Will 2019 herald ‘good time’ budgeting? – Part I

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The TTWhistleblower has undertaken a review of the Keith Rowley PNM Administration’s past three budgets as the Finance Minister prepares to deliver his fourth budget since taking office in September 2015.

The dismal record of delivery and keeping promises does not bode well, but with a general election due in 2020, it leaves one to wonder whether the cash squeeze in previous years was a deliberate attempt to ensure that there can be a ‘free for all’ – a normal PNM strategy.

The statistics and facts delve deep, but it is for readers’ benefit to ensure that they have all the facts; we at TTWhistleblower will ensure you do.

2015 to 2018

Monday 01 October is Budget Day and the Minister in the Ministry of Finance has unconvincingly told the nation that better days are coming.

The budget comes at a time when the people of Trinidad and Tobago are carrying more burdens than even they are aware and are more strained than at any other time that this generation can remember. This is moreso for the thousands of people who are now without employment.

This is because after numerous claims by the Government, three PNM budgets have failed to halt economic decline, and set Trinidad and Tobago on a firm and dedicated path of growth and sustainable development.

Whether blessing or curse, the energy sector has found its legs again with higher production and higher global energy prices, which to the PNM is a way of building a war chest for election spending. The energy sector has found itself in a place where it is supporting the survival of the economy, not because of the Rowley PNM Administration, but in spite of it!

Could this be where the PNM’s claim of better days is coming from…and should we be wary of forgetting the trauma of the past 3 years?

The statistics according to the Central Bank are clear in terms of the loose and unfocused manner in which the economy and public finances have been handled.

As recently as the July 2018 Economic Bulletin, the Central Bank noted:

·         The domestic economy saw an increase in activity in the first quarter of 2018, led by an improvement in energy output (not Trade and Industry, not Financial Services, not Manufacturing, and not the Services Sector…just energy output);

·         Latest available unemployment statistics show that during the third quarter of 2017, labour market conditions worsened when compared to the same period one year ago;

·         Conditions in the foreign exchange market eased slightly in the first eight months of 2018 in light of higher foreign exchange conversations as the energy sector improved. Despite this, gross official reserves registered a decline for the same period in 2018;

·         Non-energy sector activity declined in the first quarter of 2018 by 0.2 percent, despite favourable outturns in several sub-sectors;

·         Gross Official Foreign Reserves have dipped to a low of US$7.6 billion (2015 – US$10.5 billion) leaving Trinidad and Tobago with 8.3 months of import cover.

It gets worse…

Notwithstanding the dismal picture painted by the above data, it gets worse:

·         The Central Government deficit for the period October 2017 and June 2018 stood at -$4.5 billion;

·         Net public debt as at June 2018 stood at $96.2 billion.

PNM’s PSIP also abandoned?

When all of these facts, which represent only a fraction of the indicators that show a broken economy are considered, one wonders how, despite Government’s capital spending programme, the economy has been brought to a position of dramatic decline.

In previous analyses, we examined the Government’s Public Sector Investment Programme (PSIP) and it is worth taking a look at its performance over the years since 2015.

The Public Sector Investment Programmes (PSIP) and the pace of delivery of the Rowley Administration has been atrocious!

Vision 2030 became one of the most unimaginative pseudo-policy initiatives, as it appears the 2020 version was taken off the shelf, dusted off and inconsequentially dotted and crossed, making Patrick Manning’s Vision 2020 into Rowley’s Vision 2030.

The 2017 PSIP stated: “Government has set out its broad, long-term development agenda in the draft National Development Strategy 2016-2030 (Vision 2030). Vision 2030 seeks to transform Trinidad and Tobago into a developed country, with sustainable growth and development and an optimal quality of life for all citizens, by the year 2030.”

It outlines the broad strategies for advancement over the next five years, 2016-2020. As such, Vision 2030 provides the development context for all national and sector policies as well as projects and programmes to be funded under the PSIP.”

The Finance Ministry authored PSIP went on to state: “The 2017 PSIP incorporates the high priority investments which are cognizant of the country’s development goals outlined in the draft National Development Strategy. These goals coalesce around five key thematic areas:

I. Putting People First: Nurturing Our Greatest Asset

II. Delivering Good Governance and Service Excellence

III. Improving Quality Infrastructure and Transportation

IV. Building Globally Competitive Businesses

V. Valuing and Enhancing Our Environment”

However, the document also admitted: “In fiscal 2016, an original allocation of $7,000 million was appropriated to facilitate the implementation of projects and programmes under the PSIP…the original allocation was revised upwards to $7,700 million by the end of the fiscal year.”

It then went on to admit to a 61.1% utilization rate of the PSIP funding: “A total of $4,708.8 million was expended, with $3,162.2 million (67.2%) under the Consolidated Fund and $1,546.6 million (32.8%) under the Infrastructure Development Fund, which represents a utilization rate of 61.1 percent of the revised allocation.”

The funding that was used focused on three sectors:

•          Social Infrastructure
•          Economic Infrastructure

•          Public Administration

By the time the 2016 PSIP was reviewed for analysis of performance, it was noted that for Economic Infrastructure, essential to firing up an increasingly slugging and sinking economy, a total of $1.399 billion was spent from an original budget of $2.762 billion – a shortfall of $1.36 billion.

For Social Infrastructure, the Government used $1.711 billion out of an allocation of $2.768 billion, a shortfall of $1.05 billion.

The issue here is not whether Government saved money. Rather it is about an essential instrument in Government’s capital spending that had set targets that were not met.

Targets not being met translates to capital creation works slowing and a much more sluggish engagement of private sector capacity.

This is a core element of the economic slide that Trinidad and Tobago is currently experiencing, with Government itself being a competitor of economic factors of production, but being tight-fisted with funds already allocated, which in turn slows private sector activity to a crawl.

The 2017 PSIP

With the 2017 PSIP: “The sum of $5,022 million has been allocated for projects and programmes to be executed in fiscal 2017 comprising $2,393 million (47.7 %) under the Consolidated Fund and $2,629 million (52.3 %) under the IDF. The 2017 PSIP spread of funds is as follows:

Central Government – $4,443.8 million

Local Government Authorities – $289.6 million

Tobago House of Assembly – $288.6 million

The 2017 PSIP stated: “Compared to the 2016 PSIP provision, the 2017 PSIP represents a reduction of $2,679 million in funding, reflecting a 35 percent decrease in capital investment available for financing projects and programmes during the fiscal year.”

So after failing to execute $2.41 billion in capital expenditure for 2016, achieving only a 61% PSIP execution, the Rowley Administration did not roll over funding for the continuation or commencement of projects it failed to pursue.

What the Government did was deflate the 2017 PSIP by almost $2.7 billion.

The PSIP document stated: “However, when compared to the expenditure level of fiscal 2016, which amounted to $4,708.8 million, the 2017 PSIP allocation represents an increase of $313.2 million (6.7%).” This was an utter abuse of simple logic.

In the next part of this series, the TTWhistleblower looks at the possibilities for the 2019 budget, against the backdrop of huge tax, price, duties, fuel and transport costs.

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