GEISHA KOW­LESSAR-ALON­ZO

The Min­istry of Fi­nance plays a cen­tral role in shap­ing eco­nom­ic out­comes – dri­ving fis­cal sta­bil­i­ty, in­vestor con­fi­dence and the coun­try’s ca­pac­i­ty to man­age growth or cri­sis.

Un­der the PNM ad­min­is­tra­tion for­mer Min­is­ter of Fi­nance Colm Im­bert had a tenure of nine plus years, from Sep­tem­ber 2015 to March 2025.

How did he per­form?

Econ­o­mist Dr Vanus James told the Sun­day Busi­ness Guardian it is im­por­tant to ob­serve that Im­bert can­not be eval­u­at­ed as an in­di­vid­ual.

“He was a PNM min­is­ter of fi­nance and, in the au­thor­i­tar­i­an sys­tem of gov­ern­ment we run, that counts for quite a lot.

“So, eval­u­a­tion of his tenure is the same as eval­u­at­ing the tenure of the PNM. ...There are many rel­e­vant facts that could speak, like mon­e­tary pol­i­cy, but per­haps the most im­por­tant facts re­late to the tasks of eco­nom­ic and po­lit­i­cal trans­for­ma­tion,” James ex­plained.

He not­ed that the promise of Vi­sion 2030, for T&T to achieve de­vel­oped coun­try sta­tus by 2030, would have been 15 years af­ter the start of Im­bert’s tenure.

On this promise, he said the record of de­liv­ery is quite dis­mal.

Ac­cord­ing to the da­ta pro­vid­ed by the UNSD (the Unit­ed Na­tions Sta­tis­tics Di­vi­sion, James said in 2015, T&T’s GDP per capi­ta was US$18,614.17.

By 2020, re­al GDP per capi­ta had de­clined to US$13,454.21 even though the coun­try gave the PNM a sec­ond term, pre­sum­ably be­cause of the COVID-19 ef­fect.

In 2023, the GDP per capi­ta was US$16,329.35, about 12 per cent be­low the 2015 start­ing point and in the neigh­bour­hood of what it is to­day.

Hence, over the 10 years, James said the coun­try’s ca­pac­i­ty to fund its liv­ing stan­dards had fall­en sharply and was more than 70 per cent be­low the tar­get of US$55,000 typ­i­cal of the de­vel­oped economies.

“It would take many more than five years to close that gap,” James said adding, “Clear­ly, the poli­cies adopt­ed by the Row­ley/Im­bert and the PNM over the 10 years have failed by its own Vi­sion 2030 stan­dards.”

James fur­ther not­ed that Im­bert and the PNM took of­fice when the need for eco­nom­ic di­ver­si­fi­ca­tion from en­er­gy sec­tor ex­ports was painful­ly ob­vi­ous.

He said US crude prices had vir­tu­al­ly col­lapsed in 2015, falling by near­ly 75 per cent to be­low US$25 per bar­rel.

“The bud­get was cor­re­spond­ing­ly in cri­sis. This was a case of the fa­mous ‘gall and worm­wood’ events that Lloyd Best warned about, and as al­ways, be­cause of high im­port de­pen­dence, it was ac­com­pa­nied by chron­ic short­ages of for­eign ex­change.

“The col­lapse had con­tributed to putting the PNM in of­fice, so the Min­is­ter and his par­ty had to be keen­ly aware that what­ev­er the nec­es­sary short-term sur­vival mea­sures, the most ur­gent task was to un­der­stand the rea­son we got in­to that mess and take ur­gent steps to set long-term so­lu­tions in mo­tion,” James said.

He said that meant look­ing be­yond oil and gas prices to the fun­da­men­tals of the econ­o­my, adding that “the un­der­ly­ing prob­lems have been clear to econ­o­mists for a long time, even though Im­bert con­ve­nient­ly de­scribed them all as un­in­formed com­men­ta­tors.”

Fur­ther, James said for more than 65 years up to 2015, the coun­try had been warned of the need to ad­dress the un­der­e­d­u­ca­tion and hence un­der­cap­i­tal­i­sa­tion of its labour mar­ket and the po­ten­tial it of­fers for suc­cess­ful shift away from ex­ces­sive de­pen­dence on oil and gas.

He added that every year since 2015, the record has shown that more than 60 per cent of work­ers in the labour mar­ket have failed to achieve the min­i­mum of five O-lev­el sub­ject pass­es and not more than 20 per cent have achieved the ter­tiary ed­u­ca­tion need­ed to an­chor a process of in­no­va­tion and cre­ativ­i­ty for eco­nom­ic di­ver­si­fi­ca­tion.

