12 January 2016 - Business View Caribbean
Opening
Lines
growth in the national debt burden,” he said.
This fiscal year, because of tax incentives given to
facilitate exploration, oil revenues will be significant-
ly less. In addition, companies in the energy sector
are cutting back on employment as well as their ex-
penditure on local goods and services. This will have
a further negative knock-on effect on the rest of the
economy of Trinidad and Tobago.
Rowley pointed out that there is simply no way that
other sectors of the economy can realistically be ex-
pected to compensate for the loss of export earn-
ings from oil and gas; not in the short run (1-2 years)
and not even in the medium run (3-5 years).
“In the long run, yes we do need to work towards
building an economy with many different contribut-
ing sectors so that it becomes less vulnerable to
these types of shocks. But the fact is, today, we are
where we are!” he said.
Among the economic options available to address
the situation, Rowley rejected using reserves to
maintain incomes and levels of employment in the
light of the broad consensus that oil and gas prices
will take several years to recover and, even then,
they will probably not return to the levels enjoyed in
2014 and the years before that.
“Given the rate at which we have been consum-
ing foreign exchange, all of our reserves and most
of our other savings would be exhausted before oil
and gas prices recover or before production levels
increase to the immediate rescue,” he explained.
Therefore, while some further decline in the foreign
exchange reserves is to be expected in 2016 and
2017, Rowley said that decline must be minimized
as much as possible to ensure that, by the end of
2017, the balance of payments deficit is stabilized so
that the foreign exchange reserves remain stable at
around, at least, six months import cover.
“Second, we have to restrain expenditure overall
and also to change the mix of expenditure so that
the demand for foreign exchange is reduced whilst
local dollars are put to maximum use,” he continued.
Since government should be expected to lead the
way in restraining expenditure, not least because
government expenditure accounts for about 35
percent of GDP, Rowley said that the management
of every state enterprise, statutory body and each
ministry and the Tobago House of Assembly has
been directed to review their operations and make
