Lies, laziness and economics

DINESH RAMBALLY

Structural dependency on the energy sector

TT’s economic destiny has long been dominated by the energy sector, a reality that has become increasingly problematic. Contrary to popular belief, the cyclical nature of energy prices is not the root issue; rather, it is the deep structural dependence on this sector that poses the significant challenge.

The global shift towards renewable energy sources requires a transformation we have been unable to make or even initiate. This reluctance to diversify the economy is a combination of ineptitude, laziness and political cynicism.

The Minister of Finance recently admitted the truth about the country’s financial struggles in an affidavit, highlighting a projected $9 billion deficit for the current fiscal year. This deficit is a looming burden that will impact the population in the coming years, which the Government had been unwilling to even acknowledge previously.

Misleading financial achievements

The Government has tried to make up, or cover, its revenue shortfall in misleading ways, for example, the $1 billion drawdown from the Heritage and Stabilisation Fund (HSF) in December 2023, which is hardly mentioned. Similarly, the Government recently proudly announced its success in raising US$750 million through a US bond issue at an interest rate of 6.5 per cent.

This is not a financial victory, it is a loan that adds to the country’s mounting debt which will need to be repaid in US dollars. The bond’s high rate of interest reflects the risk of doing business with the TT Government. The higher the risk, the higher the interest rate investors will demand.

Add to the drawdown, and the bond issue is the manipulation of economic data. The recent Central Bank Economic Survey (2023) said economic prospects are “modestly favourable.” This does not align with a $9 billion deficit. It is clear the Central Bank can no longer be safely considered as an independent institution and has been politicised to promote government narratives.

Economists who read the signs think the country appears to be on the brink of an IMF programme. Providing confirmation of this suspicion is the fact that our credit rating was recently downgraded from positive to stable. This deflates the optimistic narratives presented by the Government and underscores the economic crisis it is not acknowledging.

Tax system and

economic decline

The administration’s approach to the economy via taxation shows yet another facet of the Government’s ineptitude, and the deep disconnect between government and economic realities. It took the minister nearly a decade to acknowledge the inefficiencies of the tax system, which he now attempts to “solve” with more taxation.

Given the present reality one cannot simply sidestep a potentially leaked Cabinet note and the considerations to increase VAT, etc which the Government has sought to dismiss. In a faltering economy, reducing disposable income is not just counterproductive, it is self-sabotage.

Unpaid VAT refunds and financial mismanagement

Another glaring and persistent sign of the Government’s fiscal ineptitude is its inability to pay VAT refunds, now an accumulated $7 billion. By doing this, the Government is both starving businesses of revenue (by decreasing disposable income through increasing taxation), but also of ready capital. It shows a dangerous combination of apathy toward the business community’s needs, and incomprehension of how the nation’s private sector works.

IMF recommendations and political strategy

The IMF has laid out several recommendations to address the economic challenges facing TT. These include the privatisation of National Petroleum gas stations, the removal of subsidies on water and electricity, clearing the backlog of VAT refunds, increasing the retirement age to 65, and reforming the foreign exchange market.

If the Government intends to implement these measures, it must come clean with the population. I hasten to register the caveat that any one of these initiatives must be timed for a moment when it does not push our already traumatised nation into crisis.

The Government may very well have up its sleeves postponing the implementation of these recommendations until after the general election. This strategy, however, will be of no comfort to the population.

A call for transparency and reform

The economic outlook for TT is dire, and the current administration’s policies are ineffective. The structural dependency on the energy sector, increasing high-interest debt, inefficient tax systems, unpaid VAT refunds, and the looming spectre of IMF intervention all point to a need for proper economic planning.

To inspire confidence in the Government, and its economic management, transparency is crucial. The population deserves to know the true state of the economy and what measures are being taken to solve the issues. Without this, the burden of inefficiency and lack of economic honesty will continue to fall disproportionately on the most vulnerable.

Dinesh Rambally is the UNC MP for Chaguanas West