The great howl that goes up with every significant decline in foreign exchange income betrays the country’s dogged refusal to even entertain the option of adjustment until forced by the IMF.
Led by some of the most powerful forces of the business community the instinct is invariably to press the panic button which predictably sends the country goes into a mad scramble for foreign currency in which (s)he who shouts the loudest gains the most.
You’d think that, by now, we would’ve been experienced enough in the ways of the global oil market to have finessed our response to the ups and downs of petro income. But no. Once again, with the tide against us and, once again, stranded without the lifeline of a diversified economy, the mad scramble is on with all logic pelted out of the window.
In response, the government is doing what governments have always done: appease and placate while scouring the horizon for signs of a price rebound.
Such illogic flies in the face of what the whole country already knows: that with a 60 percent decline in oil and gas prices since mid-2014, we must reduce our consumption of foreign exchange. Unless we’re willing to risk the possibility of not having enough foreign exchange to maintain critical imports, we have no choice but to rein in our appetite now and begin the adjustment to a lower level of available foreign exchange supply.
This is a moment for leadership. Judging from the scare-mongering that has already begun about possible shortages of prescription medication, such leadership is unlikely to come from the business sector.
In any case, it is the responsibility of the government to provide national leadership on the issue of national income and national expenditure priorities.
It is true that with 10-11 months import cover we are a long way from the kind of foreign exchange crunch that had supermarkets rationing onions and potatoes in the 1970s. But it is equally true that reserves are less than those of a year ago with the likelihood that choices are being made to protect the rate of forex flow to the market at the expense of other national priorities and of future generations.
In terms of the latter, official figures for the Heritage and Stabilisation Fund up to June this year indicate that no payment has been made to the fund since December 2013.
In effect, we’re stealing from our own children and grandchildren to maintain today’s lifestyle—including the waste and corruption—underscoring, once again, why heritage funds should be separated from stabilization funds.
Even if oil and gas prices were to rebound tomorrow the imperative of economic transformation remains given the geo-politics and other variables of the global energy market and, most importantly, the stark reality of T&T’s declining and finite petro reserves. High oil prices might temper the urgency of adjustment but it will not change the fact that we must adjust to survive.
This is why the government needs to abandon its defensive posture in response to the indiscriminating demand for an inexhaustible supply of foreign exchange. In this time of challenge, leadership requires that the government signal the need for change and not pander to special interests.
The government must bring all representative interests to the table and negotiate an adjustment that evenly spreads the burden of adjustment to lower foreign exchange earnings.
Small business as well as people looking for foreign exchange for their children studying abroad or needing to meet overseas medical expenses or to holiday abroad should not be left to the mercy of a market in which big business, irrespective of whether exports, imports or foreign acquisitions are involved, has first call on public reserves.
This is a matter not only for the government, bankers and big business interests but for the entire country. Politics fall back on defensiveness and manipulation when politicians lack the confidence of their own ability to persuade people and influence outcomes with the facts.
The most persuasive argument the government can make to the country is to begin the adjustment by curbing its own appetite for foreign exchange. That would be leadership.
In urging the public to buy local and accept less foreign exchange at the teller, the government must first evaluate its own foreign exchange consumption profile with a view to reducing and/or eliminating the purchase of non-critical imported products.
Although private suppliers can be relied upon to kick up a fuss, such a move will send a much-needed signal that they, too, must adjust if they are to do business with the state. Here, again, is the case for a local content policy to guide government expenditure.
Despite its expansion to the point of crowding out the private sector, the government remains supremely unaware of its own power as an economic force and, consequently, as a force for fundamental change.
In political terms, the Dr Keith Rowley-led administration has until March to get the whole country on the road to adjustment.
The multiple sectoral reviews that have been initiated are already testing many who had expected the PNM’s “government-in-waiting” to hit the ground running given its experience in government and the party’s assumed superior level of internal organisation.
Even so, Christmas followed by an early Carnival invariably buys time for all T&T governments. By then, the Minister of Finance should be ready to present his real 2016 budget in the context of the Prime Minister’s broad roadmap to the future.