Jun 2010 Financial News

National debt on the rise

Jun 16, 2010

Trinidad and Tobago’s debt is increasing much faster than monetary policy officials would like and the local economy faces tough challenges in the coming months.

Non-performing bank loans are rising, public sector debt is close to 50 per cent and private sector credit demand has dried up, Central Bank Governor Ewart Williams said yesterday.

As the country’s economy struggles against stagnant crude and natural gas prices, Williams said Prime Minister Kamla Persad-Bissessar’s government will have to take tough, serious decisions about what fiscal cuts to take to make other promises happen.

In the meantime, more money is being spent than is being collected in oil and gas revenues even though revenue collections have increased in the first few months of 2010.

Whether it is an increase in old age pensions or laptops for pupils, the government will initially have serious fiscal challenges as it faces a second consecutive year of debt of around $7 billion or five per cent of GDP.

Williams was responding to questions by the Express on recent statements by Persad-Bissessar and Finance Minister Winston Dookeran on the state of the treasury.

Dookeran said the treasury was in a ’pathetic’ state because of mismanagement by the former People’s National Movement government.

Williams said during a press conference at the Central Bank Tower, Port of Spain that the country’s current debt represented a ’serious structural defect’ in the national budget.

He admitted there was a defensible case for the deficit but it was now critical for the government to either make decisions on revenue generation or expenditure cuts to fulfil its promises.

Williams said it would not be easy to make expenditure cuts but the government would have to ask itself what needed to be taken out to accommodate other expenses.

’The debt is increasing much faster than we would like and we have to ensure it does not get to 50 per cent,’ he said.

’The bottom line is that we are facing challenges in a second year of economic deficit and the quicker we can turn this around the better.’

Continued rising debt and little sign of a pick-up in economic activity since the start of the year, suggests that there will not be an economic revival, he said.

Government will have to consolidate its fiscal situation and will have to bring the national budget back in balance, Williams said, adding that one solution was to accelerate steps to diversify the economy.

’The time is now, we can’t continue riding that boat of oil and gas,’ Williams said.

Persad-Bissessar said in an interview yesterday that a note was brought to Cabinet with respect to increasing pensions.

She said the promise that was made to increase the Senior Citizen’s Grant to $3,000 a month would apply to existing pensioners.

She said there was a possibility the new pension regime would come into play by September before a new national budget.


Source:
Curtis Rampersad Business Editor
Trinidad Express
Wednesday June 16th 2010

http://www.trinidadexpress.com/index.pl/nart?id=161698638&weba=NWSNews