Jul 2012 Financial News

Experts agree on Howai’s five-year projection

Jul 20, 2012

Chief Economist, Republic Bank, Dr Ronald Ramkissoon is not surprised by the three to five-year period in which Finance Minister Larry Howai wants to have the budget balanced. “It is not unreasonable to take this long view. It is unlikely that we will achieve a balanced budget in the short term so this comes as no surprise,” Ramkissoon told the Guardian yesterday. On Tuesday, Finance Minister, Larry Howai at the Ministry of Finance said that over the last four years T&T lost $10 billion in revenue because of the drop in energy prices and that within three to five years he would like T&T to have a balanced budget as the country has been running deficits for four years. Ramkissoon said this statement should allow the country to take notice of the task that lies ahead. “We have not had growth for the years. Revenue has been falling or at least growing slower than expenditure. We have to look at the sustainability of recurrent expenditure,” he said.

He also said apart from him, other economists have also questioned the inefficient use of expenditure. “The question is what are we getting in return for what we spend? Are we monitoring how we spend? If we continue to ratchet up expenditure we will find ourselves in a bad place,” he said. Hugh Howard, President of AmCham T&T Howard told the Guardian that budget deficits impact negatively on the economy and this leads to borrowing. “If the borrowed money is spent on projects, it stimulates the economy and generates employment. If you have jobless growth it will be faced with an environment of instability and people will vent their frustration. Borrowing must be planned properly and there must be a return on investment,” he said. He also wants to know when Howai said the budget will be balanced in three to five years, if he meant the period from when the PP Governments started office in 2010 or when Howai assumed his post.

Howard said he would not be surprised that $10 billion in revenue was lost over the last four years, although he urged caution in interpreting the figures. “In most cases the oil and gas prices are higher than what the Government budgeted for. The problem is that T&T has had a decline in oil production. Even if oil prices were higher and there was a drop from let us say 100,000 barrels being produced a day to 80,000 then there would still be a shortfall in revenue,” he said. Commenting on the overall validity of Howai’s statements, Howard said as the Minister of Finance, he expects what Howai says to be legitimate. “We hope when he makes statements, they are based on the actual work of technocrats and are authentic,” he said. The solution, Howard said, is for T&T to diversify its economy while the country can still derive revenue from these sources. “I want to see T&T diversify its economy in the next five to ten years while oil and gas are still playing a critical role. There must be a holistic plan to diversify the economy,” he said. AmCham T&T is expected to meet Minister Howai in pre-budget consultations next week.


Source:
Raphael John-Lall
Trinidad Guardian
Friday July 20, 2012

http://www.guardian.co.tt/business/2012-07-20/experts-agree-howai%E2%80%99s-five-year-projection