While the Governments decision to increase its $34 billion
budget by $4 billion has raised a few eyebrows, it hasnt
been meet with much scepticism.
Last year, the Governments $31 billion budget was increased
by $3 billion after its mid-term review, which raised questions
about wild spending, deja vu and inflation.
This time the Governments allocation for its $4 billion
increase seems justified.
Except to the Opposition UNC who claim that a forensic audit
should be conducted on the use of the $34 billion budget since
the effects of this or the GDP growth are not being felt by
Economist Jwala Rambarran and former Finance Minister Gerald
Yetming agree that this time around it isnt as
bad as it seems.
Yetming admitted that if he were the finance minister he may
have done the same thing. He believes that the Government
has given sufficient justification for the increase and there
wasnt much room for argument.
Rambarran noted that of the $1.35 million of the $4 billion
would be transferred to two funds: the Revenue Stablisation
Find and the Infrastructure Development Fund which are not
Last week, Cabinet approved the $4 billion increase, just
three months before the end of the financial year.
And its allocated almost $2 billion out of the $4 billion
to the Finance Ministry to assist T&TEC, WASA, BWIA and
to state-owned Petrotrin to provide a gasoline subsidy.
$650 million is going to Petrotrin to keep the subsidy and
how much of this amount can you really argue? Oil prices are
higher than anticipated but if you want to maintain the subsidy
and see prices fixed at the pump then you have to be prepared
to pay this amount. And we can afford to, Rambarran
He continued that while the Government is not going
to raise prices as yet it has signaled that it could look
at rolling back the subsidy because if oil prices remain high,
you have a higher level of subsidies to contend with.
He said that T&T had the luxury of being an oil producer
and could afford to maintain a gasoline subsidy for an obviously
longer period than any of its Caribbean neighbours.
Yetming added that the citizens of T&T benefited at the
pump from the oil and gas wealth.
isolation, there is little to argue with, said Yetming.
Rambarran, using a summary of Governments fiscal performance
released in the Central Banks April monetary report,
said Government has received $1.1 billion more in revenue
than it had budgeted.
But he noted that in terms of the oil revenue, it is just
$500 million below what was budgeted. The Government had budgeted
$8.7 billion in oil revenue but by March 2006 had only received
is pretty strange given that oil prices are so much higher.
So this obviously says they were forecasting a higher level
of production with a given oil price of $35, he explained.
He pointed out that the non-oil revenue is significantly up
from $6.8 billion to $8.5 billion compared to what was budgeted.
This, he attributed to higher corporate taxes and greater
return on VAT.
The Governments total expenditure of $13 billion, which
is $4.1 billion lower than the $17.6 billion budgeted, is
the reason why Rambarran is not too concerned about the increase.
Government is not spending as we thought they would be spending
or it is just not spending as fast as anticipated. Typically,
this happens at the mid-term but as you move towards the end
of the financial year, the spending will pick up. But I dont
expect them to pick up to such an extent, he said.
Rambarran told the Business Guardian that both current and
capital spending was behind which meant that when you
take the revenues and expenditure together, they are running
have a surplus of $3.3 billion versus a budgeted deficit of
$2 billion which means that they were $5.3 billion ahead by
the end of March. So, if they are running a surplus and expenditure
is $4 billion behind budget, coming to ask for $4 billion
more simply means you are making up for what you did not spend,
But while thats the good part of the story,
the bad part emerges when you look at the performance of the
non-energy deficit, said Rambarran.
He said the deficit is up significantly and when it is financed,
pushes liquidity into the system which has spillover effects
into the foreign exchange markets.
you extrapolate the same performance into the end of September,
youll see the non-oil budget deficit is going to be
about $13.8 billion, which is equivalent to 20 per cent of
non-oil GDP. This is a significant amount. It means more liquidity,
the Central Bank intervening in the money market even more
and bigger interventions in the foreign exchange markets,
Government really needs to think about how they are spending
now at the aggregate level and there is time for restraint,
you need to cap it. Same time next year, you cant continue
at this pace, you going to have to cap expenditure at $30
billion and work with that because it is having significant
impact on your money market and foreign exchange market. And
the eventual outcome on all of this is the inflation market,
the money is going
gas station attendant descends from an NP loading truck. The
government has allocated part of its $4 billion budget increase
to subsidise the price of gasoline.
An additional $371.6 million is earmarked for the Public Sector
$2.5 billion of funding into the Revenue Stabilisation Fund
(over 91 per cent of surplus oil revenue for fiscal year 2006)
bringing its balance to $7.9 billion
$650 million to Petrotrin for a gasoline subsidy
the Government would shell out $282.4 million to assist T&TEC
in servicing its 2005-2006 debt obligations in relation to
a $22 million Fincor Bond of 1991 and a $500m RBTT bond of
2001, plus a $431 million NGC medium-term loan.
An additional $630 million is required to meet the equity
injection in the recapitalisation of BWIA.
Also, $750 million is allocated for infrastructure development
fund and $600m for savings.
$292.5 million, will help WASA meet its operating deficit
and support a Water Sector Improvement Programme with a further
$15.7 million will support projects under a development programme.