. We’ve re­al­ly nev­er re­al­ly put in place a prop­er pro­gramme of de­vel­op­ment here in To­ba­go. They must de­vel­op tourism be­yond invit­ing tourists to the beach. We need to in­dus­tri­alise tourism. Al­so, they need to look at ed­u­ca­tion and health­care and the cre­ative in­dus­tries.”

James is hop­ing that the Cen­tral Gov­ern­ment al­lo­cates more mon­ey for To­ba­go in the next fis­cal year as he be­lieves that not enough mon­ey is ever giv­en to To­ba­go.

"The Cen­tral Gov­ern­ment nor­mal­ly al­lo­cates a por­tion of the bud­get and then the THA takes that and re­con­fig­ures it ac­cord­ing to the needs of the peo­ple of To­ba­go. Usu­al­ly, you are look­ing at $2 bil­lion for re­cur­rent spend­ing and $300 mil­lion for de­vel­op­ment spend­ing. This can’t do any­thing or can’t ini­ti­ate a se­ri­ous eco­nom­ic re­struc­tur­ing pro­gramme."

There should not be a big­ger bud­get–Ramkissoon

For­mer Re­pub­lic Bank econ­o­mist Dr Ronald Ramkissoon said that de­spite high­er rev­enues, he does not think that there should be a big­ger bud­get for the next fis­cal year.

"I don’t think that the bud­get should be big­ger. There are things that T&T has been spend­ing mon­ey on and we have not seen the re­sults. The ten­den­cy is that we should spend more mon­ey as oil prices are high­er.

"We have to re-ex­am­ine what the Gov­ern­ment is spend­ing mon­ey on. The state-run en­ter­pris­es come to mind. Are they ef­fi­cient­ly run? The Gov­ern­ment must be con­ser­v­a­tive. What­ev­er sav­ings are made should go to­wards gen­er­at­ing rev­enue and in­vest­ment in for­eign ex­change earn­ing ac­tiv­i­ty."