With oil priced around US$45 a barrel and gas at US$72 per mmbtu, all eyes will be fixed on the newly appointed Minister of Finance Colm Imbert over the few next weeks for the presentation of the 2015/2016 national budget.
Already, economists are weighing in on Imbert’s appointment and have given their recommendations.
Dr Roger Hosein said it was not business as usual, that astute planning and critical foresight were required to shift the country out of its state of moderate growth.
Given the global decline in the prices of the two major resources—oil and gas—Hosein told the Sunday Guardian “all hands on deck are required and it’s not business as usual.”
Meanwhile, Indera Sagewan-Alli said the budget was the main focus right now and assumed Imbert would be “heavily relying” on the work of former finance minister Larry Howai, especially if the budget was expected to be read in the next few weeks.
She said, “I can’t imagine that he can do much tinkering.”
On Friday, Imbert said a tentative date for the budget was September 28, which is about two weeks away.
Sagewan-Alli said Imbert’s appointment was “a surprising one” given his background in engineering. While she appreciated that he had a lot of political experience having been in the field for “so long,” whether that would translate into the requisite competencies of a Minister of Finance was left to be seen.
She said, “You have to give them time to prove their mettle. They can either deliver on our expectations, positively, or they could not, as we have seen with past governments.
“We just have to be vigilant as a people and ensure we continually hold them to account to determine whether it is in our best interest.”
Diversification of the
economy
Hosein said the new Government had no choice but to focus on diversification of the economy.
He said, “I think the decrease in oil and gas prices has made it very clear that unless they can find suitable, alternative means for generating foreign exchange, this economy will find itself within the next few years, if things continue as they are, with a very severe foreign exchange problem.”
He added that the new ministers needed to put their heads together with the relevant stakeholders to find ways and mechanisms to improve the pace of diversification.
He said it was no longer necessary to hold conversations on diversification.
”It is now necessary to move the whole diversification into one of action rather than a conversation.”
Hosein said that much needed emphasis had to be placed on areas where expenditures could be cut.
He said Imbert would want to look at decreasing overall expenditure, particularly in areas of transfers and subsidies and at the same time boosting revenue intake.
“The new minister will have to look carefully at non-petroleum tax revenue flows within the next three years and make a judgment as to whether or not there is need to increase the personal income tax rate so as to bolster government revenue inflows.
“One of the tendencies we have been noticing in the economy is that a concentration on non-government capital expenditures has not been able to adequately improve the overall output level of the economy since 2009.”
Hosein said the new minister might therefore want to consider a reformulation of government expenditure with a greater focus on capital expenditures.
He added, “This will help to strengthen the productive capacity of the economy and may also help in lowering the overall inflation rate.”
In this regard, he may need to pay attention to the San Fernando to Mayaro Highway, using an appropriate financing mechanism.
Hosein suggested that Imbert and the Minister of Planning Camille Robinson-Regis pay close attention to appropriately diversifying the economy in the coming years, saying the room for error was now small and that wide-scale stakeholder consultation on the process was necessary.
“It is not business as usual. The medium-term growth rate is likely to be at best moderate and so, astute planning and critical foresighting are required to move the economy out of this period of moderate economic growth.”
Stop the ‘gimme gimme’
In his address after the swearing in of his new Cabinet on Friday, Prime Minister Dr Keith Rowley said it was time to get rid of the ‘gimme-gimme’ attitude.
Sagewan-Alli said the PM had continued to allude to the fact that the country needed greater efficiency and needed to move away from the high dependency situation to one of greater responsibility.
Regarding the budget, she said, “What we will be looking for is the stamp of this new administration on the budget.”
She said a budget was upon this new administration almost immediately.
“Unless they were spending time developing policies while in Opposition, which I hardly think is the case, I don’t expect to see any drastic changes.”
As to whether there would be savings with the trimming of several ministries, she said yes.
However, even though salaries will not be paid for those ministries that no longer exist, costs will be incurred for the changing of names, stationery and other items.
“In the immediate term, the only savings will be salaries and that could possibly be offset by the increased cost of what is needed to have the new ministries.”