The TTWhistleblower continues an in-depth three-part analysis of Trinidad and Tobago’s declining economy – ‘Economic decline returns, with fury’ – with the intention of understanding where we came from, where we are, and expert opinion on our future prospects.
Yesterday, we examined a Trinidad and Tobago economy that was characterized by strength, resilience, and confidence. Now, we explore what a terrific difference just one year can make.
Borrowing for routine expenses
A look at the debt to GDP ratio of the past shows it was strong and manageable at 46% by 2015; a stark difference to 61.1% as at September 2016. This does not include the TT$500 Million bond auctioned by the Government in December of 2016.
The real shocker in the increase in the debt to GDP ratio hits home when we see that in one year, we saw a 15% jump; whereas it took the previous administration five years to increase the debt to GDP ratio by the same amount.
According to Central Bank TT statistics, in 2011, debt to GDP stood at 31.2%, and by 2015 rose to 46% with significant investment spending in infrastructure, health, and financial services. In 2016, one year into a new Government, debt to GDP has jumped to 61.1% with absolutely no investment spending.
Worrying is that the present Government’s borrowing has had nothing to do with financing for investment or any kind of infrastructure or value creation. All borrowings so far, including the US$1 Billion bond floated by the Government in July/August of this year, have been to finance operational expenses (recurrent spending) and padding foreign reserves.
And let’s not forget the debilitating hit taken by our currency, depreciating rapidly against the US dollar. In October 2015, commercial banks sold you US dollars at $6.36, levels which held robustly for years.
As at November 2016, the banks sold US dollars to you at TT$6.77. And that’s when you’re actually able to get US dollars from the banks.
Back to the purpose of borrowing, in the public notice of the Government Bond auction of 15 December 2016, the Government went as far as to admit that the purpose of the bond was to: “…assist in financing Government’s recurrent expenditure.”
This means that even as the public debt rockets to increasingly unmanageable levels, not a cent of borrowing is going into investment strategies for stability, infrastructure projects, or new diversifications sectors.
Truth in crisis
In a time of crisis such as ours, the first public response must always be the facts! In whatever way they are managed and used, the most effective crisis management is steeped in truth.
A moment ago, we looked at the public debt and immediately started seeing conflicting views.
With a shaky economy, job losses and wild anxiety, we are progressively more unsure of whether we are actually being told the truth.
In the same interview referred to a few paragraphs ago, Imbert also said: “Using the net public debt as the basis, our net public debt to GDP ratio in September 2015 was 45.4 per cent and it is currently 45.8 percent, a negligible change. This is after taking into account the recent US$1 billion bond issue.”
But Imbert’s assertion was a stark contradiction to the Central Bank whose data showed that in 2011, debt to GDP stood at 31.2%, and by 2015 rose to 46%; an approximate 15% increase over a five-year period. And one year later, debt to GDP has jumped approximately 15 points to 61.1%.
That’s quite a contradiction from Imbert’s claim that debt to GDP “is currently 45.8 per cent, a negligible change.”
In that particular statement to the media, Imbert did not refer to the unprecedented withdrawal from the Heritage and Stabilisation Fund (HSF). A total of TT$2.5 billion was withdrawn from the HSF, not for investment spending based on an economic recovery strategy, but simply for ‘paying bills’.
Sketchy facts didn’t stop there. It was in delivering the budget 2017 that Imbert said to the House of Representatives, that ‘fortuitously, with the prudent financial management of the PNM, confidence is returning to the economy, evidenced by the increase in foreign direct investment in 2016, particularly in the energy sector’.
But the facts, from the Central Bank, media, and Ministry of Energy and Energy Industries tell a completely different story, that the significant investments in energy came before the Rowley PNM Administration took office.
In fact, by 2010, FDI suffered to such an extent that only US$501 Million was invested in TT from abroad. By 2012, following successful oil bid-rounds for new investments in new acreage, FDI as much as quadrupled to US$2.2 Billion, and continued at high levels into 2015 with triple the 2010 level at approximately US$1.5 Billion.
The former British Prime Minister, the late Baroness Margaret Thatcher who said: “There can be no liberty unless there is economic liberty.” But how can we achieve economic liberty when we’re still struggling to achieve the truth?
A collapsing economy
Despite the first line of defense from the Government being “people are being alarmist” it is not pessimistic to refer to the economy as collapsing. In fact, one editorial in the Trinidad Express of 29 November 2016 referred to a “coming economic collapse”.
The newspaper put it bluntly: “The Government has embarked upon misguided strategies to turn around the economy and in this regard they are digging a larger hole to bury the economy instead of rescuing it from large-scale unemployment, runaway inflation and the general pauperisation of the population.”
