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Howai mum on ‘election budget’
By By Asha Javeed
Story Created: Sep 6, 2014 at 9:25 PM ECT
Story Updated: Sep 6, 2014 at 9:25 PM ECT
After spending $227 billion in four years on four budgets, Finance Minister Larry Howai will present the country’s most expensive budget tomorrow.
Last year, Howai delivered the People’s Partnership’s largest fiscal package of $61.4 billion with a deficit of $6.3 billion.
For the upcoming year, with wages and salaries alone accounting for 16 per cent of Government’s expenditure and outstanding negotiations with the Public Services Association (PSA), the country’s expenses are expected to increase.
And it won’t get a financial bump from the planned initial public offering (IPO) from the State enterprise Phoenix Park Gas Processors Ltd as that exercise will be on hold, Howai has said.
“In keeping with the policy of this administration with regard to the divestment of State enterprises to the citizens of Trinidad and Tobago, the Phoenix Park IPO will take place in due course. Please note that I have given the undertaking that the Phoenix Park IPO will go forward only after all investigations into the First Citizens IPO have been concluded and steps taken to ensure what happened in that instance will not recur with Phoenix Park,” he said in an e-mailed question and answer interview with the Sunday Express last week.
Howai will have to manage the expenditures, of which the Ministry of National Security will get $6 billion, with a seemingly narrow debt to GDP ratio. In 2013 the debt to GDP ratio stood at 33.7 per cent.
And despite declining reserves, the main cash stream will come from the country’s declining energy revenues.
But that won’t curtail Government’s expenses of two major subsidies, which account for a substantial part of the Government’s expenditure- education and fuel- in the fiscal year ahead.
Last week, the International Monetary Fund (IMF), in a statement released following its latest Article IV Consultation with Ministry of Finance officials in June, said the country needs to reduce fuel subsidies and rationalise social programmes.
But that will not happen tomorrow when Howai unveils his Government’s financial plan for 2015, which is also an election year.
Howai explained that of the transfers and subsidies, the two significant culprits were fuel and education—specifically, the Government Assistance for Tuition Expenses Programme (GATE).
GATE costs Government about $4.5 billion a year.
The Government’s fuel subsidy usually averages about $4 billion annually.
In outlining his Government’s rationalisation for maintaining the GATE expenditure, Howai explained that it was a step in diversifying the economy as human capital was a major resource.
“In this light, subsidising the education of our citizens through GATE so that we can continue to attract investment such as the Business Process Outsourcing which has started operations here, can only be seen as a wise use of the country’s resources. What has to be done now is ensure that our investment in the education of our citizens achieves the gains we envision by turning out graduates in the fields which will most complement this country’s growth potential,” he said.
“As to the fuel subsidy, while the Government acknowledges the need to reduce this, we are mindful of the social impact that will result. Any increase in the price at the pump will have a ripple effect throughout most of our economy. Transport costs will rise as will most goods, most critically food. Therefore before any move can be made to reduce the subsidy with its concomitant increase in the price of gas, we are seeking to develop an alternative ie, CNG. The Government is even now well on the way to having 22 CNG fuelling stations (either dedicated or in conjunction with regular fuel) up and running in the short term. Only when the CNG option is properly in place can the government feel comfortable in reducing the fuel subsidy,” he explained.
Construction
Major construction projects such as aquatic and tennis centres in Couva are earmarked for completion by April 2015 while more sections of the $7.5 billion highway extension from Golconda to Point Fortin will be opening in 2015.
With regard to construction, a benchmark of economic activity in an economy, Howai explained: “Most of the construction projects announced in last year’s budget have started in one way or the other although some, eg, wi-fi connectivity in schools and the hospital at Point Fortin are two which have been slower than we would like but these are all in process at the moment with major progress (plans drawn up, approvals acquired, contracts and scope of works developed etc) being made toward their realisation.”
Questioned specifically by Sunday Express on whether Budget 2015 was going to be an election budget, Howai responded: “Despite expectations that there will be goodies galore for the electorate given that 2015 is an election year, the Ministry of Finance and the Economy (MOFE) is intent on continuing its measured approach to managing the country’s resources. We are committed to reducing the deficit to 2.6 per cent this year (last year it was 3.6 per cent) and we are working toward achieving that goal. To the extent that we have not had to increase the price of gas, nor have we had to reduce the subsidy to tertiary education (GATE) to achieve this reduction, it reflects our astute management of the economy. The country can rest assured that, whatever year it happens to be, we shall always seek to ensure that our promises/commitments are met.”
It’s all about balancing the developmental targets of the country with the targets of the People’s Partnership party, he said.
“On one hand, you have the genuine desire of the elected Government to meet the legitimate demands of their constituents. On the other, you have the reality of a finite number of dollars in the country’s coffers. It is the task of the MOFE to navigate the sphere between desire and reality in the most democratic way possible,” he said.
Howai’s challenge in the budget is how to manage an economy at full employment.
“The issue that we have to manage is under-employment and that is being addressed by way of our strategies for diversifying the economy. It should be pointed out that notwithstanding GATE we are unable to fill key positions in the public and private sectors and we have had to import labour eg, nurses and doctors,” he said.
The Energy Equation
With a 45 per cent contribution to the country’s Gross Domestic Product (GDP), Trinidad and Tobago is still dependent on its energy revenues.
In 2014, the country’s upstream and downstream sectors faced challenges. Oil and gas production were adversely affected in January 2014 when bpTT temporarily took down its Savonette Platform to accommodate drilling another well.
