Colm’s budget and Petrotrin

A strategy for the future of Petrotrin– expected to end operations by November 30–as well as measures to curb crime and the economic burden on average citizens, should form part of tomorrow’s 2018-2019 budget presentation, analysts have predicted.

However, they warned that citizens should not have any unrealistic expectations given the country’s precarious economic situation.

Dr Vaalmikki Arjoon, lecturer in finance and economics at the University of the West Indies, said the likelihood of any election ‘goodies’ was remote.

“Certainly not,” he declared in a Sunday Newsday interview.

“If there is any attempt to ease the burden on the country, it would possibly be a political initiative given there is a local government election next year and a general election in 2020.”

Arjoon added: “I think given the trend we have been seeing for the last three years, I don’t expect to see any significant goodies in the basket being offered at this particular point in time.”

He said this was not necessarily a bad thing since governments in the past have wasted billions of dollars on social programmes, transfers and subsidies.

“That is not to say that some of these programmes were not necessary but there were many instances of cost overruns where we did not see the benefits that should have been derived from it.”

Stockbroker Subhas Ramkhelawan agreed that a budget filled with goodies may not be in the cards.

“There are challenges with the main one being the rising level of debt.

“We are continuing to run deficits without any clear perspective ahead for the economy apart from the energy sector for any kind of growth to talk about.”

However, Ramkhelawan, founder and managing director of Bourse Securities Ltd, said citizens may get some reprieve.

“As far as the citizens are concerned, I don’t think the government will raise fuel prices (as a result of the impending closure of the Petrotrin refinery) as is being discussed all around.

“I don’t know that that fear is going to be realised I suspect it will be something that will be considered for some deferral.”

The former independent senator expects to hear some announcement on how the payout to retrenched Petrotrin workers will be carried out.

However, he said this may do little to ease the anxieties among the wider citizenry.

“That (payout) is going to call for a significant amount of retrenchment funding somewhere in the order of about $2 billion.

“But it will put even more pain on the population and might not be the best order of things when you think of it from the socio-political aspect.”

Energy Minister Franklin Khan has said the severance bill could be upwards of $1 billion.

Scheduled to begin at 1.30 pm in the Parliament Chamber of the International Waterfront Complex, Port of Spain, the fiscal package–the fourth of the Dr Keith Rowley administration–will be delivered by Finance Minister Colm Imbert.

It is being read against the backdrop of modest energy growth and a volatile labour sector, dominated by the recent fallout from the closure of the Petrotrin refinery and possible restructuring of the beleaguered state-owned entity.

The company is expected to end operations by the end of November 30.

On the flip side, the budget is also being held amid welcomed news that the government has received a positive report from the International Monetary Fund.

A release from the Ministry of Finance said an IMF Mission has been in TT for the last two weeks for its regular annual Article IV consultation with the government.

The Article IV Mission said the economy was in recovery mode having shown signs of improvement driven largely by energy sector growth from the second half of 2017.

It also projected positive growth in 2018 due to recovery in the non-energy sector, with nominal GDP increasing from $154.4 billion in 2017 to $163.9 billion in 2019.

Real GDP is projected by the IMF to increase by one per cent in 2018, with constant increases thereafter. And while this may signal a glimmer of optimism in a macro sense, Arjoon is hoping measures will be announced to mitigate the impact of the Pointe-a-Pierre refinery shut down by way of retooling initiatives or measures to reabsorb the retrenched employees in the workforce.

Like Ramkhelawan, he said there also has not been talk about where the money for the huge payout would come from.

“Petrotrin is a very sensitive issue. But there has been no mention of that thus far and the overall bill is going to run into billions of dollars.

“My suspicion is that it can very well be above $4 billion for the least given the type of salaries that individuals would have earned in Petrotrin in the past.

“Given the length of service that many individuals would have also had in the past as well and some of their skills sets, example senior engineers, they would have enjoyed high salaries coming out of the company.”

Arjoon reasoned Petrotrin could not afford to foot that exorbitant bill on its own, given that it has lost significant sums over the years.

He said the government would likely intervene.

“This beings me back to the point that when it comes to state enterprises, poor decisions are usually taken many times because there is the underlying perception that because it is a state enterprise, government will bail you out.”

The lecturer added: “It is as if you have a spoilt child that goes out there and does wrong things with the impression that his father, who might be a rich guy, will pop in at the end of the day and bail him out.

“It is the same mindset that applies to government and state entities and I presume it is going to be answered in the budget.”

Arjoon is also hoping an announcement is made about the assets of the refinery.

“Has a buyer been allocated and we just don’t know about it?” he asked.

“Is it a local or foreign entity? Moreso, how do you plan, as a government, to remodel Petrotrin, what is the business model that you are going to use specifically for this exploration and production entity they want to essentially form?”

Both men agreed that crime was still a troubling issue in the country.

“It is in a very turbulent and worrying state,” Arjoon said, adding he wished new Police Commissioner Gary Griffith well in his efforts. Ramkhelawan said although crime was still at an unacceptably high level, he did not see the Ministry of National Security receiving significantly more resources to tackle the scourge.

“I think that is an operative matter in terms of what the Commissioner of Police will in fact do because I think many of the policies that are needed to be put in place as well as the financing has been there, reasonably so. It is just the enforcement.

“I don’t think there is much you can squeeze out of national and personal security. It is a question of the effectiveness of the Police Service in terms of prevention, detection and evidence fro conviction.” In last year’s budget, education and training received the lion’s share with $7.29 billion.

This was followed by national security and health at $6.23 billion and $6.02 billion, respectively.