“Today, our collapsing economy under the Rowley-led PNM Government shows up the glaring incompetence of having an engineer playing economic doctor, a Prime Minister who appears to prefer economic ‘jamettry’ to economic strategy, and his amateurs in the Cabinet of Trinidad and Tobago who all agreed to make the PNM’s 2015 manifesto official government policy”.
Here’s an excerpt from my maiden contribution in the Senate on the 2018 Budget debate.
Madame President, this brings me to why the PNM’s economic strategy is not working. The first reason is this Government is ignoring the advice of its very own economic experts.
Dr. Terrence Farrell writing in the Trinidad Express on January 3rd 2015 offered a seven-point economic plan to the then PP Government to stabilize our economy in the face of falling energy prices. The PP Government began to implement some elements of Farrell’s plan but demitted office in September 2015.
The incoming Rowley-led PNM administration appointed Dr. Farrell as Chairman of the Prime Minister’s Economic Advisory Board.
Did the new Minister of Finance follow the advice of his own Prime Minister’s Chief Economic Advisor? Let’s look at the record:
The broad elements of Farrell’s seven-point plan were as follows:
Act quickly and decisively, and avoid the IMF. Instead, the Minister of Finance has failed to act quickly and decisively, pushing us even closer to the IMF. He is certainly doing his part to ensure Prime Minister Rowley’s self-fulfilling IMF prophecy is manifested.
Achieve external balance in the shortest possible timeframe. Instead, our official reserves are still depleting.
External balance must dictate the stance of fiscal policy. Instead, the stance of fiscal policy is based on generating revenue, not protecting our external position.
Fix the time frame for achieving external balance. The timeframe should NOT be more than TWO years! Instead, two years have passed and we have not achieved external balance.
Fiscal adjustment should begin immediately. The HSF should NOT be touched. Instead, the HSF has been raided, twice, so far.
Monetary policy should cooperate by raising interest rates. Instead, the Central Bank has kept its policy interest rate unchanged over the past two years. The last interest rate hike was in early December 2015, mere days before I was removed from office. Low interest rates mean the Central Bank is failing to protect our external position.
Wages and incomes policy should cooperate. Instead, the tripartite agreement is in shambles as the trade union movement prepares to rumble.
So, why does the Minister of Finance continue to ignore the advice of Dr. Terrence Farrell, his Prime Minister’s Chief Economic Advisor?
Maybe the Minister of Finance is following the advice of his own Economic Advisor, Ewart Williams. Let’s see.
Speaking at the Demas/Rampersad Seminar Series at UWI, St. Augustine, on November 14th 2013, Ewart Williams indicated that his research on resource-rich developing countries like Trinidad and Tobago show that six basic pre-conditions must be met for economic diversification to take place.
The six pre-conditions are:
A macro-economic policy that ensures economic stability. Instead the economy is in recession, fiscal deficits are large, public debt is building up and our foreign reserves are depleting rapidly.
A high quality physical infrastructure in the roads, power, water, ports and very importantly, communications infrastructure. Instead, our physical infrastructure is suffering with the senseless budget cuts and poor implementation of the PSIP – just look at the recent widespread flooding.
A high quality human capital as reflected in the output of our secondary and tertiary education system, complemented by a flexible system of training institutions. Instead, GATE has been cut and the training institutions have lost their way.
Adequate investment in research and innovation, supported by both the public and private sectors. Instead, investment in research and innovation is negligible, if not near zero.
A business-friendly environment that is attractive to both foreign and local investment. Instead, our Ease of Doing Business position has worsened with the plethora of new taxes.
An effective, modern and transparent system of governance. Instead, important national institutions have been under assault…just look at the Central Bank, the Integrity Commission, and the Judiciary.
After two years in office, the PNM Government has not met even one of the following six basic preconditions for economic diversification put forward by the Minister of Finance’s own Economic Advisor.
