The TTWhistleblower continues this series looking at economic hardships, even after three budgets by the Keith Rowley Administration.
In this series, previous budgets are being analysed in the context of the Rowley Administration’s delivery and performance.
With the mid-year review of the 2018 budget on its way, the present conditions and forecasts for the immediate future will also be examined.
Looking to the Rowley Administration’s past performance in Tourism makes one believe that the sector was just a mere mention in the 2017 PSIP.
According to the 2017 PSIP: “The Ministry of Tourism has targeted the tourism sector for transformation into a prime economic sector. During fiscal 2017, an investment of $83.2 million will be made in the sector.”
A prime sector it says, which one finds hard to take seriously given the protracted sea-bridge crisis that the Rowley Administration seems incapable of appropriately solving…
The document went on to state: “Another key initiative of the Tourism Development Company Limited (TDC) is the establishment of a Visitor Relationship Management System. The global tourism industry has become highly competitive in attracting and maintaining destinations of increased tourism visitor frequency.”
“The Project is estimated to cost $2.65 million. For fiscal 2017, an allocation of $0.4 million is provided to facilitate the official launch of the Visitor Relationship Management System and implementation of Phase I of activities. The Project, while in its formative stage, requires wide stakeholder input for acceptance and execution.”
The Government also committed $0.3 million for the continuation of works including the repainting of Shed #3 and branding of the roof of Sheds #3 and # 4 which are visible to arriving passengers on cruise ships.
Now, the most considerable impact on Tourism has arisen from the collapse of the sea bridge and the crisis that followed.
For both local and foreign visitors the absence of a reliable sea bridge and a strained air bridge made it difficult to access Tobago.
Another critical factor that will have to be addressed by the 2018 budget mid-year review is the financial stability in the Financial Services Sector, and broader economy of Trinidad and Tobago.
The Central Bank’s 2016 Financial Stability Report has warned that: “The Trinidad and Tobago economy continues to slowly adjust to the terms of trade shock occasioned by the decline in international energy prices since 2014. This has translated into a reduction in foreign exchange inflows and an erosion of fiscal buffers.”
For the benefit of readers, “terms of trade represent the ratio between a country’s export prices and its import prices. The ratio is calculated by dividing the price of the exports by the price of the imports and multiplying the result by 100. When a country’s TOT is less than 100%, more capital is leaving the country than is entering the country. When the TOT is greater than 100%, the country is accumulating more capital from exports than it is spending on imports.”
The report further stated: “The contraction in economic activity has negatively affected private credit demand. At the same time, the Government has increased domestic financing.”
Given the dynamics of the Trinidad and Tobago economy, a relationship is inevitable between the Government’s failure to execute its capital expenditure programme and a slowing of private sector credit demand.
Businesses relying on the pursuit of Government projects have scaled down operations and its demand for private sector credit through loan facilities has been drying up.
The report also warned: “There was a marked increase in credit card usage and the pace of debt consolidation has doubled. On the other hand, business lending continued to be flat.”
The Central Bank also warned of the deterioration of the Foreign Exchange Reserves and availability of FOREX to local businesses.
Its findings included in the report stated: “Purchases of foreign currency from the public by authorized dealers (mostly commercial banks) declined by 13.2 per cent in 2016. While foreign exchange sales have also fallen by 21.8 per cent from 2015, demand remains robust. Sales of foreign exchange by the Central Bank to the authorized dealers amounted to US$1.8 billion in 2016, and net official foreign reserves declined from US$9.9 billion at the end of 2015 to US$9.5 billion at the end of 2016.”
The most recent figures for Foreign Exchange Reserves, according to the Central Bank’s online data centre is worse than the end of 2016.
Reserves have fallen further and is currently at just over US$8 billion (an almost US$2.4 billion slide) giving this country approximately nine months of import cover.
