THE address to the nation by Dr Keith Rowley will exacerbate anxiety and instability created by his Government’s failure to meet economic challenges head on, because it is now clear that the PNM never had the economic plan they claimed. This, according to Opposition Leader, Kamla Persad-Bissessar.
In a comprehensive statement following Dr Rowley’s address to the nation, Persad-Bissessar said “the statement is tantamount to putting the country in intensive care without prescribing any medicine to stimulate an economic recovery.”
Persad-Bissessar said “what we heard was over 30 minutes of a Prime Minister abdicating his responsibility, blaming others for challenges, taking credit for fixing damage they in fact created, and demonstrating he has no understanding or idea of how to manage the present economic challenges”.
“In fact, a detailed analysis of Dr Rowley’s statement points to the very real possibilities of capital flight, a return to spiralling inflation and the potential for devaluation.”
PRIME MINISTERIAL RESPONSIBILITY
When Dr Rowley took office, energy prices were already low and measures were already put in place to reduce spending by the People’s Partnership. We were clear and specific that budget adjustments would focus on maintaining a healthy level of investment and protecting jobs, incomes and the vulnerable.
But since September, the Rowley government has used every possible opportunity to complain and misinform the public on the nation’s finances. Now that they are being called upon to act like a Government, neither the Prime Minister, nor the Minister of Finance is ready or capable of taking responsibility.
They have still not been able to articulate a clear plan on how we will manage the present challenges, and how we will ensure the economy is kept on a sustainable growth path.
Apart from making up policy as they go along, the Prime Minister is now on his fourth foreign trip in under four months. Three of these four trips have been for personal business – a PNM fundraiser in London, a wedding and golf in Barbados, and now a wedding in Miami.
By the time Dr Rowley returns on 4th January, he would have served 117 days in Government and spent almost an entire month (24 days) travelling abroad to secure his personal interests.
The PM’s speech will do very little to generate confidence from the public, it will not give confidence to the local business community and will make international rating agencies quite uneasy. The Prime Minister must stop the campaigning, and joy-riding and take responsibility for Trinidad & Tobago.
On the specific measures, Dr Rowley made a passing mention that he anticipates that manufacturers and service sector companies will “continue to do well” and urged the private sector to control their spending, particularly in US dollars. But he made absolutely no clear and cogent reference to fiscal strategy or policy. The private sector needs to know what the Government’s development agenda and plans are if they are to align their strategic plans to the direction intended by the State.
Dr Rowley also claimed that the previous Government did not decrease expenditure; this is completely false. The 2015 Budget by the People’s Partnership Government had originally projected expenditure of $60.1 Billion. The Estimates of Revenue and Expenditure 2016 showed spending at $55.6 Billion for 2015, a reduction of almost $5 Billion. What makes this even more disingenuous is that at page IV of the Estimates of Revenue and Expenditure, we find that the Rowley government’s 2016 Budget projected an increase in spending in 2016 to $58 Billion.
His latest suggestion of an across the board cut in spending by 7% in Ministries and State companies carries little benefit if he cannot say how these cuts will be managed to preserve the working population’s jobs and incomes.
The People’s Partnership improved and enhanced the operations of State companies and Ministries since January 2015 when we sought to reduce spending, without cutting jobs. So saving 7% by spending cuts could very well mean that Dr Rowley will preside over a continued increase in unemployment.
His reference to the Loran-Manatee cross-border natural gas field as a source of comfort in the current economic challenges is misplaced and deceptive. The cross-border field will not reach production for many years. Even if everything were in place tomorrow, it would take at least five years to bring same to production and market.
Dr Rowley bemoaned the fall in oil production from 2010 to 2015 from 90,000 to 80,000 barrels per day, and a decrease in gas production – but we have already made very clear that it was the failure to take the right decisions and competently manage energy during 2002-2009 period that caused a decline in oil production from 145,000 barrels per day in 2005.
In fact it was very recently made clear by Standard and Poors when they affirmed Trinidad and Tobago’s A rating that the strategies (by the People’s Partnership) to restore confidence and stability to the energy sector are what underline Trinidad & Tobago’s future stability and growth potential.
And while the Prime Minister has repeated random measures already mentioned in the 2016 budget, he made absolutely no mention of how his Government will use fiscal measures to boost agriculture and manufacturing in support of his call for ‘buying local’.
BUFFERS – FOREIGN RESERVES AND SAVINGS
The use of the Heritage and Stabilisation Fund amounts to raiding the piggy bank and which creates more anxiety and questions. If Dr Rowley intends to withdraw almost US$1.5 billion he must immediately explain how he will use this to achieve stabilisation and a balance in expenditure and revenue and how he will meet requirements for utmost transparency and scrutiny.
Dr Rowley also needs to give a clear assurance that funds from savings will not be used for consumption, but rather for investment spending and creating value within the economy.
Similarly, in the context of foreign reserves, while Dr Rowley accused the former Central Bank Governor of releasing US$2 Billion into the economy in 2015, he has failed to address the shortage of foreign exchange, or explain the decrease in Foreign Reserves by US$700 Million in less than two months.
