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Wednesday 19 September 2018
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Harsh reality

Central Bank Governor Ewart Williams has officially confirmed what everyone, except the Cabinet, had long known: the economy is in decline.

The starkest figure cited by Mr Williams when he released the Bank’s Monetary Policy Report last Thursday was related to unemployment. The unemployment rate has already moved from just over four percent last year to between six and seven percent in the first quarter of 2009. This means that the Government can no longer boast about having achieved zero unemployment in Trinidad and Tobago. But, as long as two years ago, economists such as Jawala Rambarran and Ronald Ramkissoon were warning that the unemployment figures were essentially illusory. The majority of jobs, they pointed out, had been created in construction and the government sectors. What this meant was that the drop in unemployment was not tied directly to increases in productivity, but was in essence transfers of higher revenues earned from the increase in oil and gas prices. Such transfers can be justified if they are used to increase social stability, but social indicators have actually worsened even as the economy grew over the past seven years. That in itself was a sign that the country’s increased prosperity was being mishandled.

So now that people are losing their jobs, with energy prices down, inflation still high, producer prices rising, and consumer demand dropping, Mr Williams on Thursday suggested that a fiscal stimulus package might be needed to bring the economy out of the doldrums. This, however, seems to be an about-face from statements made by the governor just three weeks ago, when he said, “The inflation rate is still 11 percent. If it was only five or six percent, it would have given us much more room to have a stimulus, but unfortunately we are where we are.” If he has changed his mind, Mr Williams should specify how such a stimulus package would work and what role the Central Bank would play.

Mr Williams also asserted that poverty alleviation should be a priority and that any increase in government expenditure must be done with fiscal discipline. Again, given the manner in which the PNM administration has handled social spending, this is inherently contradictory advice. Prime Minister Patrick Manning has already stated categorically that there will be no cutbacks in the URP or CEPEP programmes. Yet it is not at all clear that these are the best methods of relieving poverty for those who most need such assistance. The government’s own Vision 2020 Poverty Report, submitted in 2003, noted that “Laventille residents claim that these programmes are distributed to groups that are either politically affiliated or groups that are perceived to be highly aggressive and able to impose their will by the threat of violence.”

Clearly, if the worst effects of this economic downturn are to be reduced, the Government must make a complete turnaround in its fiscal approach. No longer can there be vast expenditures on tall buildings and, where infrastructural development must continue, the accounting processes have to be drastically improved. With six months still to go before its finish, the Uff Commission of Inquiry has already shown that millions of dollars have been wasted because of lax management procedures – money which otherwise would have been available now to assist the dispossessed of the society.

So the coming months, and perhaps years, will be difficult. But TT has weathered such storms before. This time, however, much depends on the Government’s willingness to face up to harsh reality.

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