The budget in context

THE EDITOR: In expressing my pre-budget view, I always like to position the entire financial and economic management of the country in perspective, while taking a long-term view. I would like to adopt a similar approach in this analysis.

Since 2014, what have been the international headwinds rocking the TT economic boat? Energy prices declined from an average of US$100 per barrel to below US$30 in the subsequent years. Gas prices, production and revenues similarly declined to the point where energy companies' tax revenue fell from $17 billion in 2014 to $1 billion in 2017.

Added to that, just as a recovery seemed imminent, the covid19 pandemic hit, effectively disrupting our local and global economy for almost two years. Another energy price collapse in 2020 saw oil prices fall to single digits and then go negative, a phenomenon that was unprecedented.

Added to this, global supply-chain issues and the war in Ukraine sparked a period of heightened global inflation, severely impacting food prices and consumer goods across the world.

It is against this difficult backdrop that hard policy and economic decisions had to be made. Faced with dwindling revenues in 2015 and record expenditure of above $60 billion by the previous government, the new government was forced to stabilise expenditure to reduce deficits, generate growth, keep workers in jobs and fulfil our social safety net obligations such as pensions, food grants, disability grants and other transfers, aimed at the most vulnerable in society.

Reducing expenditure while increasing revenue is a difficult task and I recall many economists commenting that the country would be at the doors of the IMF within a few years.

Unsustainable expenditure had to be adjusted such as a $4 billion to $7 billion annual fuel subsidy. Petrotrin proved to be a drain on the economy, losing $2 billion a year and with a US$850 billion debt payment looming. A leaner government with focused and targeted expenditure was needed. And this was exactly what was done.

Was the adjustment difficult? Yes it was, but it placed this country on a sustainable path to navigate these challenges, despite even top economists doubting our ability to do so.

Where are we now? Despite the challenges, this country has managed. The full burden of revenue reduction has not passed to citizens, with borrowing and withdrawals from the Heritage and Stabilisation Fund (HSF) utilised to cushion the hard, potential landing. Still, our debt is at a manageable level by international standards, our HSF stands at over US$6 billion and import cover measures over eight months coverage, above international standards.

Our economy is showing signs of recovery led by the non-energy sector. Inflation has subsided to below one per cent. The social safety net remains intact and per capita national income has grown to over US$20,000 from roughly US$17,000 in 2017, at the height of the energy price collapse, according to the IMF.

More so, our energy sector future looks more optimistic with cross-border deals with Venezuela projected to bear fruit from 2027 onwards, increasing gas production, revenues and economic growth.

It is within this context I will examine and analyse the national budget. We have been through a very difficult period which required hard adjustments, but it is my belief that the right decisions were made and the country and the people of TT are better off for it.

The budget is not a standalone document, it is important to understand its context and the long-term decision-making which impacts it.

VYASH NANDLAL

Carapichaima