Note that the report states FOREX Reserves falling to US$9.9 billion by the end of 2015. This is despite the fact that in September 2015, Foreign Exchange Reserves stood at US$10.4 billion and 12 months of import cover.
The Central Bank’s online Data Centre calculates import cover in relation to foreign reserves starting January 2006 when Foreign Exchange Reserves stood at US$4.190 billion, or 8.3 months of import cover.
In the time since then, import cover reached as low as 7.7 months in March 2007 under the Manning Administration.
With FOREX reserves having tumbled so far, one wonders what impact rising revenue and stable energy prices will have and what report the Finance Minister will give in his mid-year review.
The Central Bank report also looked at Trinidad and Tobago’s declining credit standing, highlighting three major global agency findings:
· S&P downgrade of T&T’s sovereign credit rating to BBB+: “The downgrade reflected the further deterioration in the economy’s debt burden.”
· Moody’s downgrade of T&T’s sovereign credit rating to Ba1: “Declining production from maturing energy fields coupled with limited investment prospects, in a context of low energy prices, materially undermined growth prospects.”
· CariCris downgrade of T&T’s sovereign credit rating to CariAA+: “Fiscal performance has been severely impacted by low oil and gas prices.”
Doubtless, the private sector and the population at large are very keen on hearing how this country will work to defend and improve its credit rating, given the report on 27 April 2018 that:
“International credit rating agency Standards and Poors has revised its outlook on Trinidad and Tobago to “Negative” from “Stable. The rating agency affirmed its ‘BBB+/A-2’ long- and short-term foreign and local currency sovereign credit ratings on Trinidad and Tobago. S&P stated that the “negative” outlook reflects the view that there is at least a one-in-three chance that S&P could lower the ratings over the next 12-to-24 months.”
Consumer loans and credit showed troubling findings when compared on a five-year scale.
The Central Bank report’s findings are shown below:
Consumer Loan Purpose December 2011 December 2016
Other reasons $3.024 billion $3.446 billion
When all categories are included, a sliding economy has seen a huge jump in consumer loans and credit, which totaled $21.012 billion by December 2011, and $30.638 billion by December 2016.
Education and Poverty
Despite its many commitments to pursuing aggressive education targets, the 2017 PSIP showed a decrease in spending on scholarships for sixth form students intending to pursue tertiary education.
At page 81 of the Estimates of Development Programme Expenditure for 2017 it is stated: “The Scholarships Division of the Ministry of Education will receive an allocation of $155.1 million in fiscal 2017 [2016 – $171,750,000m]. The funds will be provided for the payment of tuition and compulsory fees, personal maintenance allowance, books, special equipment, salary, allowances and payment of tuition fees to scholarship recipients.”
The Estimates stated: “Scholarships will be awarded in the following fields: Medical Science, Natural Science, Social Science, Physical Science, Education, Mathematics, Law, Engineering, Finance, Information Technology, Arts and Humanities, Philosophy, Drawing and Painting, Accounting, Economics, International Relations, Youth Studies and Community Work, Environmental and Occupational Health, Cinematic Arts, and Physical Education.”
We would all recall students reporting serious problems in receiving disbursements, with some facing cold weather without food in the United Kingdom because of late payments of scholarship funds.
In poverty alleviation, the Government’s Social Sector Programme focused on “the eradication of poverty and economic and social marginalization.” The Government allocated a total of $45.4 million.
An allocation of $15 million was committed to the National Commission for Self Help (NCSHL) to continue implementation of community projects and provision of various grants to provide financial assistance through three major grant facilities:
• Minor Repairs and Reconstruction Grant (MRRG)
• Low Cost Housing Grant (LCHG)
• Emergency Repair/Reconstruction Assistance Grant (ERRAG)
The 2017 PSIP stated: “Additionally, funding will be provided for infrastructure projects such as construction of retaining walls, drains, roads, recreational facilities, bridges, steps and repairs to school, caregiving institutions and places of worship.”