The Prime Minister’s speech contained a clever mix of sobering analysis and bullish solutions. It was designed to sober up but not alarm.
The portents hadn’t been promising. Finance Minister Colm Imbert had said a few days before Christmas that the Prime Minister would be delivering a “reality check.” And when the PM himself announced that he would deliver his address after Christmas, the suspicion was that he wanted us to be able to digest our pastelles.
The seven per cent cut in spending at state entities and ministries needs more detail. Is it a uniform seven per cent or are there variations in there? How is it going to be accomplished without job losses, something that Dr Rowley was very firm about being off the table? Will some entities have to cut deeper than others?
The bigger question, of course, is whether the depth of the cuts is enough. Given that the state spends a staggering 35 per cent of what the country earns, and that the price of oil is less than half of what is projected, does seven per cent go deep enough?
At one tower in Port-of-Spain that houses a number of ministries, I once counted 16 people in the lobby, security and reception/counter staff who keep visitors’ logs. Everyone with knowledge of T&T’s income and expenditure knows that the public sector is too fat.
The Rowley administration may have to come back for deeper cuts there, and many of those affected will be the people who habitually vote for the governing party.
It would be an act of political courage. It may be unavoidable down the road.
There’s much to digest on HSF, housing and the social safety net, which Dr Rowley went to great pains to say that he’d be strenthening.
The D-word, devaluation, was absent from the speech.
Opposition Leader Kamla Persad-Bissessar, in charge of the economy for the five years leading up to September but showing epic chutzpah in disclaiming all responsibility for the current state of things, had warned her successor not to go there.
Its effect can be devastating, regardless of the size of the adjustment of a country’s currency.
In the 80s the Guyana dollar went from $4.30 to $1US, to $10 to $1US. It was the equivalent of having your savings halved without touching your money. One relative saw the chance of a US college education disappear, just so. Still, he had it better, much better, than many poorer people in the country.
Such a big adjustment was never on the cards in T&T, of course, but devaluation changes the cost of absolutely everything, from bread, to flour, to doubles, to gas, to rent, to getting to Barbados.
No matter how modest the numerical adjustment, it can be a big blow to consumer confidence and can deepen economic gloom.
So, devaluation dodged. The threat can’t have gone away and we will be asking the economists if it’s a question of when rather than if in the coming months.
Dr Rowley spent much time laying out the context: How the country came to be where it is. Much of this we heard before from Finance Minister Colm Imbert in his budget and subsequently, but less politically combatively presented than Mr Imbert. But Mr Imbert was right. It was a reality check.