Dr Rowley has also failed to explain how the Government will manage borrowing which has recently been increased by TT$50 Billion, particularly as a substantial part of this borrowing will be facilitated in US dollars. This will add further pressure to the foreign exchange shortage because we will have to pay those debts back in US dollars.
In addition to further constriction in the supply of US currency, we also need to know what measures will be pursued to earn foreign exchange, and with increased borrowing, and draw-downs from the Stabilisation Fund, what will be the impact on our import cover, which at September this year stood at approximately 12 months.
LOCAL AND FOREIGN INVESTMENT
While we expected an economic plan from Dr Rowley, he not only failed to address new revenue measures, but also said nothing on how his Government will work to increase local investment and Foreign Direct Investment.
Four months of the Government’s doom and gloom public discussions have created great anxiety for businesses.
He has repeatedly claimed that the Treasury was empty, despite Standard and Poors’ assessment giving lie to those claims, and now that he is called upon to demonstrate an understanding of the economy, he is unable to specify what fiscal policy the private sector and foreign investors can align with.
Dr Rowley’s comment that there is need to look at private savings being held abroad is also a source for great concern and anxiety. He needs to explain how the Government will go about intrusive monitoring of the private assets and holdings of citizens and business-people, how this information will be stored, and how it will be used.
Here as well, Dr Rowley’s comments will negatively impact confidence in the economy and the spin-off of this could be an increased cost in borrowing for the Government; increased cost of borrowing by businesses and consumers, and foreign rating agencies looking unfavorably on medium and long term prospects in Trinidad & Tobago. Standard and Poors’ has already changed their long term outlook to negative.
The impact of the Government’s measures on education will also have a lasting, negative effect on children and the future of our country.
Dr Rowley has asked that Teachers pay attention to the effect of austerity measures on children, but Teachers are not trained for that.
The previous Government invested in training for Guidance Counsellors for schools across the country and their training makes them fit to monitor the wellbeing of children. By putting responsibility on Teachers, Dr Rowley is signalling that this programme for Guidance Counsellors could be discontinued.
Already homework centres have been removed, the text book programme has been overturned and it has been suggested that the school feeding programme could be in jeopardy.
No adjustment to economic realities could be so imperative that we must make children pay such a harsh price for it.
HOUSING AND INFRASTRUCTURE
Dr Rowley’s reference to a housing programme with the private sector is not new and in fact, was started and implemented by the previous Government with the Carlton Lane, San Fernando housing project, in partnership with Republic Bank.
Further, the merger of TTMF and HMB was passed by the People’s Partnership Cabinet in July 2014, well before the slide and impact of global energy prices, and requires a number of technical adjustments before it can be implemented.
What Dr Rowley must make clear is the impact of expanding the housing programme on foreign reserves. He must make clear whether engaging the private sector only in housing and pursuing a purely State-led investment programme in other sectors will further constrict foreign exchange availability, and the cost of borrowing for the private sector.
Dr Rowley also failed to mention how the Government will proceed with completing the San Fernando to Point Fortin Highway which is incurring costs for every day of delay, even as he continues to tout a Rapid Rail vanity project.
Dr Rowley must also explain why he has halted work on the Arima and Point Fortin Hospitals, which are two projects that can substantially engage local contractors and keep thousands of people employed.
TRIPARTITE APPROACH/SOCIAL ENVIRONMENT
Dr Rowley’s address to the nation also referred to “an intention to initiate tripartite” discussions. But what does ‘initiating’ discussions mean when the Public Services Association has expressed concern for jobs, implying that they were not consulted?
It must also be noted that the Prime Minister promised at the start of his term that jobs will be protected, despite several thousand jobs having been lost since that time. Therefore his proposal for an across the board cut in spending of 7% with Ministries and State companies will further inflame anxieties over job losses and a further lack of confidence by business and investors.
Citizens are deeply concerned about the safety of their incomes and livelihoods and measures must clearly underline people as the main priority. Nothing in Dr Rowley’s address to the nation provided that assurance.
Even reference to a 5% contribution by Cabinet Ministers to organisations of their choice does little to inspire confidence, as we have already seen the Prime Minister using his official position in London to raise funds for the PNM, and his Minister of Energy using her Parliamentary Representative office to solicit funding from State Energy firms for a community organisation to which she is affiliated.
The Prime Minister and Government, however, are not without options and they must begin paying close attention to measures that will inspire confidence, investment and calm the fears of the population and business community.
The People’s Partnership recognised that we were entering a new phase of economic management because of challenges and energy and this is why we gave a full account of plans for the Green, Silver and Blue economy.
This strategy was underlined by continuing our successful efforts in expanding non-energy growth, and engaging all of the resources of Trinidad & Tobago to build a new and more sustainable economy. The plan is a public document and the Government must pursue those or similar measures if the economy is to navigate safely to growth and expansion.