“Com­pare that 20 per cent to more than 43 per cent in coun­tries like Sin­ga­pore or the USA. To head in the di­rec­tion of a Sin­ga­pore, the school sys­tem would have to be changed to in­clude a skill-in­ten­sive track at all lev­els and, to ad­dress the brain drain. It would al­so have to be ex­tend­ed in­to the work­place us­ing an ap­pren­tice­ship sys­tem with cer­ti­fi­ca­tion. How­ev­er, the Row­ley/Im­bert regime seemed com­plete­ly un­aware of this sit­u­a­tion, as­sert­ing from time to time that the ed­u­ca­tion sys­tem was sup­ply­ing a flow of work­ers ad­e­quate to meet the coun­try’s de­vel­op­ment needs,” James stat­ed.

He ar­gued the trick to trans­for­ma­tion­al growth in that sit­u­a­tion is in­ter­na­tion­al col­lab­o­ra­tion to en­gi­neer a shift in­to pro­duc­tion and ex­port of the cap­i­tal ser­vices.

Re­ces­sion­ary pres­sures

The Sun­day Busi­ness Guardian al­so reached out to econ­o­mist Dr Vaalmik­ki Ar­joon who said un­der the for­mer fi­nance min­is­ter, the econ­o­my faced deep re­ces­sion­ary pres­sures, per­sis­tent fis­cal deficits lead­ing to surg­ing debt, cred­it rat­ing down­grades, tax hikes, and a steep rise in the cost of liv­ing.

Specif­i­cal­ly, he said Im­bert’s tenure saw GDP con­tract­ing by 17.6 per cent, with five years of neg­a­tive growth.

Ar­joon not­ed that while de­clin­ing en­er­gy pro­duc­tion and the pan­dem­ic were key dri­vers, struc­tur­al chal­lenges – weak­ened pri­vate sec­tor com­pet­i­tive­ness and in­sti­tu­tion­al in­ef­fi­cien­cies – fur­ther weighed on per­for­mance.

“Rev­enue short­falls, un­der-di­ver­si­fied in­come streams, tax leak­ages, and re­strained ex­pen­di­ture cuts to pre­vent wors­en­ing eco­nom­ic fall­out, led to cu­mu­la­tive deficits of $71 bil­lion over nine years, and the Con­sol­i­dat­ed Fund over­draft in­creas­ing to $47.76 bil­lion—$14.4 bil­lion high­er than in 2015,” he ex­plained.

For the Min­istry of Fi­nance to fi­nance these deficits, bor­row­ing surged. Pub­lic debt rose by $65.1 bil­lion to $140.5 bil­lion by Sep­tem­ber 2024 (74.7 per cent of GDP), while ex­ter­nal debt more than dou­bled to US$5.58 bil­lion.

Ar­joon said though this helped tem­porar­i­ly bol­ster for­eign re­serves, it po­ten­tial­ly lim­its fu­ture fis­cal flex­i­bil­i­ty, di­vert­ing fi­nan­cial re­sources to debt ser­vice in­stead of in­vest­ments in in­fra­struc­ture and hu­man cap­i­tal.

Al­so, he said it al­so rais­es the risk of fu­ture tax in­creas­es or spend­ing cuts to ser­vice debt, fur­ther sti­fling the pri­vate sec­tor ac­tiv­i­ties.

Heavy bor­row­ing trig­gered cred­it down­grades – Moody’s low­ered T&T from in­vest­ment-grade Baa3 in 2017 to now spec­u­la­tive Ba2, while S&P down­grad­ed us from A in 2015 to the low­est notch of in­vest­ment grade at BBB–, but we are still in­vest­ment grade thanks to as­sets like the HSF.

To off­set de­clin­ing en­er­gy earn­ings, Im­bert broad­ened the rev­enue base by rais­ing and in­tro­duc­ing new tax­es, which cush­ioned fis­cal short­falls but ul­ti­mate­ly sti­fled busi­ness in­vest­ments and in­creased liv­ing costs.

Ar­joon not­ed one key re­form was rais­ing the cor­po­ra­tion tax from 25 per cent to 30 per cent, re­duc­ing af­ter-tax prof­its and ham­per­ing SMEs’ abil­i­ty to rein­vest, pay salaries, and ex­pand op­er­a­tions.

