Jun 2010 Financial News

'Govt will have to cut costs'

Jun 16, 2010

Dookeran described the nation’s previous fiscal management as ’pathetic’ last week.

Stockbroker and former independent senator, Subhas Ramkhelawan, managing director of Bourse Securities in Port of Spain, said the current financial situation shows signs that work needs to be done to remedy the ’challenges’ ahead.

’We had a fiscal deficit of $7 billion last financial year and a projected $7 billion deficit this year according to the budget. It does not take much common sense to know if you spend more than you earn then you have to draw on your savings. We have some savings but it will be reckless to draw on the Heritage and Stabilisation Fund even though there is about $18 to $20 billion in that fund,’ he said.

Ramkhelawan said while he was not in a position to advise Dookeran, he said the first thing the minister should look into was the area of profligate expenses that could be cut.

’It will require going through the country’s finances with a fine tooth comb and breaking down the expenses into three categories: the must dos, the should dos and the would-be-nice-to-dos,’ he said.

Ramkhelawan said this new government needed to get around the island politics and start staggering the campaign promises.

He said the way to see the economy through the upcoming hard times was to look for areas of divestment within the state’s assets and infrastructure.

’If at the end of the day there is not a sufficient decrease in expenditure it will affect areas of employment and incomes and trigger a long term downward spiral effect on GDP (Gross Domestic Product) and the economy,’ he said.

’He may need to recant on some campaign promises because they are facing a significant challenge,’ he added.

Ramkhelawan said the People’s Partnership seemed to have a significant amount of political goodwill that it could leverage on to resolve the state of affairs.

Banker Larry Howai, chief executive of First Citizens said he felt that the fiscal imbalance needed to be addressed.

’We need to have a government that could produce a balanced budget as soon as possible,’ he said.

He advised that the best way to fix the issue was to first understand exactly what they were dealing with.

’For a new government they need to do a full review of each ministry,’ he said.

Howai said that the People’s Partnership seemed to be on target ’so far’.

’The key is value for money,’ he said.

’If you have to spend, you need to be getting good value for your money and you need to introduce efficiencies into the ministries to be able to do that,’ he said. ’Only then would we see a narrowing of the fiscal deficit.’

Economist Jwala Rambarran said he was not surprised by Dookeran’s findings on the state of the economy.

’By the time the 2008 budget was read, it meant nothing because it did not insulate the country against the global economic crisis,’ he said.

He blamed the ’spend more’ reaction of the former Government for compounding the problem and making recovery harder after the economic crisis.

’We have been on the tail end of the boom for some time. The party has been over for some time, but we just kept the music playing,’ he said.

He said now the first act of the government was a formal assessment and proper diagnostic of the country’s financial state.

’Broadly speaking they need to divide the political framework into sections,’ he said.

He said the government needed to stabilise the economy to prevent the country from sinking into a deeper hole.

It also needed to lay groundwork to develop sustainable growth and build up some immunity for the external shocks that could still affect the country.

Rambarran said the government should institute legal guideposts to ensure that deficient budgets were not the norm.

’We need to ensure that regardless of who is in power that good governance is always adhered to and prudent management is taking place,’ he said.


Source:
Trinidad Express
Wednesday June 16th 2010

http://www.trinidadexpress.com/index.pl/nart?id=161698746&weba=MAGBusiness