According to the Central Bank’s Monetary Policy Report, the closure meant that crude production fell 2.6 per cent during the first quarter of 2014, while natural gas output slipped 2.5 per cent over the same period. However, production rebounded in March 2014.
Last week, the 2013 Ryder Scott Natural Gas Reserve Audit Report revealed that there’d been a seven per cent decline in proven natural gas reserves in 2013 compared with 2012- T&T has proven reserves of 12.24 billion cubic feet (bcf), probable reserves of 5.526 bcf and possible reserves of 6.116 bcf.
But Howai says Government has a plan to better manage a steady revenue income collection from the energy sector.
“The sector has been experiencing a resurgence of investment and we can expect significant growth in the coming years. We shall expand more in the budget statement,” he said.
CL Financial
After four years of trying to resolve and rationalise the $25 billion expenditure to CL Financial/CLICO, Howai says the issue remains in abeyance until a final decision is made on the value of the shares of Methanol Holdings shares by arbitrators of the International Court of Arbitration.
“The CLICO policyholders who accepted the Government’s offer have all received their bonds. The MHTL/CLICO matter is still in arbitration and the MOFE awaits the decision of the arbitrators.
The Government has requested a valuation of the assets and liabilities of CLICO from the actuaries and expects to receive it in the next month and then a decision will be made on the way forward. Negotiations are close to completion with the shareholders regarding the repayment of the sums advanced but this cannot progress beyond the current stage until the decision of the arbitrators is received. We do intend and expect to recover the money spent to date,” he said.
The Gaming Industry
In May, Republic Bank announced that it was stopping the servicing of accounts of private members clubs operating in T&T
“This decision was taken as a result of the significant impact that this type of industry has on the bank’s compliance requirements. Republic Bank understands that many banks in the country have adopted a similar approach,” the bank had said in a statement.
In 2009, the Financial Action Task Force (FATF) had shown there were more than 70 private members clubs operating in the country.
“Local banks have been taking steps to curtail their involvement with the gaming industry as it now operates in Trinidad and Tobago in an effort to be compliant with the new AML/CFT requirements.
The MOFE has developed a policy document together with the draft legislation for managing the sector which includes more Government and regulatory oversight of casinos and the gaming industry which will bring them into compliance with international best practices.
In the meantime, the MOFE has arrived at an arrangement that resolves the issue and allows banks to once again service the local gaming industry,” he said.
Howai had said a regulated gaming industry could generate $300 million in additional taxes to the state.
Caribbean Airlines
In last year’s budget, the cash-strapped State enterprise was granted a $400.7 million subsidy to facilitate the airline’s restructuring process.
For 2013, Caribbean Airlines (CAL) loss was projected at under $100 million.
But Government will not be injecting more company into the company just yet, says Howai.
“CAL produces its accounts monthly. It is in the process of bringing its audits up to date. Several years were outstanding when the new board was appointed. The board has been working on this and we expect that by the end of this year the audit of all the accounts will be completed.
I am informed that the company has been able to reduce its losses this year. As you know, CAL is in a special situation. The Government subsidy of passenger airfare to Tobago does not cover the airline’s costs on its airbridge services yet it must continue to provide such services. This has put additional pressure on the airline,” he said.
National Security
With billions spent annually on national security, the country’s crime rate is still high.
Howai explained that successive administrations have struggled with this paradox.
“Though I must say that this administration has made a definite impact on the crime scourge. Serious crime including murders is down significantly from where it was when we took office. The recommendation of the experts has been to invest in better education and more social programmes alongside our spending on anti-crime personnel and equipment. The Government has pursued this strategy and the results are apparent,” he said.
He explained that the Ministry of Security costs the Government approximately $6 billion a year.
“Apart from investing in more equipment for the nation’s security services, Minister Griffith has given the undertaking that his ministry’s allocation will be spent more efficiently and effectively and I expect that this will be the case,” he said.
Government Expenditure 2011-2014
Oct. 2010 – Sept. 2011 $51,527.7 billion Actual
Oct. 2011 – Sept. 2012 $52,838.9 billion Actual
Oct. 2012 – Sept. 2013 $57,338.5 billion Provisional
Oct. 2013 – Sept. 2014 $65,197.9 billion Budget
GRAND TOTAL $226.9 billion
TriP wrote:$6000 for poor babies
shermantank wrote:what time it staring?
K74T wrote:shermantank wrote:what time it staring?
Around 2 pm
Allergic2BunnyEars wrote:I think that GATE figure is not per annum but a sum of several years. In this article it states that the sum of GATE is just over 3 billion dollars from 2005 to 2011. I doubt GATE increased that drastically to 4.5 billion per annum.
http://www.guardian.co.tt/news/2012-09- ... t-students
The fuel subsidy however is about 4 billion per annum.
UML wrote:Budget Day is Monday 8th September 2014
No price hike in fuel
Incentives for hybrid and electric cars
Trini Hookah wrote:Allergic2BunnyEars wrote:I think that GATE figure is not per annum but a sum of several years. In this article it states that the sum of GATE is just over 3 billion dollars from 2005 to 2011. I doubt GATE increased that drastically to 4.5 billion per annum.
http://www.guardian.co.tt/news/2012-09- ... t-students
The fuel subsidy however is about 4 billion per annum.
Nah bro. The GATE figures add up more than you'd expect.
src1983 wrote:Come on
Give us a train man!!!!
UML wrote:Galeota Port
La Brea industrial development
CNG Stations
Tax relief on Electric and Hybrid cars
UML wrote:Galeota Port
La Brea industrial development
CNG Stations
Tax relief on Electric and Hybrid cars
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