THE 2019-2020 Budget will be read in Parliament on Monday October 7, Finance Minister Colm Imbert said during debate of the Firearms (Amendment) Bill, 2019 on Monday.
Economist Vaalmiki Arjoon said the authorities would do well to remember that a budget is much more than an outline of planned revenues and expenditure. It is a roadmap for the upcoming fiscal year indicating projects the government is planning to embark on to generate further productive employment, maximise revenues, attract private sector investment, and boost our exports and forex earnings.
“This is essential now more than ever as our economy is still in a precarious position. Since October 2015, we spent over $180 billion and took over $17 billion in additional debt – but what have we to show for it? Activities in the non-energy sector continue to decline, falling by an average of -0.5 per cent for each quarter in the last year.”
He said retail sales were still low, falling by over seven per cent in the last four years, the bulk of small to medium enterprises have poor profitability, our forex reserves have fallen by about 40 per cent since December 2014, foreign direct investment (FDI) was in the negative zone at over –US$450 million which meant that foreign investors were leaving our shores, while many local businessmen are engaging in capital flight where they were setting up operations in other parts of the Caribbean region and the US.
Arjoon said confidence in the economy has been shattered. He said as we are in the election season, it was highly likely that the state will continue to increase its expenditure, especially on capital projects to increase HDC housing, improve infrastructure and our transportation networks, to provide a façade that the economy has “turned around”.
“With the termination of the housing contract with the Gezhouab Group International Engineering Co. Ltd, the state ought to ensure that in the upcoming year, they hasten to engage in a transparent and competitive bidding process to ensure that these housing units are still constructed.
“Another essential element of capital expenditure much needed is to improve the infrastructure and engage in dredging of the Port of Port of Spain, to turn it around from its loss making state.” He said any attempt to increase taxes at this stage must be avoided at all costs.
In the last few years, the state attempted to raise revenues by raising taxes, but this backfired as it stunted the growth of the private sector, stymied investment activities, resulted in higher costs of doing business, damaged profitability and contributed to crashing confidence locally.
He noted that government may try to finance part of its expenditure by taking on extra debts through issuing additional government bonds or a similar outlet such as the national investment fund. He said the manufacturing sector remained underutilised by over 32 per cent, not just due to higher taxes but also due to forex woes.
Arjoon said the state needed to provide a plan to encourage further activities in manufacturing especially for small manufacturers while making it easier for them to do business and acquire forex.
He said manufacturers were heavily dependent on importing their raw materials and machinery, as we do not have the capacity nor the expertise to produce many of them here. Without adequate access to forex, many were facing significant delays in getting raw materials and some have even lost suppliers due to late payments.