“Political language is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind – George Orwell.”
The TTWhistleblower continues a series of economic analyses, ‘TT economic future hangs in the balance’ looking specifically at the current economic prospects for Trinidad and Tobago, and the fate of other nations around the world that have already experienced or now face the prospect of bankruptcy.
Since the first part of this series, a great deal of research has been ongoing on the impact of the decline on the population and the future of the economy. In this Part 3 of the series, we shake apart the forest from the trees and look behind the Finance Minister Imbert’s legalese to find the truth of the Trinidad and Tobago economy today.
Budget bluff…who got what
A general consensus has quickly been formed on the Finance Minister’s 2017 Budget Mid-Year Review; it was an exercise in bluffing, self-justification and increasingly tired attempts at blaming every ill on the previous People’s Partnership Administration.
In fact, by the time Colm Imbert delivered his 90 minute (or thereabouts) presentation on the review of the 2017 budget, the nation has been left with no greater clarity on:
- The economic strategy in motion;
- The vision for recovery and sustainable development;
- Firing up a sputtering economy, and
- Keeping prices of food and normal goods and services at affordable levels.
The Keith Rowley Administration went to the Parliament on Wednesday 10 May 2017 with its budget Mid-Year review, specifically for the purpose of varying recurrent expenditure to the tune of $1,188,684,544.
This means that the overall size of the budget has not been increased, but funds have been shifted around to different Ministries and divisions to meet expenditure shortfalls.
According to the Report of the Standing Committee on Finance, the variations reflected:
- Need to meet Personnel Expenditure of $6,395,700;
- The cost of Goods and Services of $221,022,780;
- Minor Equipment Purchases of $60,658,000;
- Current Transfers and Subsidies of $672,043,064; and
- Current Transfers to Statutory Boards and Similar Bodies of $228,565,000.
The variation of appropriations in the 2017 budget were also required to retire an advance of $21,857,680 from the Contingencies Fund for the conduct of the 2016 Local Government Elections and the Tobago House of Assembly Elections held on January 23, 2017.
More to the point, the Ministries and Departments receiving more money are below. In its tireless effort to keep the nation up to date with the truth and facts, The TTWhistleblower found the original allocations in the 2017 budget, matched against the relevant increases:
*See this link for original 2017 budget allocations
Of note, Imbert’s Ministry’s allocation was decreased $1,363 billion from the original allocation for 2017 of $5.769 billion.
The Mid-Year Review at a glance
Analysis of the 2017 budget Mid-Year Review served only to consolidate the belief that Imbert has no idea of where he is, where he wants to go, and what to do to solve the perilous economic slide Trinidad and Tobago’s back is being forced to endure.
The Mid-Year Review at a glance can be summed up as:
- It’s the previous Government’s fault if something went wrong; it’s the PNM ‘prudence’(?) if something happened to end up working right;
- The Central Bank has been empowered to become part of the decision making in the allocation of Foreign Exchange to manufacturers and trade oriented businesses;
- Despite claims of saving $10 billion in expenditure, the deficit now stands at $5.9 billion, rather than $6 billion;
- Government has already borrowed three times in 2017, including $1 billion in bond offerings and a Government guarantee of $90 million for the completion of the horrendous symbol of shame – the Tarouba Stadium;
- Attempts are being made with Fitch Inc so that a “more balanced perspective to T&T’s credit rating” can be reflected, following Moody’s ‘junk’ downgrade;
- Petrotrin has become to 21stcentury Trinidad and Tobago what Caroni (1975) Limited was to the 20th century administrations;
- There has been another shortfall in Value Added Tax (VAT) collections to the tune of $669 million, although Government revenue has increased by $600 million;
- The First Citizens Bank Initial Public Offering (IPO) has yielded a total of $1.025 billion;
- Unemployment has increased; there are now 25,500 in this country without jobs;
- The Property Tax will proceed, whatever the public outcry and backlash.
Fact, fiction and Imbertian arithmetic
During his contribution, Imbert appeared to glow with pride at his announcements, although his figures and dodgy calculations could point to an attempt to understate the true state of the nation’s public debt.
