As we begin 2018 the storm clouds are gathering: should the government not rethink its plans and re-order its priorities, the Government will take Trinidad and Tobago into a perfect storm.
The start of a new year is often a time for reflection, mature assessment and planning the way forward. In this regard I share my thoughts on the state of our nation today with emphasis on the state of the economy, and, offer some suggestions on the way forward.
January 2018 marks two years and four months since citizens of Trinidad and Tobago decided to entrust the care of our country to the Rowley Government, after they assured the country they were “red and ready” to govern. The question that citizens must now consider is: Are you better off now than you were prior to September 2015? The answer is most certainly a resounding “No.”
It is evident that the Rowley Government has absolutely failed to deliver on any of its promises, and has found itself embroiled in several self-inflicted controversies, including millions of dollars lost in “fake oil”, allegations of ministerial misconduct including ministerial involvement in the procurement of a ship, and even a crude attempt to censor our constitutionally entrenched right to freedom of expression.
What the country has witnessed in the past 28 months is a dramatic decline in the quality of life of citizens, with escalating crime, high unemployment, increased cost of living, and an ailing health care and education system.
In the critical area of management of the economy, the Government has failed, and has shown that it is incapable of putting forward any new ideas to fix the economic problems facing our country. The only measures they have taken are to increase the tax burden on citizens, and to continue with their unsustainable policy of borrowing to meet recurrent expenditure.
While companies are forced to downsize by dismissing workers, reducing capital expenditure and investment, the Rowley Government continues to engage in excessive borrowing to fund vanity projects.
Our Current Economic Reality
- Net official reserves are haemorrhaging, falling sharply from a peak of US$11.5 billion in December 2014 to US$8.3 billion by November 2017, the lowest level in a decade. Many small and medium businessmen continue to vociferously complain about how much foreign exchange they get and when they get it. Sales of US dollars by the banking system remain concentrated among bigger business entities, the 1% supra-elite. This situation is prompting feverish speculation that a devaluation of the TT dollar is imminent.
- Fiscal deficits have been large in the first two years of this PNM Government, averaging nearly 7% of GDP, and their intention is to continue running sizeable fiscal deficits during the remaining three years of their term.
- These large fiscal deficits have been financed mainly through heavy public borrowing. Public debt is rapidly increasing to uncomfortably high levels and risks pushing our country into the middle-income debt trap, once again. The IMF in its latest 2017 Article IV Consultation Report projects that public debt in Trinidad and Tobago could mushroom to an unsustainable 85% of GDP within the next five years.
- We have already experienced one casualty of high and rising debt. Last April, Standard and Poor’s downgraded Trinidad and Tobago’s investment-grade sovereign credit rating, warning that further downgrades are possible unless the government stabilizes the public debt burden. By April 2018, S&P is likely to downgrade our credit ratings to speculative grade or junk status. This label of junk status will negatively affect how foreign investors view the quality of our economic management.
- In 2016, we experienced the sharpest economic contraction in more than three decades; real GDP shrunk by an estimated 6%. Economic growth is expected to be marginal in 2017 and to remain weak over the next few years.
While the Government has attempted to paint a rosy picture of the country’s economy, the reality is that there is limited activity or investment in our economy, as no new policies, programmes or projects aimed at diversification and sustainable growth have been proposed.
Now, after 28 months of failure, the Prime Minister has planned yet another press conference to make excuses for his ineffective leadership and his Government’s non-performance. We hope that in his Address to the Nation the Prime Minister will account for the $115 billion spent since taking office. So many billions of dollars spent, yet citizens live in fear, sick people cannot get medication, our children do not have access to books and technology, and thousands of people are without jobs.
The Rowley administration has already wasted two years hopelessly trying to stabilize the economy, and, given their track record, they will likely waste a third year in 2018 unless they change course. Their economic policymaking is characterized by impotence, incompetence and insensitivity. Their policies have resulted in the collapse of small and medium-sized enterprises (SMEs) as only large conglomerates with access to stored capital and borrowings can survive in the current economic environment.
Their failed economic policies, including excessive taxation, continue to take a toll on the people of this country, and have led to the decimation of all gains made between 2010-2015 under the People’s Partnership Government, when record revenues, GDP growth and job creation were achieved through prudent management
If the Government does not change its course and adopt sustainable strategies for growth, Trinidad and Tobago will face further downgrades from credit rating agencies to junk status, further devaluation of the TT dollar, a massive increase in unemployment, capital flight and hoarding, and tightening of lending by financial institutions.
These factors, together with new taxes since fourth quarter 2015, the unavailability of foreign exchange, the failure of the Government to pay debts and rising crime have the potential to create a perfect storm in 2018.
Some Suggestions on the way forward for T&T
But all is not lost… there is hope. Our economy can be fixed. We can regain fiscal balance, stabilize public debt, stop the bleeding of official reserves, and bring our economy back onto a path of growth. But it will take a Government with the will, the knowledge and the vision to make it happen.
- The first critical step is to restore confidence and rebuild trust. This means the Government must come up with a credible medium-term economic plan, communicate the milestones of that plan, and act decisively in implementing the plan.
- It also means the Government must stop imposing a plethora of taxes on citizens. This is not generating revenue on the scale needed to drive growth in our economy. Instead, it is having the opposite effect – increasing the cost of doing business in the country. We urge the Government to rescind the increases in taxes on businesses as these, together with the foreign exchange constraints and increased costs, will decimate the SME sector.
- The Government must also cease and desist from trying to secretly depreciate the TT dollar. Small island economies like Trinidad and Tobago require exchange rate stability, not exchange rate uncertainty. It is a terribly misguided notion to believe that depreciating the TT dollar will somehow deliver more US dollars to everyone.
- The Government must re-organize its priorities and place greater emphasis on developing our country’s human capital. We call on them to rescind the cuts to the education sector, re-invest in tertiary education and in retraining the existing workforce to upgrade to the digital age, or T&T will be left behind. In this regard, the South UWI Campus should be completed and turned into an integrated facility for the introduction of certificate, diploma, undergraduate and postgraduate degrees including those for the protective services and judicial offices. The courses should include law, forensic accounting, forensic sciences, policing, criminology, policing vulnerable societies, criminal justice policy, cyber- crime and criminology research.
- Existing trade agreements should be implemented and improved, and new trade agreements pursued with South and Central American countries, as well as West African countries.
- Measures should be initiated to strengthen and protect local manufacturers from unfair trade practices and illegal competition by, for example, clamping down on illegal/untaxed goods entering our ports.
- Increase funding and manpower of TTBS (Bureau of Standards) to examine, test and prevent importation of substandard and potentially dangerous goods into TT. There is currently a flood of poor quality/substandard products in our markets underselling higher quality local products.
- Full pursuit of the digital economy to usher in the fourth industrial revolution.
The above represents just some of many other suggestions to help disperse the storm clouds and improve our nation’s economy as well as the quality of life of our citizens.
The UNC assures the people of Trinidad and Tobago that we have prepared a plan to move the country forward. We have a vision of a stronger, more prosperous Trinidad and Tobago, and a plan to return our country to growth, make our homes and streets safer, improve access to health care and education and create more jobs by rebuilding our economy with a drive powered by the innovation and creativity of the people of Trinidad and Tobago.
Happy New Year to you and your loved ones.
Kamla Persad-Bissessar, SC, MP