Noble: T&T’s economic performance, the IMF and Professor Hosein’s gish gallop

More than half our population did not experience the ravages of the 1988 International Monetary Fund’s (IMF) intervention.

This group likely does not pay attention to the news reports on the Article IV consultations. They do not know that the Public Services Association’s 1988 membership was savaged and subsidies were slashed.

Image: A satirical look at the IMF’s loan policies.

They may not be aware that that year saw the introduction of a 15% VAT, even while there was the non-implementation of a 6% award granted by the Industrial Court. Pain was everywhere.

Many of us rely on what our political party says about the economy and carelessly blame others for any deterioration in our comfort levels. We often ignore the Article IV IMF reports.


The IMF policy reviews are designed to ensure the effective operation of the international monetary system. We are not the star! IMF economists visit us at least once a year to collect and analyse data and hold discussions with a broad base of officials.

Upon their return, the staff submits a report to the IMF’s Executive Board, which would then send it back to the country’s authorities. In the case of the April 2023 report, the Board accepted it without any discussion!

Our newly minted Professor Roger Hosein reportedly accused the IMF of using “flowery” language, necessitating him to scrutinise the data. The Express reported his comments.

UWI senior economist Dr Roger Hosein.
(Copyright Bpartofit.com)

He made the following points: “So whatever data the IMF got from the Central Statistical Office, new and improved data tells a completely different story about the T&T economy.”

Professor Hosein was reported as saying he was worried when he saw the 2022 IMF report and considered migrating, and now the 2023 data made him question why he was still here.

He believed “it would take over a decade for the T&T economy to return to the level it was at in 2015.”

Minister Colm Imbert responded immediately, identifying Hosein’s misconceptions.

He explained that during that visit, the IMF met with numerous government agencies, private companies in the energy sector, business organisations and other stakeholders. The IMF’s highly trained world-class economists would have rigorously and comprehensively interrogated all the information presented.

The IMF headquarters.

Imbert stated: “Indeed, it is outrageous for him to claim that he somehow has access to new and improved data for 2023 when we are only in May 2023, and the CSO will not be reporting on 2023 economic data for several months.”

Professor Hosein then gave Newsday a corrected version of his remarks but never addressed Imbert’s points directly. He called on the Finance Ministry to “let us have a seminar and elaborate on all the various structural gaps in the economy at this point, for the benefit and improvement of all of the people.”

Professor Hosein then pointed out: “… when the IMF indicates via its database that in 2028 the T&T economy will only exist at a level of GDP that is about 94% of what it was in 2015, I think we should be concerned.”

His Newsday’s spiel smacked of what is called gish gallop. Proof by verbosity is the game: drown you in a deluge of deflections and distractions.

All this took place within hours of each other.

It’s about the economy…

Curiously, the whole week went without a further peep from him in the Express. Hosein’s audience, composed of professional money managers, did not utter a word.

This exchange, bereft of comment from other economists and professional bodies, immediately politicises the discussion. This lack of professional courage is our bane.

Minister Imbert and Professor Hosein did not fully enlighten the population about the success or lack thereof of the country’s progress.

The Express had to draw two UWI economists out to comment. One stuck with the narrative that the 2015 GDP was better than our 2022 performance. The other one was more balanced and pointed out the full import of the IMF report (on which Minister Imbert did not spend time).

What kind of leaders do we have?

Minister of Finance Colm Imbert.
(Copyright Office of the Parliament 2022)

Here is the link to the Report, which is not a long read and is worth studying. It raised the issue of the National Insurance system’s deficit which is expected to widen, gradually depleting its reserve by the mid-2030s.

It spurs the government to increase the retirement age to 65 years, which would help partially contain the deficits and raise contributions.

It identified potential capital outflow risks and reduced excessive risk-taking incentives that could threaten financial stability. Given our recent CLF experience, this is a matter that we ought to be duly concerned about.

Then from left field, it intones: “…progress is needed in transforming the investment fund sector from constant to variable net asset value (NAV), enhancing the consolidated supervision of conglomerate groups, providing the CBTT with explicit macroprudential authority and tools, and strengthening supervisory resource and independence in line with international best practices.”

Image: The IMF is a controversial entity in the developing world.

All of us with investments in money market funds ought to have sat up when we read the point about constant to variable net asset value. We also should be scratching our heads when the IMF proposes that more tools and authority be given to supervise our conglomerate businesses.

Together these observations warrant our attention.

