Arjoon, Bharath: A matter of timing for subsidy removal

ECONOMIST Dr Vaalmiki Arjoon and former trade minister Vasant Bharath said timing is important when it comes to dealing with the longstanding issue of removing billion dollar subsidies on water, electricity and fuel. They made their respective comments on Thursday in response to comments that Finance Minister Colm Imbert made on this matter during a virtual news conference on Tuesday.

Arjoon said, "It makes no sense trying to protect the vulnerable on one hand but then taking measures such as this to encourage more vulnerability on the other hand."

While in the long term subsidies should be removed because they are not sustainable, Arjoon said, "Timing is critical."

He added, "The state ought to establish the model for removing the subsidies, but delay actually removing them."

Arjoon said the subsides cannot be removed "until herd immunity where at least 70 per cent of the population has been vaccinated (against covid19)."

He said that was the only way businesses could begin to safely operate at levels similar to the pre-pandemic period. And once covid19 restrictions are gradually removed and the economy begins to reopen, different sectors of the economy would take different periods of time to regain some financial strength.

Arjoon estimated that could take several months.

"Therefore, at the end of fiscal 2022, they should evaluate the performance of the economy."

Arjoon said if, by that time, "we have achieved herd immunity and the business community has regained adequate financial strength, then they can start to slowly implement the subsidy removals."

Should households and businesses not be in a safe place by the end of fiscal 2022 to consider a gradual removal of subsidies, Arjoon suggested the exercise be delayed until proper financial resilience has been achieved "to afford the increase in business and living costs."

He said a better formula for covid19 vaccine rollout, providing relief to the vulnerable and removing bureaucratic delays in the public service when interacting with the business community, "is what is more critical at this time."

Bharath suggested Imbert focus on providing incentives and encouragement to small and medium enterprises (SMEs) "to allow them to quickly restart, retool and re-establish themselves, thereby creating economic activity, employment and tax revenues for the Government."

He estimated that pre covid19, there were over over 20,000 SME's operating in Trinidad and Tobago, employing over 200,000 people and contributing about 30 per cent of GDP.

"We must bear in mind that the flawed economic policies of increased taxes, increased debts, taking money from the HSF and the sale of state assets have failed in spectacular fashion resulting in six successive years of negative growth and a subsequent lack of confidence from the investing community."

With citizens and businesses already cash starved and reeling with real unemployment and underemployment in the region of 15 per cent and growing, Bharath asked, "How and where on earth will they find the means to pay increased taxes and utility rates?"