Home' Trinidad and Tobago Guardian : January 28th 2016 Contents JANUARY 28 • 2016 www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
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There is a point of view that is
being expressed more fre-
quently in private that the
Government spokesmen on
the economy---mainly Prime
Minister Keith Rowley and
Minister of Finance Colm Imbert, but also
Minister of Energy Nicole Olivierre---have
described the domestic economy in terms that
are too bleak and too pessimistic.
According to this narrative, both Prime Min-
ister Rowley and Minister Imbert are to blame
for pointing out that the country is in the
state that it is in because of the collapse of
energy prices and as a result of the squan-
dermania of the previous administration, which
increased spending in the runup to the Sep-
tember 2015 general elections.
Both gentlemen are being castigated in pri-
vate for not providing the country's busi-
nesspeople with alternative sources of income
in the form of non-energy industries that
would provide diversified streams of foreign
exchange to eventually replace T&T's dwindling
The narrative---which is being propagated
by members of the country's chambers of
commerce---goes on to claim that the bleak
outlook of the country's economy is having
a negative impact on consumer and investor
It is being argued that the consequence of
that negative sentiment is that businesspeople
delay or postpone investment decisions and
middle-income households cut back on their
spending, both of which contribute to a further
contraction of the economy.
When the reductions in investment and in
spending ç are taken together with the cutback
in Government spending, the people who make
this argument claim that Mr Imbert is con-
tributing to the worsening and lengthening of
My own reading of the economy is that the
economy is in a much, worse situation than
Mr Imbert has up to now implied, inferred or
In Parliament last week, the minister of
finance said that if energy prices continue
where they were last week, T&T would suffer
a revenue shortfall of $2.4 billion, which would
reduce tax revenues from the $40.8 billion
figure contained in the 2016 Draft Estimates
of Revenue to $38.4 billion.
But, it seems to me, even collecting $38.4
billion in 2016 is going to be a stretch. That's
because the revenue estimates document
envisages that VAT receipts in this fiscal year
would increase by 84.4 per cent from $6.7
billion in 2015 to $12.4 billion in 2016. That
simply is not going to happen.
The Government is unlikely to collect more
than $5.7 billion in VAT for this fiscal year---
given the seven per cent expenditure cut for
all ministries and state enterprises ordered by
the prime minister, the increased retrenchment
in the country and the slowdown in spending
by the population following the former Central
Bank governor's announcement of a recession
on December 4.
If the VAT receipts are $7 billion short, that
means total tax revenue is likely to be reduced
from $38.4 billion to $31.4 billion.
If Government is successful in reducing
total expenditure by 7 per cent, that would
cut the $63 billion budget by $4.41 billion to
If $31.4 billion is subtracted from $58.6 bil-
lion, that would leave a gap of over $27 billion
that would need to be financed.
Having already signalled tax increases and
cuts or delays in expenditure, I would argue
that there are now eight ways in which the
Government can go about financing the gap
between revenue and expenditure that could
be as much as $27 billion:
2) Draw down savings
3) Sell assets
4) Dividends from state-owned companies
5) Advances from Central Bank
6) Repayment of debts owed to T&T
7) Currency depreciation
8) Enhanced revenue collection.
Faced with a scenario of having to finance
a $28 billion gap, I invite readers to make rec-
ommendations on what combination of rev-
enue-raising measures the minister should
For those who are arguing that the Mr Imbert
is only feeding the population a steady diet
of despair and doom and gloom now, my
advice would be to wait until April when he
discloses the "true facts" of the actual state
of the T&T economy.
There are reasons the Government has not
as yet announced any new spending projects
(except for the Brian Lara Stadium in Tarouba)
or gone to the market to raise new money to
get its capital expenditure budget for this fiscal
year off the ground...not to mention pay the
debts, backpay and other commitments owed
by the Government.
The reasons include:
• The spectacular and unpredictable fall of
oil and natural gas prices
• The secular decline in natural gas produc-
• The drying up of liquidity caused by the
misalignment of monetary policy with fiscal
and exchange rate policies
• The unreality of the VAT revenue targets
• The delay in resolving the Clico issue
• The hostility of the trade union leaders to
• The national fear of the correction of the
T&T's grossly overvalued currency.
All of these issues contribute to T&T's rev-
enue picture being extremely murky, opaque
In the context of revenue opacity, one won-
ders whether those in the business community
who are calling on the minister to comfort the
nation and give it hope of a brighter tomorrow
would recommend that he put lipstick on the
pig, as Americans like to say.
It seems to me that he is better off warning
people about how bad things are, and could
be, than dishonestly telling them that there
are blue skies sometime in the predictable
future. If Mr Imbert warns people of hard
times, they are likely to adjust their lifestyles
and be prepared for further adjustment.
On the other hand, what if he tells the pop-
ulation that they should expect blue skies in
in 2018---when the Juniper Platform would
have been commissioned and oil and gas prices
would be at more normal levels---but the skies
are still dark and ominous then?
Wouldn't the entire population be completely
unprepared for the adjustment that would
then be mandatory?
Is it better to under promise and over
achieve, or over promise and be accused of
setting the population up for a massive repos-
session of their houses by T&T's "friendly"
On the issue of the Government providing
alternatives to the energy sector---in effect,
directing the diversification of the economy---
I am in the camp of those who believe that
the Government should be less involved in
the economy and not more involved.
It is not for the Government to pick winners
in an open, free market economy. It is for the
capitalists among us to see the opportunities
that the slowdown of the economy generates
and for them to deploy their capital in sectors
that they feel will be profitable. The Govern-
ment's role is to facilitate this process.
We should not forget that the two biggest
indigenous companies in T&T's history (ANSA
McAL and CL Financial) were established as
a result of the 1980's depression and the local
business sector would be wasting the oppor-
tunity of the current downturn if they do not
learn from that history.
The recent rush by the private sector to
build new retail spaces is a mistake, but that
is a function of the grossly overvalued exchange
rate, which makes the sale of imported goods
too cheap and easy.
Is Mr Imbert too pessimitic
on the T&T economy?
Prime Minister, Dr, Keith Rowley
Minister of Finance Colm Imbert
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