DINESH RAMBALLY
Structural dependency on the energy sector
TT’s economic destiny has long been dominated by the energy sector, a reality that has become increasingly problematic. Contrary to popular belief, the cyclical nature of energy prices is not the root issue; rather, it is the deep structural dependence on this sector that poses the significant challenge.
The global shift towards renewable energy sources requires a transformation we have been unable to make or even initiate. This reluctance to diversify the economy is a combination of ineptitude, laziness and political cynicism.
The Minister of Finance recently admitted the truth about the country’s financial struggles in an affidavit, highlighting a projected $9 billion deficit for the current fiscal year. This deficit is a looming burden that will impact the population in the coming years, which the Government had been unwilling to even acknowledge previously.
Misleading financial achievements
The Government has tried to make up, or cover, its revenue shortfall in misleading ways, for example, the $1 billion drawdown from the Heritage and Stabilisation Fund (HSF) in December 2023, which is hardly mentioned. Similarly, the Government recently proudly announced its success in raising US$750 million through a US bond issue at an interest rate of 6.5 per cent.
This is not a financial victory, it is a loan that adds to the country’s mounting debt which will need to be repaid in US dollars. The bond’s high rate of interest reflects the risk of doing business with the TT Government. The higher the risk, the higher the interest rate investors will demand.
Add to the drawdown, and the bond issue is the manipulation of economic data. The recent Central Bank Economic Survey (2023) said economic prospects are “modestly favourable.” This does not align with a $9 billion deficit. It is clear the Central Bank can no longer be safely considered as an independent institution and has been politicised to promote government narratives.
Economists who read the signs think the country appears to be on the brink of an IMF programme. Providing confirmation of this suspicion is the fact that our credit rating was recently downgraded from positive to stable. This deflates the optimistic narratives presented by the Government and underscores the economic crisis it is not acknowledging.
Tax system and
economic decline
The administration’s approach to the economy via taxation shows yet another facet of the Government’s ineptitude, and the deep disconnect between government and economic realities. It took the minister nearly a decade to acknowledge the inefficiencies of the tax system, which he now attempts to “solve” with more taxation.
Given the present reality one cannot simply sidestep a potentially leaked Cabinet note and the considerations to increase VAT, etc which the Government has sought to dismiss. In a faltering economy, reducing disposable income is not just counterproductive, it is self-sabotage.
Unpaid VAT refunds and financial mismanagemen