According to Imbert: “It is important to note that the net public sector debt, exclusive of Central Bank open market operations, at the end of fiscal 2010 was $45.4 billion, with a corresponding debt-to-GDP ratio of 32.1 percent. However, by the end of fiscal 2015, the net public sector debt stood at $76.5 billion with a resulting debt-to-GDP ratio of 50.9 percent – an increase in the net public sector debt of $31.1 billion, equivalent to a 70% increase in our debt over the 2010-2015 period.”
Imbert also said: “It should be noted that at the end of fiscal 2016, net public sector debt was $87.6 billion, largely as a result of the US$1 billion international bond issue raised in July/August 2016, which equated to a debt-to-GDP ratio of 60.1 percent. However, during the period under review, i.e. for the first six months of fiscal 2017, despite our very serious financial challenges, the net public debt only increased to $89.1 billion, representing an increase in our debt-to GDP ratio of just 1 percentage point to from 60.1 percent to 61.1 percent between October 2016 and March 2017, in stark contrast to the excesses of the past.”
Imbert slipped passed some terminology gymnastics in an attempt to understate 2010 figures and reflect softer 2017 figures when he chose to discuss ‘net’ public sector debt over ‘gross’ public sector debt.
And noet that he switches from referring to ‘net’, to dollar terms, and then vague reference to just the debt to GDP ratio; indicating the possibility that he was mismatching figures purely for the reason of painting a misleading picture.
Gross debt is the total amount of debt Government has issued, including debt owned by the Government itself.
On the other hand, net public sector debt does not include debt owned by the Government to itself which, for fiscal accounting purposes, is an absolute necessity.
That said, according to the Central Bank of Trinidad and Tobago – an institution that Imbert hasn’t the intellectual or moral capacity to dispute, the true figures that Imbert attempt to skid past look quite different. It should be noted that at the time the People’s Partnership took office in 2010, the net debt to GDP ratio stood at approximately 30%:
Approximately one year after taking office, by June 2011, the net debt to GDP stood at 30.7%. On leaving office, the net debt to GDP ratio stood at 50%.
But, it is either Imbert chose to ignore the facts, or genuinely didn’t care to know them; the debt to GDP ratio first spiked in the post-2010 era on account of the mismanagement of the CL Financial bailout initiated by the previous PNM Government.
Imbert might also have forgotten that while his PNM of 2001 to 2010, of which he was a Cabinet Minister and close advisor to the then Prime Minister, the late Patrick Manning, estimated the CL Financial bailout at $11.9 billion, the ACTUAL bailout cost more than doubled to almost $26 billion.
The Central Bank’s Economic Bulletin of July 2013 Volume XV No. 2 detailed categorically that the deterioration of the nation’s debt to GDP ratio was NOT on account of Government borrowing, but rather on account of Government’s bailout for CLICO/CL Financial.
The report was clear that the PNM calculated the cost of the bailout at approximately $11.9 Billion, but the true cost was in excess of $20 Billion, and a total of $26 Billion when Government support to Caribbean nations is included.
This means the lion’s share of borrowing by the People’s Partnership Administration was to meet the escalating cost of a CL Bailout that had run out of control.
The fact is that in the first two years of the previous Government (2010 to 2012), net public sector debt rose from approximately $45.403 billion to $64.134 billion largely on account of a miscalculated and mismanaged CL Financial bailout by the previous PNM Government.
What should also be noted was the immediate uptick in capital projects, Government spending, Foreign Direct Investment and expanded trade relations between 2010 and 2012.
Between 2015 and 2017, however, net public sector debt rose from $77,341 billion to almost $90 billion, with only previously started capital projects being the ill-fated billion dollar Tarouba Stadium, and the Government campus. And, the CL Financial bailout has already been cleared in terms of liabilities to the Government.
With the quantum of inaccuracies in the Finance Minister’s Mid-Year Review Presentation on 10 May 2017, the TTWhistleblower continues tomorrow with a deeper look at other information where…the numbers just do not seem to be adding up. Stay tuned!