The trinidad Guardian / The priority should not so much be to swear to protect T&T from having to turn to the International Monetary Fund (IMF) to supplement the stock of foreign reserves. Rather, the focus of the Minister of Finance in his budget should be to find ways and means to stimulate production for export to earn hard currency, and to take measures to achieve greater equity in income-earning.
Ultimately, those are the initiatives, successfully embarked upon, which will steer us away from the Washington doors of the IMF.
The far more dangerous and immediate path to avoid is that which leads to Venezuela, a mere seven miles off the coast of Cedros. Entrenched “Down the Main” are the disparities in income-earning and wealth accumulation, and the total dependence on high oil prices. These are the factors which triggered the ideological intervention by Chavez, now Maduro, violently contested by the opposition.
Subsequent to the first boom in oil prices in 1973, T&T’s economy and society have contracted the same characteristics. The results have been a classic case of the folk saying that “laugh and cry live in the same house”. There is merriment, waste, incompetence and corruption in the boom periods, and weeping and gnashing of teeth in the bust.
The economists who have reviewed and compared the state of the economy in this bust period usually conclude, by pointing to the macro-economic indicators (major among them, the state of the foreign reserves) being far better today than they were through any of the previous, bust periods. Prior to approaching the International Monetary Fund for the stand-by arrangement in 1988, there was little money in the till to pay the salaries of public servants and the economy did not have the foreign reserves to service debt and pay for its imports.
The Central Bank estimates the current reserves at approximately US$9 billion; T&T at present does not qualify for a stand-by arrangement.
Venezuela has found itself in the social, economic and political catastrophe and conflict, having wasted untold billions from oil revenues, not having built up a strong and structured non-oil sector and therefore reliant on petro-dollars.
Deep social class inequities, corruption and ideological contestations are renting Venezuela apart. That is the condition we have to avoid as our social and economic conditions are similar. Replace socialist ideology with contestations based on race and party fanaticism in our instance.
The Minister of Finance has a real challenge to keep expenditure within available revenues. But beyond the bookkeeping task and the attendant fiscal discipline (deep cuts in expenditure) to be applied-which is perhaps the message the Prime Minister was intending to send with his IMF comment-he must be strategic in giving a lead to the private sector to expand the economic base. Additionally, the minister must point in the direction of transformation of the nature of an economy which leaves the majority of income earners seriously disadvantaged.
Wide income disparities are not peculiar to T&T, but rather are a feature of the free-market system practised in North America and Europe. Inequality, the latest study by economist Joseph Stiglitz, describes and analyses the features of our economic state.
The difference between the US and say Germany-post election Chancellor Merkel has become aware of those marginalized by the free-market economy-and T&T is that those economies and societies are wide-based, resilient, and the disadvantaged groups can still survive. T&T and Venezuela are open and dependent with very few places to hide.
The pie must not only be divided as equitably as possible; but enough of it must be allocated to creating possibilities for growth and development.
A more progressive taxation system and the spreading of the tax net are mechanisms used to achieve greater levels of equity to avoid social disruption and the IMF.