Bold statements as they are, they’re certainly not alarmist, but rather realist as both the once towering energy sector, as well as the formerly growing non-energy sectors are in serious decline.
Crude oil and natural gas production have declined when we compare 2015 to 2016. Production of crude oil declined by 10.7% and natural gas by 10.9%. Even the high-earning liquefied natural gas (LNG) has declined in production by 12.2% and petrochemical output fell by 4.7%. These figures are according to the Central Bank.
On the non-energy side of the economy, activity has weakened to a frightening level with declines in construction of 23.5%; declines in cement sales by 15.1%; declines in aggregate sales as well as hardware and construction material by 21.9%. Again, this is data according to the Central Bank.
The same data shows that even in the Distribution Sector, new car sales, in particular, have declined by 7.7%.
Jobs going, going, gone…
One of the areas where there have been increases is in unemployment, with the Central Bank showing that by the second quarter of 2016, unemployment stood at 4.4%, whereas for the same period in 2015, unemployment stood at 3.2%.
Job losses and the impact on families across Trinidad and Tobago have been harsh. According to the CSO, 5,400 people lost their job in the second quarter of 2016 and most of them were working women.
A Trinidad Guardian article also noted that close to 500 workers were retrenched at ArcelorMittal in February, along with over 800 Construtora OAS workers in March 2016, and 200 workers from Centrin were also laid off.
The rapid increase in unemployment forced Labour Minister Jennifer Baptiste-Primus to unwittingly abdicate responsibility when in her contribution to the 2017 budget debate, she said Government was partnering with Canadian HPD having identified 35,000 vacancies in Canada for long-haul drivers.
She essentially said to the population to forget about finding a job here, leave and work in another country. An unprecedented abandonment of public duty if ever there was one!
Job losses are also being reflected in the deterioration in private sector credit in the first three-quarters of 2016. Credit to the business sector by the consolidated financial system fell from a rate of 6.4% in December 2015 to 3.5% by September 2016.
According to the Central Bank, there was a deceleration in business loans which after experiencing a 2.9% increase in the last quarter of 2015, declined by almost 2% in September 2016.
<h2>The food price tragedy</h2>
As jobs losses increase, so too have food prices. Poverty has been the most instant and obvious upshot of this rapid-fire broadside to the economy.
The Government delivered on it’s promised to reduce the rate of Value Added Tax but delivered it with a damaging sting in the tail by applying VAT to thousands of previously zero-rated food items. Statistics show that this very harsh move had the effect of driving inflation to as high as 9.4% by February 2016.
The tragedy of food prices is that food price inflation stood at 2% in the last quarter of 2015, holding at similarly low levels in previous quarters.
Ironically, further afield, the United Nations Food and Agriculture Organisation (UN-FAO) announced on 08 December 2016 that global food prices were moving downwards, having dipped almost half a percentage point in November.
This came shortly after the people of Trinidad and Tobago were said to be bracing for higher prices in the fourth quarter of 2016.
The Sunday Guardian on 18 September 2016 looked at specific prices showing that a tin of Citrix moved from $110 in October 2015 to $140.69 in September 2016, although the 12.5 per cent VAT added to the item showed an increase to $123.75.
It also showed that items like split peas increased from $16.95 for five lbs in 2015 to $19.85 in 2016, and toilet paper moved from $87 for a 48 roll package, to $106.
Worried stakeholders and sectoral leaders
Weaving the spiral of violent crime, increasing poverty and hopelessness and a startling lack of fiscal strategy, devastating worry is growing across the nation in stakeholder groups and even religious leaders.
On Christmas Eve, Roman Catholic Archbishop Joseph Harris, Parish Priest Fr Clyde Harvey and Secretary General of the Sanatan Dharma Maha Sabha, Sat Maharaj boldly verbalized those concerns.
“The economy has contracted…there are more people out of jobs. There are more people grieving because their loved ones have been killed. We are not in a very good place,” the Archbishop bemoaned.
The Maha Sabha’s Maharaj said: “The economy is on the decline…the workforce is on the rampage, threatening to disrupt the country; we have a Minister of Education who is totally lost in his job, and crime is out of control. People are living in fear.”
Fr Harvey, though hesitant to add his voice, said the country needed action, not wishes, adding that 2016 has been difficult and the country is worse off than before.
Daunting as the facts are, it is necessary for the population to know the truth of the challenges we face so that we know the role we must play in driving recovery.
Having given a clear picture of where our economy was before, and where it is now, in the next and final part of this series, we will listen to the experts, both at home and abroad, talk about the prospects for Trinidad and Tobago.