Trinidad and Tobago Still Facing Difficult Road Ahead

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Dr keith Rowley

Prime Minister Rowley says, ‘We will overcome the violent few who are determined to make hell out of this paradise’

PORT OF SPAIN, Trinidad – Prime Minister Dr. Keith Rowley Sunday acknowledged that Trinidad and Tobago will have to undergo “more adjustment” before it is able to “clear these dangerous rapids towards clam water”.

In a wide ranging address to the nation, Rowley, nonetheless said he was confident the nation would be able to deal with the challenges and urged responsibility as the members of the population “put our shoulders to the wheel and make our individual presence felt”.

Rowley said that 2018 had started with reports of the continued murderous scourge in Trinidad and Tobago and appealed “to all citizens to keep hope alive in this war against the heartless family members and career violent criminals.

“We must continue to support the police in the national effort which last year saw 1,064 firearms of all description and 18,000 rounds of ammunition confiscated, record numbers for the Caribbean, yet we face almost record killings.

“Additionally, over 12,000 persons were arrested last year. We must, and we will, win this war on crime,’ Rowley promised, saying that new strategies being employed by law enforcement authorities were resulting in improvements in response and detections.

“Notwithstanding many huge negatives which still exist, we are heading in the right direction. We need to increase speed on all fronts so that we can get to that destination of safety and security which the population deserves.

“With appropriate leadership and effective actions all around, from the home to the Parliament, from the school yard to the police station, we will overcome the violent few who are determined to make hell out of this paradise which we all have inherited as our homeland. “

Crime apart, Prime Minister Rowley said that the economic situation confronting the oil-rich twin island republic was still a major issue since his administration came to office in 2015.

“As you are well aware by now, for quite some time, our economy has been facing a decline in the production of oil and gas, two commodities that make the main contribution to our gross national product, government revenues, our exports and foreign exchange earnings.

“Energy sector revenues were hit by a dramatic collapse in international oil and gas prices and our own low production levels. The combination of these factors gave rise to a sharp decline of over 90 per cent in tax revenues coming from our energy sector in a short two-year period.”

He said to illustrate the extent of the predicament, oil prices fell from US$106 per barrel in June 2014 to US$30 per barrel in February 2016, which coincidentally was just five months after his administration came to office.

He said given the significant contribution of the energy sector to government tax receipts, total government revenue fell by a similar amount.

“The resulting fiscal deficit was financed by ad hoc arrangements, including billions of dollars in short-term loans from the domestic banking system, many of which came due in 2016, the first year of the new government.

“Part of the expenditure splurge in 2014/2015 reflected a 14 per cent wage increase to public servants, which created an obligation for back pay, which was initially promised to be paid before the end of fiscal 2015.”

Rowley reminded citizens of the five billion dollars (One TT dollar=US$0.16 cents) his administration had to meet, telling the nation “many people sympathized that this was not the election to win, as our new administration could not continue with the largesse of the recent past.

“After taking stock of the economic situation, our government immediately embarked on a fiscal consolidation program whose main obstacle was the fiscal deficit, the driver of our public debt situation which had increased at an uncomfortable pace.

“The public debt, in fact, increased by 70 per cent over the 2010 to 2015 period from TT$45 billion to TT$76 billion. As the oil price shock became a long term structural industry change, rather than a short-term cyclical phenomenon, it was clear that we had to strengthen our domestic revenue base and reduce our heavy reliance on energy revenues.”

Rowley said that while the achievement of strong and diversified economic growth was also considered an urgent objective, his administration was convinced then, as indeed it is now, that the restoration of fiscal and external stability was urgent and an essential prerequisite to economic diversification.

“Our most immediate task, therefore, was to stabilize the economy, and in particular government spending, which was completely out of control when we came in.

“The available accounts in the Central Bank had been used up, the overdraft had been used up, the TT$16 billion investment retention at NGC (National Gas Company) had been used up, the Green Fund had been mortgaged and in addition to this government contracting and debt to contractors, large and small were at an all-time high.”

Rowley said that he would be less than honest if he did not concede that the first two years of the fiscal consolidation strategy have been very difficult.

