T&T going along ‘happy like pappy’ Originally printed at trinidadexpress/business-magazine/TT-going-along-happy-like-pappy-286749031.html December 24, 2014 The spending spree by Government and citizens over the Christmas season, no expenditure spared in any quarter, suggests that no one is taking plummeting oil prices and the likelihood of lower gas prices seriously. Except for Finance Minister Larry Howai’s polite request to all ministries that they try to cut back on expenditure by $45 million each, it has been business as usual thus far. The Prime Minister, unlike President Anthony Carmona, did not curtail her series of Christmas parties, which seemed to be as extravagant as always. Her toys distribution extravaganzas—she estimated that some 110,000 children got gifts—continued unabated. As far as we know, other ministries, departments and State enterprises exercised no restraint during the festive season as drinks, food and music flowed. In the spirit of joy and happiness, Minister Lincoln Douglas pointedly said there will be no cutbacks on expenditure for Carnival, with prizes for all competitions remaining at the levels that held over the past few years. Ironically, the only organisations that seem to be mindful of possible hard economic times are two trade unions, the OWTU and the PSA. The former called off a threatened strike at Petrotrin over the oil company’s offer of a zero per cent increase over the past three years (when oil prices were high), leaving the matter to the Industrial Court. And the PSA thanked the CPO for putting 13 per cent on the table for the same period, while it said it would pursue a better deal through discussions. Maybe the government knows something about the oil prices scenario that we don’t. It could well be that their experts have advised that crude oil prices (WTI traded at US$55 a barrel last week Friday) will rebound soon, that gas prices will remain buoyant, and that production of both commodities will increase in 2015. Whatever their thinking, their behaviour is strange in the face of highly unstable commodities’ prices and projections that things might get worse during the first half of next year. Most oil producing and exporting countries have revised downward their revenues’ forecasts and are implementing measures to meet the shortfalls. The mighty Saudi Arabia is dipping into its huge sovereign wealth fund to meet budgetary commitments. Other oil giants—Russia, Iran, Norway, Venezuela—are making adjustments. But Trinidad and Tobago seems to be “happy like pappy”, displaying a not-a-care-in-the-world attitude to what, surely, must be the biggest economic crisis in almost two decades. Not many people will remember the oil boom of the mid-1970s, when crude oil prices spiked from US$2.40 a barrel to a whopping US$36.83 by 1980. Such was the windfall that the country enjoyed, the then Prime Minister, Dr Eric Williams, boasted in 1976, “Money is no problem.” Government and people engaged in an orgy of wild spending. By 1986, oil prices had collapsed to US$14.43, Williams was dead, the PNM was unceremoniously booted out of office, and the new NAR government found an empty treasury. The government resorted to borrowing from the IMF, freezing and in instances cutting back on public sector wages and salaries. In droves, middle and upper-class citizens lost new houses and luxury cars that were heavily mortgaged; commercial finance houses collapsed; and a people who had acquired a taste for premium whisky for the Christmas and Carnival seasons, reverted to rum. Large industrial, commercial and residential projects were abandoned. Unemployment rose to very high levels. The country was on its knees. Economic recovery did not return until the latter 1990s. By then, natural gas was coming of age and the downstream energy plants came on stream contributing to revenue, and at the turn of the millennium, rebounding oil prices ushered in another boom. We do not envisage another boom-bust cycle like that. But surely, in the face of falling revenues, Government needs to rein in expenditure, especially discretionary spending on festivities that bring seasonal gratification, but inevitably inflict long-term pain.
Posted on: Wed, 24 Dec 2014 12:27:14 +0000
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