A rung up, down the 20-20 ladder

The verdict is still out on whether the massive $22 billion Budget for fiscal 2003/2004 will get a high grade or will barely muster an average performance pass.

So far, there’s been mixed reaction from various sections of the society to the budget presented by Finance Minister Patrick Manning on its promise to take the country up another rung on the development ladder. University of the West Indies (UWI) Economist, Dr Dan Mahabir said one of the problems with the budget was that it was short on targets. Commending Manning for facing up to the macro-economic problems of the country such as the high debt servicing, Dr Mahabir however said that there were no projections on how the Government intends to reduce the mounting debt on an annual basis. “He did not say what were his targets, what was he going to do to bring it down, is it going to be at 60 percent over a five-year period...what are his targets? “If currently, poverty is 25 percent of the population, what is his target for next year and the next 3-4 years. He must know what these allocations are supposed to do. Is he aiming by 2007 when the next election comes around for poverty to have fallen from 25 percent to 20 percent and therefore he would know how to go about re-adjusting the programmes to ensure they are effective?”

Another UWI economist, Dennis Pantin speaking about the high debt servicing said about $6 billion would have to be allocated towards it, just below what is being spent on wages and salaries. “In effect you’re spending $6 billion more on the servicing on debt relative to all your public service and that suggests that something has to be a little out of proportion in terms of what is happening with your debt. Of course this has been accumulating for some years. “When you think about it, you’re spending more on servicing past debts than you’re spending on your entire public service,” said Pantin. Dr Mahabir was also aggrieved about the lack of commitment to the Revenue Stablisation Fund and said based on the Budget, there should be no expectations that any money will go into it during the new fiscal year. “If any has to go in there, it will have to come from an oil price over US$25,” he said. The Finance Minister, said Dr Mahabir, also failed to identify measures for increasing domestic savings such as annuity contributions, although Government has removed the five percent tax on interest on savings, although it’s an old measure by the previous government which never went into effect. Financial analyst Ronald Hinds said the removal of the five percent tax on interests on savings was no longer a big deal since interest rates have been continuously falling over recent years. “I think it has happened at a time when it’s least significant,” said Hinds. “So in terms of interest on savings, that has been going down so I guess the impact of that measure is less significant all around...(but) in principle, it was long overdue.”

Hinds also had concerns about the heavy spending currently taking place in the country from revenues earned from the non-renewable and depleting oil and gas sources. “If you’re going to get $3 billion in one year, the kind of replacement income you need over time to fully replace that, in terms of other kinds of economic activity, is significant and it is for that reason I’m always concerned about the sustainability of things like the spending that arises from what is a windfall situation,” said the financial analyst. The Port-of-Spain-based KPMG which provides audit and risk advisory services, tax, consulting and accounting services, in their analysis of the budget, said it spoke to the issues of the day such as reversing the spiralling crime rate, improving the education system, providing adequate housing, rejuvenating and modernising the health delivery systems and eradicating social dislocation. “The plethora of measures enunciated are imbued with the Vision 2020 concept, consequently, they have long gestation periods. The national community may not see the effects, if any, of the intended multi-sector reforms for some time to come. “This is because some of the measures will be implemented over the medium to long-term and others relate to amendment or enactment of legislation for which opposition support is required and, may not be forthcoming,” the international company said.

Last year, the Government set a target for growth of real GDP over the period 2003 to 2005 at between 4 percent and 6 percent. Growth was actually 6.7 percent. The main impetus for this growth was and will continue to be the energy sector, which grew by 9.5 percent. KPMG said the non-energy sectors for the most part, continue to be sluggish and unless these key sectors can be stimulated, the Government’s aim of making the economy globally competitive and knowledge-based will not be realised. “We maintain that in this regard, a critical success factor will be the Government’s ability to harness and develop the country’s human capital.” It also said that consistent with the Government’s existing policy, very few changes to the fiscal regime that are expected to have an impact on public and business sentiment, were made. “The measures enunciated can be described as being limited in scope. “Tobago House of Assembly Chief Secretary Orville London said the Central Government demonstrated fiscal responsibility by providing over a TT$1.3 billion allocation to the tourist isle. “We got about 90 percent of recurrent expenditure and about 60 percent of development and we must also bear in mind that when you examine the Budget, there were a number of other areas from which Tobago benefited like the police stations at Roxborough and Old Grange and the social sector programmes so when you look at it, I am fairly comfortable that we will be able to achieve our objectives.”

But former Chief Secretary and now Minority Leader of the THA, Hochoy Charles said while he didn’t have a problem with the large sum of money being allocated to the island, his concern was one of prudent spending. Charles said while the PNM-run THA received much more money than when he headed the assembly, the island was worse off now. “Businesses are closing, people are unemployed, we are still paying people under the minimum wage; CEPEP is an example. I ran Tobago and did more than what is being done,” said Charles. Independent Senator and economist Mary King said having heard about the Vision 2020 committees set up by Government for almost two years, she thought they would have submitted reports, identifying particular directions for the country and economy. “But we didn’t get any of that, we got more of the social welfare funding and in my view it could have given more direction, it could have been more geared towards maintaining family life, geared towards perhaps women (headed) households, low income mothers,” she said.