“I can also say with satisfaction that we have made important progress in that we have begun to successfully address some of our entrenched vulnerabilities and to make the hard decisions that are indispensable to our long term economic survival.

“Even so, as we struggled with existing high debt load, this new assignment could not have been done without resorting to new borrowing to prevent the economy from collapsing completely. In these difficult times the government gets voluminous and divergent advice from a variety of quarters, none of which is without some element of negative side effects.”

Rowley said one persistent view from some prominent quarters is that the government has not cut expenditure sufficiently and should have made much deeper cuts at the beginning of its tenure.

“These kinds of advice, useful and informed as they are, usually are never accompanied by any list of the consequences of such actions, as advised. It would have been a much more arid and barren land had we not managed the last two years with a steady hand making the adjustments along the way, with far less available revenue, then our future would have been far less hopeful than it is now.

“Ladies and Gentlemen, we started our adjustment programme immediately in late 2015, when we ordered a seven per cent cut in public expenditure. We also took initial additional steps to reduce expenditure, including a phased reduction in fuel subsidies. It’s worth recalling that prior to 2015 the Government had spent as much as seven billion dollars per year subsidizing the cost of gasoline and diesel, a subsidy that can no longer be afforded nor is it the highest priority when funds are desperately scarce.”

Rowley spoke of the various storages employed by his administration in dealing with the economic situation noting “without these initiatives and in the face of the much lower national budget, then overall economic collapse was the alternative, given the dominant role that government expenditure plays in sustaining the national economy in both the public and the private sector”.

Rowley said that his administration’s first year in office was particularly challenging as energy revenues fell by a further 50 per cent because of a further decline in oil and gas prices, compounded by the fact that petroleum companies made full use of the inordinately generous fiscal incentives negotiated in 2014, where oil and gas companies were given the ability to engage in accelerated write-off of capital expenses.

Rowley said that because of the decline in petroleum prices and the impact of the concessions, some petroleum companies have paid no corporation taxes at all over the last two years.

He said the chronic, financial difficulties at the state-owned oil company, PETROTRIN, have further exacerbated this problem, because although PETROTRIN produces over 50 per cent of the country’s oil, it is not paying its oil royalties and taxes in any timely manner, or at all, which is an unacceptable state of affairs that will not be allowed to continue in 2018.

He said PETROTRIN owes the government TT$2.75 billion of which TT$588 million is SPT, a tax that only becomes due during times of high oil prices.

“What this means is that even as oil prices have rebounded somewhat the structures in place conspire to ensure that the government obtains precious little consequential increase in revenues.”

He said with the sharp drop in government revenues it is unable to immediately meet all the arrears of back-pay for public servants, left by the previous administration.

“However, we managed to negotiate a solution with the relevant unions and have paid the billions of dollars over a two-year period. Incidentally, I have never heard this mentioned by a single labour leader, voices that are routinely condemnatory and accusatory where government actions are concerned.”

Rowley said that even as his administration is implementing various cuts in expenditure but he wanted to make it clear that he is “fully aware of the impact of expenditure cuts on the macro and micro economy and the effect of these cuts on people.

“We know that it’s tough on everyone but there are few better or painless options. We just have to take our medicine and work hard towards the cure that we are confident can be had.”

Rowley acknowledged that a sizeable cut in government expenditure since his administration came to office in 2015 “ has had a significant knock-on effect on economic growth in the non-energy sector and to some extent, delays in making payments to contractors and suppliers.

“However, through it all, we have managed to fulfil our responsibilities in terms of essential payments, such as public sector wages and salaries, healthcare delivery, education, national security, pensions and social welfare benefits.

“With our careful and measured approach, we have managed to keep our head above water and have the country running without social and economic chaos.

“I want to assure you, however, that in making these expenditure cuts, your government has sought as far as possible to focus on cutting out waste and inefficiency, maintaining a balance and protecting the most vulnerable and preserving jobs. We have also declared war on corruption in the public sector.

“To this end we have made significant progress in identifying white collar criminals and are tracking and holding to account individuals and entities that made “fast and loose” with the public trust and public monies.

“A few of them are already on their way to the courthouse to answer for their dastardly actions,” Rowley said. – CMC

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