Economist Dr Roger Hosein has attributed a persistent fiscal deficit and stagnation as the reasons why T&T citizens are not satisfied with the Government’s management of the economy. Hosein was commenting on a survey conducted by the Ansa McAL Psychological Research Centre, University of the West Indies, St Augustine, in which 507 respondents were questioned on how satisfied they were with the Government’s management of the economy.
Sixty per cent of the respondents were “unsatisfied,” 34 per cent were “satisfied,” while six per cent of respondents said “Don’t know.” On Tuesday, Hosein said some citizens have been expressing dissatisfaction with the Government’s management of the economy based on two factors—a stagnating economy, which is characterised by a low level of growth, and the persistence of a fiscal deficit.
“Some people generalise the deterioration based on oil and gas prices which they associate to the sitting government. I think the more educated people are unsatisfied because of the persistence of a fiscal deficit. And even more, the pronouncement by the Minister of Finance that the budget deficit, should things continue on a straight line, if they win the election, would continue into 2016.”
Hosein said people would have liked to see that imbalance corrected in a shorter period of time. “Since 2008 the price of oil has fallen and although it recovered marginally, the recovery thereafter was volatile. To manage an economy of fluctuating revenues is an enormous undertaking,” Hosein explained.
‘Rationalise public expenses’
He suggested that the Government rationalise public expenses and use its inflow of revenues in a wider and prudent manner. Hosein also advised the Government to expand the infrastructural capacity base of the economy, noting the extension of the $7.5 billion Solomon Hochoy Highway to Point Fortin and plans to construct a $16 billion San Fernando to Mayaro Highway, which was touted as an integral access route for the gas corridor by Prime Minister Kamla Persad-Bissessar in January.
“These projects are welcomed. These projects should not be compromised and more so be encouraged.” By opening economic space with infrastructural expansion, Hosein said, the economy will be able to absorb more of its under-employed resources and continue to maintain a high level of employment. He said the fact that the unemployment rate stands at 3.6 per cent does not mean that people are happy with the labour market. “The highways will help with underutilised land and labour,” Hosein said.
In the last five years, Hosein said, the Government’s settling of exorbitant debts owed to contractors, and the CL Financial and HCU bailouts did have an effect on the economy. “These types of heavy payments which the Government inherited would have comprised the country’s fiscal flexibility.
So that some of the decision making by the Government would have been from the previous regime payouts. A lot of Government expenditure was spent mopping up those types of distorted economical events that happened before. At the same time, a more pronounced effort could have been made to discontinue, where it was possible, moral hazard expenditures, for example the Government Assistance for Tuition Expenses Programme (Gate) programme.”
Hosein said the Gate programme should have been rationalised earlier and steps taken to have it revert to the Dollar-for-Dollar programme.
‘Revisit level of income tax, ensure more prudent fiscal approach’
He also felt that the Government should have embarked on a programme to redeploy Cepep workers into productive farming programmes which he referred to as Farmpep. “This would have immediate benefits by changing the work ethics of Cepep employee to work more efficient hours and help reduce the food import bill, which is about $6 billion now.”
Hosein said energy revenues for the next three years would be conditioned by the price of oil between US$50 to $75 a barrel, as compared to over US$100 a barrel in previous years. “Perhaps the time has come for Government to revisit the level of income tax.” Hosein said in 1998 T&T was able to manage the economy on oil which was priced at around US$9 a barrel at a particular time.
“So we have the capacity to operate on lower per unit prices per oil and by extension gas. We were also able to run the economy at a time when the unemployment rate was much higher, on much lower levels of transfers and subsidies. So certainly, if a more prudent fiscal approach is taken towards expenditure rationalisation and revenues maximisation, the medium term could look brighter as we move forward.”