Madame President, apart from ignoring the advice of his own economic experts, the Minister of Finance does not have a concrete, realistic plan to stabilize our economy. Just look at the confused themes of his budget statements, a wish list of the latest buzz words:
- Budget 2016: “Restoring Confidence and Rebuilding Trust – Let’s Do This Together”
- Budget 2017: “Shaping a Brighter Future – A Blueprint for Transformation and Growth”
- Budget 2018: “Changing the Paradigm and Putting the Economy on a Sustainable Path”
There’s no economic logic that ties together these three successive Budget statements. The only constant among these Budget statements is the narrative of “Blame Kamla”, of which the country has become tired.
The PNM has ruled this country for 41 out of the 61 years since general elections were held in September 1956, squandering three energy booms in the process, yet “Blame Kamla” is the only mantra the PNM apologists can come up with to the many ills facing our country.
We have no idea what milestones the Minister of Finance has in mind to restore confidence and rebuild trust, to regain fiscal balance, to stabilize public debt, to stop the hemorrhage of official reserves, and to bring the economy back onto a growth trajectory.
Come tomorrow, we don’t know where the exchange rate will be… we don’t know whether we will have a job… and we don’t even know if we will be faced with another harsh, punitive tax.
Why did the PNM announce in Budget 2017 it’s going to build a blueprint for transformation and growth, and then decide to change the paradigm, in the next year? Where’s the economic logic?
So the Minister of Finance is ignoring his experts, he does not have a plan, and he has not articulated a path to economic stability… what else could he be doing wrong? Well, the Minister is implementing his fiscal policies at the wrong speed and in the wrong order.
Madame President, what confuses me as an economist, is how could the Minister of Finance and his many economic advisors, when they were writing the PNM’s 2015 manifesto, the blueprint for its current policies, fail to take into consideration the need to properly pace and sequence these policies.
The Minister of Finance has introduced VAT on food, mixed it with a few dashes of higher fuel prices, attempted to introduce the controversial property tax, plans to tax the life out of the gambling and gaming industry, and thrown in an on-line tax for good measure.
He’s implementing all these new, punitive taxes at the same time with a “big bang”, which means these taxes are working against each other, cancelling out any intended revenue benefits.
It’s no surprise the Minister continues to fall short of his revenue targets, but then again, he’s short…on logic and his policies are short-sighted.
Madame President, two years ago we entrusted the care of our country to the Rowley-led PNM Government, after they assured us they were “red and ready”. They have absolutely failed to deliver on that promise.
This PNM administration has already wasted two years, and given their poor track record will waste a third year by the time Budget 2019 comes around. This PNM Government has replaced competence, creativity and compassion with impotence, illiteracy and insensitivity, these are the new hallmarks of economic policymaking.
Our window of opportunity to prevent an economic crisis from erupting is fast closing. As the Managing Director of the IMF, Christine Lagarde, said at the recently concluded 2017 IMF/World Bank Annual Meetings, the improving global economic outlook provides a window of opportunity to tackle key economic challenges with “growth-friendly” fiscal policies and structural reforms.
So what should the Government do? Here are my Do’s and Don’ts:
- Do listen to the Chairman of your Economic Advisory Board.
- Do come up with a medium-term economic plan, communicate the milestones of that plan, and act decisively.
- Don’t tax the air we breathe and everything else to death. This will not help generate revenue on the scale needed to drive growth in our economy. It’s having the opposite effect.
- Don’t dangle the IMF over our heads and try to secretly depreciate the TT dollar.
Our economy can be fixed but the window of opportunity and options are narrowing and in 2020 when the PNM leaves office they would have set us back in terms of development. So while we may not get hit by hurricanes each year, this Government’s economic blunders over its term of office would amount to being hit by a category 5 hurricane.
Madame President, I close with this last point.
Just like the electorate called upon the NAR to rescue our economy from the PNM in the late 1980s, so too the political storm clouds are gathering and the real paradigm shift will soon take place: the electorate will call upon the UNC in 2020, or even before, to rescue them from the most incompetent, spiteful and vindictive incarnation yet of the PNM.
Madame President, I thank you for allowing me the opportunity to make my contribution to the 2018 Budget debate.