“This harsh­er tax en­vi­ron­ment al­so con­tributed to for­eign in­vestors with­draw­ing from our econ­o­my, with to­tal FDI net in­flows from 2015 to 2023 amount­ing to neg­a­tive US$3.18 bil­lion,” he added.

An­oth­er key re­form was the grad­ual re­duc­tion of the fu­el sub­sidy, which drove the price of su­per un­lead­ed up from $2.70 to $6.97 per litre since 2015.

Ar­joon not­ed that while this helped re­duce the sub­sidy bur­den, from $2.1 bil­lion in 2015 to $1 bil­lion in 202, it al­so raised trans­port costs, strain­ing house­holds and in­creas­ing busi­ness ex­pens­es, es­pe­cial­ly in man­u­fac­tur­ing and agri­cul­ture.

Like­wise, he said ad­just­ing VAT from 15 per cent to 12.5 per cent while re­in­stat­ing it on many pre­vi­ous­ly ze­ro-rat­ed items trig­gered a 7.7 per cent surge in food prices, dis­pro­por­tion­ate­ly af­fect­ing low-in­come house­holds, who spend 46 per cent of their in­come on food.

Ar­joon al­so not­ed that weak­ened con­sump­tion led to a short­fall in the gov­ern­ment’s $12 bil­lion rev­enue tar­get in 2016, with ac­tu­al col­lec­tions at just $7 bil­lion.

“Though some re­lief came with the re­moval of VAT on se­lect ba­sic foods in late 2021, food prices still rose by 14 per cent in the fol­low­ing year and now stand 46 per cent above 2015 lev­els,” he said.

To ease ris­ing liv­ing costs, the MoF grad­u­al­ly raised the in­come tax al­lowance from $5,000 to $7,500 per month. This of­fered lim­it­ed re­lief to low­er-mid­dle-in­come earn­ers but short of off­set­ting the broad­er cost-of-liv­ing in­creas­es, while not ben­e­fit­ting those earn­ing un­der $5,000.

How­ev­er, Ar­joon said de­layed VAT re­funds added to the fi­nan­cial strain on the pri­vate sec­tor, par­tic­u­lar­ly SMEs strug­gling to meet ba­sic ex­pens­es like salaries and util­i­ties.

“These de­lays were dri­ven by both rev­enue con­straints and lengthy au­dit process­es at the BIR. To set­tle grow­ing ar­rears, the Min­istry of Fi­nance be­gan is­su­ing VAT re­fund bonds in 2020, amount­ing to $9 bil­lion to date. While giv­ing some fi­nan­cial re­lief, this not on­ly in­creased pub­lic debt but al­so re­duced for­eign ex­change avail­abil­i­ty in com­mer­cial banks, as en­er­gy com­pa­nies – ma­jor re­fund re­cip­i­ents – re­deemed bonds for TT$ in­stead of con­vert­ing US$ through the bank­ing sys­tem,” Ar­joon ex­plained.

On the in­sti­tu­tion­al front, the im­passe with the Au­di­tor Gen­er­al over a $2.6 bil­lion rev­enue re­port­ing dis­crep­an­cy high­light­ed se­ri­ous gov­er­nance is­sues. Ar­joon said in­stead of en­gag­ing in trans­par­ent di­a­logue to re­solve ac­count­ing dis­crep­an­cies, Im­bert’s “con­fronta­tion­al ap­proach -char­ac­terised by at­tempts to pres­sure and in­ves­ti­gate the Au­di­tor Gen­er­al-” ex­ac­er­bat­ed ten­sions and un­der­mined in­sti­tu­tion­al in­de­pen­dence.

He said this not on­ly risks di­min­ish­ing trust in fis­cal gov­er­nance but al­so dis­tract­ed from ad­dress­ing deep­er struc­tur­al chal­lenges in T&T’s pub­lic fi­nance sys­tem.

Re­gard­ing oth­er ar­eas, the for­mer min­is­ter of fi­nance al­so cham­pi­oned the T&T Rev­enue Au­thor­i­ty (TTRA) which is con­cep­tu­al­ly sup­posed to mod­ernise the tax sys­tem, re­duced tax leak­ages with high­er com­pli­ance rates, Ar­joon ar­gued. How­ev­er, he not­ed, con­cerns have been raised about how in­su­lat­ed the TTRA will be from po­lit­i­cal med­dling, and whether its struc­ture might com­pro­mise its very goals of fair­ness in tax col­lec­tion.