Most important budget ever

The outcome of next month’s general election will either see the incumbent People’s Partnership (PP) or the People’s National Movement (PNM) forming the next government. The first task of the new administration will be to convene the Parliament for the purpose of passing the Budget before the deadline of September 30, the start of the new financial year. While Prime Minister Kamla Persad-Bissessar is correct that budgets have been presented shortly after general elections in the past, she did not include the fact that on those occasions the deadline to pass the budget was October 31. Last Wednesday, Finance Minister Larry Howai indicated the 12 supporting documents to the budget will be ready in about two weeks. From his comments, it appears that Howai is attune to the reality that the country must have a budget in place, regardless of who the government is.

“I think we should be about ready for what transpires on September 7,” Howai told reporters following the launch of 2015 TT report by the Oxford Business Group (OBG) at the Hilton Trinidad last Wednesday. From an economic perspective, what appears set to transpire after the election is not something whoever forms the government will be looking forward to and it is most likely that many election manifesto promises from any party or coalition in power will remain on the paper that they are printed on and not implemented.

Global oil prices have dipped close to or below the revised budget oil price of US$45 per barrel in recent days. The argument from the PP that we are more a gas based economy provides little comfort.

As Howai noted last week, the gas price this year has given the country a little wiggle room but that room will become narrower.

Add this to the inability of the PP to get any sustainable revenue generator going, significantly diversify the economy enough, approve to a large number of hefty wage increases (arguably to curry favour with voters) and maintain a high level of expenditure in the social sector (despite cautions from several quarters not to), means it cannot be business as usual after September 7.

Should she be re-elected as prime minister, Persad-Bissessar may very well have to break her promise of not introducing taxes or increasing existing ones as global oil prices are projected to stay low for the foreseeable future.

Certainly this would have to be done if revenue flows from other sources either dry up or are constricted. Initial Public Offers (IPOs), such as the Phoenix Park IPO, could bring in some revenue but Howai also pointed out that IPOs cannot fulfil more sustainable revenue generator. Last Wednesday, Planning Minister Dr Bhoe Tewarie noted, “We are likely to have a long period in which the prices are going to remain low.” Tewarie added if prudence was required going forward. In its report, the OBG said both the PP and the PNM acknowledge the country will have to adjust its fiscal spending levels but “the debate is about how and to what extent this should be done, not whether it should be done.” The OBG indicated that while the PP and the PNM had not revealed their respective “detailed economic policy platforms” at the time the report was being written, “they are market friendly in their approach.” We await the presentation of the next budget to see what are the detailed economic plans that will be used by whoever is in government after September 7, to guide us through the post-September 7 challenges that will confront this country.