Then the IMF returned to an old issue that has been reported for the last nine years or more:

“The quality, timeliness, and coverage of statistics have improved, but challenges remain. It is recommended to strengthen the institutional capacity with the operationalisation of the independent National Statistical Institute and to build on recent efforts to broaden fiscal data coverage of SOEs and other public bodies.”

How could we discuss the economy without data?

Image: Getting to grips with “big data”.

 

In 2014, the IMF said: “Critically, the lack of reliable and timely data is an overarching problem that hampers public and private decision-making. Since the last Article IV discussions, there has been little concrete progress in implementing lasting reforms to remedy data shortcomings.”

Today, we see shifts in our economy, and we do not know why. For example, non-energy revenues have increased from TT$7 billion to over TT$29 billion.

Finding the answers to that while addressing the continuing challenge of gathering and assessing important information about the country’s workings will be the business of the National Statistical Institute. But we have only moved inches from the submission of the Task Force to set up the Institute.

The data lag is still too long, as Minister Imbert’s correction of Professor Hosein identified.

In a previously uncharacteristic move by the IMF, they now advocate: “…preserving the spending for the most vulnerable…”

Image: A satirical take on the IMF.

This massive swing from the austerity measures the IMF once embraced should cause us to scrutinise the various grants offered.

With his allegation about the IMF’s language, Professor Hosein obviously missed that institution’s October 2022 public and stinging rebuke of the UK’s tax plans under Liz Truss. Why would they ease Trinidad up?

The IMF’s communiqué rebuked the British Government for their proposed significant tax cuts because they would mainly “benefit high-income earners” and “likely increase inequality”.

Our Report’s comment about the most vulnerable echoed this posture. Is any local researcher looking at income inequality?

Did Professor Hosein and his fellow economists scrutinise the language of the IMF’s 2014 or 2016 Reports on Trinidad? (There was no 2015 report)

Image: A satirical take on the predicted economic backlash to the Covid-19 pandemic.

In their 2014 Article IV consultation report, the IMF admonished us for wasting our opportunity for development. That Report spoke to the ills of the structure of our economy.

In March 2016, the IMF pronounced: “… taking into account the size of energy revenue windfalls, the country has under-saved and under-invested in their future [which] could lead the country to uncomfortable levels of debt…”

In 2014, the IMF warned that excess reliance on National Gas Company dividends could undermine company finances. The then Government assured the IMF that they would be disciplined in current spending in the run-up to 2015, only to decide on a last-minute giveaway of TT$1.9bn to the unions.

Did these UWI economists forget the fateful December 2015 announcement then-Central Bank Governor Jwala Rambarran made about the country backsliding for the entire year? The fete was long over, but we partied heartily.

Like yuhself…

Why did our UWI economists cite this year as a high water mark?

What do other global figures say about the economic forecasts? George Buckley of Nomura, the Japanese investment giant, says that understanding the story and what’s going on beneath the bonnet is generally much more important than the exact accuracy of forecasts.

Cecilia Rouse, who served as Chair of the White House Council of Economic Advisors until the end of March 2023, recently said: “Sometimes I, in this course of the last few years, wished my PhD was in psychology.”

She, a labour economist, oversaw the creation of more than 11 million jobs.

But the past president of the Inter-American Development Bank, Luis Alberto Moreno, said in 2014: “We’ve come from an era of growth and increasing prosperity and, as the good situation starts to recede, the structural weaknesses that were always there and were masked by the growth resurface, become again apparent and impactful.

Image: A satirical take on central banks.

“[…] The abundance allowed them to live beyond their means without making the necessary reforms.” He could have been describing us.

Does our respected Professor even read the current financial results of publicly listed companies? Massy, this week, announced a 20% increase in their profit before taxes for their food sector! KFC is back to its 2019 performance. Agostini’s is minting money and being brave in their acquisitions.

Yes, there is uncertainty in the recovery from the Covid period, but if we persist in speaking with the same high-end restauranteurs, we will miss the green shoots.

Has anyone observed 139 Tragarete Road? The food court that bustles all day? But the media is stuck in their ways.

KFC’s business is booming, since the pandemic.

Rouse has some advice, repeatedly emphasising the need for humility in evaluating decisions made in response to the wide range of possible risks. She said: “We were all working under uncertainty; I think time will tell whether that was the right move.”

Economists take pride in the sophisticated statistical techniques on which they rely. But François Bourguignon, the chief economist at the World Bank, admits: “We do not know what causes economic growth.”

We, too, do not know whether our Professor will carry out his threat to migrate. As Elton John said: “Sorry seems to be the hardest word.”

A real tabanca story for many leaders who wish to jump ship.

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One comment

  1. Excellent Mr Philip. Excellent!

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