By VASANT BHARATH
The March 26th downgrading of Trinidad and Tobago’s currency credit ratings by Standards & Poors once more exposes Finance Minister Colm Imbert’s patent bungling of the economy.
The continued absence of economic diversification and precipitous decline in the Ease of Doing Business indices, coupled with the lack of Foreign Direct Investments (FDI), are again unmasked in the midst of the S&P decision.
The Government has even failed to establish the two essential national agencies that were identified as being crucial.
The respected international rating firm has relegated Trinidad and Tobago to just one rung above the highly undesirable junk bond status.
This is the second national downgrade in nine months, and the measures were undertaken for fairly similar reasons.
Unfortunately, as a result, S&P also lowered their ratings on Republic Bank, FCB, NGC and TGU.
A primary factor is the steep collapse in crude oil prices, with the current trading value being around US $20 a barrel, one-third of the sum on which the national budget was pegged last October. Additionally, of course, is the massive impact that the Covid19 virus has had on economic activity.
In the midst of the recent price freefall, Imbert recently re-tabulated oil returns at US $40 per barrel, but even that is not a realistic short-term projection, as current prices would indicate.
Natural gas prices have also sagged to almost half of pre-Covid 19 days.
In addition, domestic production of both oil and gas remains depressed.
The lower-than-projected trading prices and production have expectedly weakened the government’s already brittle revenue base.
We must bear in mind that as a result of the Government’s failed economic policies, the country has suffered 4 consecutive years of negative growth.
Diversification is still a meaningless term to the Rowley administration
Imbert has estimated a budgetary deficit of around $6 billion, but the shortfall is likely to be significantly larger, even without configuring the $2.5 billion COVID-19 rescue package.
Midway into the PNM Government’s tenure, Imbert had pledged to balance the budget in his final presentation, but that became as impractical and shallow as virtually all his other promises.
The Minister cannot be blamed for the plummeting energy prices but must be held accountable for gross mismanagement of the economy.
Diversification is still a meaningless term to the Rowley administration.
For example, even in these troubled times, there have been no efforts at improving food production in order to shrink the $6 billion annual import bill.
In fact, the Government is unbothered even though international food supply chains are expected to face trade disruptions as a result of COVID-19.
Other stated planks of diversification – tourism, creative industries, maritime sector etc., — make nominal economic contributions and offer no practical hope of becoming major industry players.
As for foreign investments, they have not only dried up but T&T, once a Caribbean haven for manufacturing, has seen major corporations, including Unilever and Arcelor-Mittal, packing up and moving to greener pastures.
Still, the Government is indifferent as the Ease of Doing Business metrics nosedive, and Jamaica, a prior basket case, emerges as the region’s preferred investment destination.
Gov’t’s trademark sluggishness
S&P also took a dim view of the inability to set up the long-promised Revenue Authority, an institution aimed at strengthening financial collections.
Despite being a frontline 2015 PNM General Election manifesto promise, the establishment of the authority has been processed with the government’s trademark sluggishness.
The project remains stalled in the legislative process, and with a General Election imminent, is likely to lapse into another electoral term.
S&P is also unimpressed that the Government has not improved its data collection machinery, meaning that the moribund Central Statistical Office (CSO) has not been replaced by the much-mooted National Statistical Institute (NSI).
That venture has also received the characteristic PNM treatment.
Another manifesto promise, the NSI was hyped as a ground-breaking measure, and a Canadian agency was retained to establish the new structure. Almost five years later, the relevant legislation is trapped in parliamentary bureaucracy.
The incompetent Government is incapable of simply transitioning a data collection organisation.
Apart from being a repeated source of frustration to S&P, the non-establishment of NSI means the ruling regime touts CSO’s outdated figures, including a wild assertion that unemployment is in single digits.
The rating downgrade took place before Imbert cleared legislative hurdles to access around $8 billion from the Heritage & Stabilisation Fund (HSF).
S&P may well consider that major development during its next evaluation exercise.
In its previous rating last July, the agency hailed the country’s “sizeable liquid financial assets”, but the HSF raid would deplete a significant chunk at a time of economic uncertainty caused by the pandemic.
In another act of ineptitude, Imbert accessed the sovereign fund instead of venturing into multilateral lending agencies, which have set aside large sums for countries that would inevitably turn up with the begging bowl.
Incompetence and negligence continue to rule
International Monetary Fund (IMF) is set to deploy US $1 trillion, according to Managing Director Kristalina Georgieva.
“We will massively step up emergency finance,” Ms Georgieva stated and revealed that 80 countries have already approached the organisation.
The IMF is also working with similar organisations “to provide a strong coordinated response.”
She said she is “concerned with low-income countries in debt distress, an issue on which we are working closely with the World Bank.”
But Imbert opted instead to crack the national piggy bank.
Of note is that the IMF, World Bank and other international lending agencies would have set stringent and focussed lending conditions.
That is not the case with dipping into the HSF.
In fact, even though Imbert has secured the right to withdraw $8 billion, he has publicly accounted for allocating $2.5 billion.
In a General Election year, there is no prize for guessing how a significant slice of the funds may be dispersed with virtually no oversight.
The looming financial crisis caused by the COVID-19 crisis is likely to lead to increased joblessness, partly because thousands of fragile Small and Medium-Sized Enterprises (SME) may not survive.
The impending economic calamity demands competent financial stewardship, which does not reside with the Minister of Finance, and which the Government is not inclined to engage.
The Economic Development Advisory Board (EDAB), whose remit was to provide expert advice to the government, was disbanded after members were frustrated into resigning.
Dr Terrence Farrell said he quit as Chairman and as a member of the Board because he was not able to make headway in this vital assignment. Successful businessman Trevor Lynch also resigned for the same reason and this was subsequently followed by all the other members of the Economic Advisory Board.
Dr Farrell said: “The macro-economic, developmental and diversification challenges facing the country are serious and require urgent, concerted action based on sensible plans which have the highest priority and should be implemented with focus and resolve.”
The turn of economic developments since Farrell’s resignation has become even more acute and essential, but the Government still remains as callous and reckless ever.
Incompetence and negligence continue to rule, even as the financial times get tougher.