Did IMF intervene?
Thursday, September 13 2012
ALTHOUGH Finance Minister Larry Howai has neither stated what the austerity measures to be presented in the 2012/2013 Budget would be, nor whether they were suggested by an external agency, to with the International Monetary Fund (IMF), nevertheless there is the possibility that the measures were indeed proposed by the IMF. The hint of intervention by the IMF can be observed in Minister Howai’s defining of austerity measures as having a meaning in relation to the economic crises facing the Eurozone.
It was the IMF which advanced measures for dealing with those crises. Will the Budget measures be a repeat of what the IMF and,separately, the International Bank for Reconstruction and Development (IBRD) had proposed in 1989, when the then National Alliance for Reconstruction Administration approached them for aid at the height ofthe recession which had negatively impacted on Trinidad and Tobago’s (TT) economy? Will the measures be aimed at what the IBRD, popularly referred to as the World Bank, had referred to as “shrinking the public sector”? Measures then had included a reduction in public sector employment and the restructuring and/or divesting of State-owned enterprises, public utilities, including the achieving of financial self sufficiency.
Will Howai announce, for example, the setting up of a Voluntary Termination of Employment Plan, the divesting of some State-owned companies such as Petrotrin and the First Citizens’ Bank? In turn, will he seek an increase in corporation and personal income taxes; an increase in bus fares and a move to pursue an increase in electricity and water rates and, if so, to what extent?
It should be understood that it has been customary for successive administrations to have regular meetings with teams from the IMF and while, as a general rule, save in the crises of the 1980s and early1990s, governments have had the prerogative to accept or reject IMF recommendations, the worsening international financial crisis has impacted negatively on the country’s economic growth.
In the meantime, on the proverbial hindsight there were indications that something was amiss. The prolonged use of Treasury deposits last year to pay for bills incurred by the People’s Partnership Government and the turning to the Corporacion Andina de Fomento (CAF) for a loan, although the terms and conditions have never been revealed.
Added to these was the drop in anticipated economic growth and the clear reluctance of businessmen/women in the non-energy sector to invest in new businesses or expand those already in existence. Should a reduction in the fuel subsidy form part of the proposed austerity measures to be announced in the forthcoming Budget, while it will mean the retaining of additional revenue by Government it will, nevertheless, lead in the short and medium term to an increase in transport costs, as well as the cost of production, inter alia.
This would trigger a rise in the cost of living as well as make TT produced goods that much less competitive in the international market place and even the domestic market as well, with a possible lowering of employment opportunities. Should the austerity measures embrace a drop in funding for social sector programmes, such as the Unemployment Relief Programme and CEPEP as well as the crucial CDAP, then countless thousands will be adversely affected.
Not merely adults, but their dependents as well. It will have a domino effect, what with less money being turned around within the economy.
Owners and operators of conventional and maxi taxis will earn less and so, too, will food vendors and business establishments. When Howai delivers his now more than ever eagerly awaited Budget speech, he should explain the need for the austerity measures. Howai’s statement that the population should not be worried by the announcement of austerity measures is clearly not enough.