Tuesday, January 12, 2016

WE ARE IN TROUBLE ... DEEP TROUBLE



Unfortunately, nobody seems to have zeroed in on the real problem that Trinidad & Tobago is facing with its finances. Oh! There is a lot of talk, but nobody is explaining to the ordinary person just how deep we are in the mess. Last night I had a conversation with a leading economist who put the problem in perspective for me. He said that he had reviewed the budget over the Christmas holidays ... not the speech, that's not the budget, but the real budget ... the figures. He said that when he looked at the projected income figures from the energy sector for 2014 they showed an income of approximately $16 billion. The figures projected by the Government for the 2016 budget (he said) show a projected income of $3.5 billion based on oil at $45 per barrel. he expected that with oil prices continuing their downward trend, the real income will be something closer to $2 billion!


Got that? Well it gets worse. In 2014 (he said) VAT earnings were approximately $5.7 billion. He went on to say that for most of the previous years before 2014 VAT earnings were more or less at this figure. But for 2016 the figure jumps to something like $12.1 billion. How? Where is this extra projected VAT income going to come from? The short answer is that it ain't comin' any time soon!


So? What is the Government likely to do? Well, my expert continued, if you look at Canada and Australia, which are both resource based economies like ours, they have had to devalue their currencies by approximately 25 percent. In other words, we can expect the same ... which will take us to around $8.00/$8.50 to the US dollar. The Government can then make up part of its shortfall this way.


Also, he said, the Government will probably stop paying VAT refunds. This way the debt (the refunds) will be an effective loan that won't show up in the books as a loan! It will soak up the excess liquidity in the system and private businesses and persons who were counting on that money suddenly won't have it any more.


To add more misery there is the issue of Petrotrin. If you thought that Caroni Limited was a drain oon the exchequer Petrotrin makes it look like a walk in the park. Petrotrin currently employs some 5,000 workers. The average monthly salary at Petrotrin is $23,000. In other words, Petrotrin's average monthly wage bill is $11,500,000.00!!!


You don't have to be a genius to figure that one out! So question: if shutting down Caroni was the right thing to do would it be also the right thing to do to shut down or scale back Petrotrin significantly? If not, why not? If so, when will this be done?


Put another way: we are in trouble ... deep trouble!!



2 comments:

  1. 23,000 x 5,000 equals TT$115,000,000.00

    We are in deep deep trouble!!!

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  2. The government have to look for new ways to increase its revenue. "As the residents of Colorado are about to find out, legal pot pays. The decriminalization of marijuana in the Centennial State has been so successful that every Colorado adult is in line to receive a $7.63 refund, Associated Press reports (via High Times). Residents may be eligible for the refund due to the economic stimulus provided by legal marijuana, a 30 percent tax on that weed and a 1992 state amendment that puts a cap on how much the state could receive from taxpayer money."

    Colorado with a population of 5.5 million has found a way. Why can't we emulate them instead of strangulating the population with the same old stories.

    Al

    ReplyDelete