Episode Transcript
[00:00:01] Speaker A: The best insight Instant feedback Accountability the.
[00:00:04] Speaker B: All new Talk Radio Freedom 106.5 the mid year budget review. We have our guest, Justin Ram, economist and international consultant on the challenge of economic stability or sustainability. Good morning to you Justin. How are you this morning?
[00:00:23] Speaker A: Good morning Davey. I'm doing really well. Thanks again for having me on your program.
[00:00:28] Speaker B: Great to have you this morning. Great to have you this morning. First of all. So let's kick things off with this budget.
It's much in the public domain at this time but I did some research and I'm getting two figures so maybe you can clarify it for me. What was the, the last financial budget that the PNM administration under the Finance Minister Colm Imbert would have unleashed on this population? Was it 56 billion or was it 58?
[00:00:57] Speaker A: I believe it was 58 billion.
[00:00:59] Speaker B: 58 point something billion. That's what my research showed me. 58 point something was the budget. And now with this supplemental ask of government to the tune of 3.2 billion, that will see us somewhere in the vicinity of 61 point something billion. Correct?
[00:01:15] Speaker A: Yeah, that's. That's right.
[00:01:17] Speaker B: Okay, just wanted to make sure because.
[00:01:19] Speaker A: Yes, when I saw that supplement I was a little surprised by it. But hopefully the government will explain why it needs this extra money.
[00:01:26] Speaker B: Well, I think they already did. When we look at what is being asked in the.
It was stated more or less based on the expenditure, the supplemental heads of expenditure.
It started off in our Guardian this morning on page five. The President would be receiving somewhere in the vicinity of a million dollars. And then the list went down to the Auditor General coming in second at 4.98 million. The judiciary 50 million. The industrial court somewhere of 771.
No, that's 771,000.
All right, that's probably the lowest I'm seeing. Could be. No, there are some lower ones I will go through Parliament I think is getting 20, 27.9 million and so on and so on with the highest being the Ministry of Health receiving 700 or the ask is for $728.5 million. Now this money, our budget is going to be red in three months and some days and some weeks or so. All right. We are expecting a budget. September, October, somewhere thereabouts we should see a budget.
Why ask for this astronomical figure of 3.41 or 3.14 billion when we just have roughly 100 days to go before we see another budget? Is it. Do you. Should we believe that it is this crucial that the government inherited exhausted ministries budgetary allocations.
[00:03:00] Speaker A: Well, that's why I said at the beginning that we really need to understand why these extra funds are being requested.
Because you have to remember, David, that the 58 billion budget was already a deficit budget.
Now we're going into more a higher deficit which then needs to be financed.
So it means that the government will more than likely have to either borrow on the open market or in the drawdown some funds from the Heritage and Stabilization Fund.
And I think that what we really need to see now is the new government really trying to do things more efficiently and seeking to reduce expenditure more in line with the actual revenues that they collect in taxes and royalties and fees, for example. I think that's the main thing now. And I think I'm a little bit concerned because I think the country is at a point where we need to start seeking and making it a better environment for more investment rather than for more government expenditures. I think the time has come for us to start looking at more investment, more private sector led growth rather than the public sector led growth that we have become accustomed to over the last few decades.
[00:04:29] Speaker B: Research have shown me, and I thank you very much for your comments. Research have shown me so far that the inherited ministries by this incoming government would have shown that as you mentioned, a deficit budget, so the these finances and accounting would have been exacerbated, would have been exhausted. As a matter of fact, there are some ministers quoted as saying the ministry have no money, there's salaries to be paid. There are in some instances there are projects that has already been approved. You know, can government truly say to us as a nation that we will find a way to sustain this and this ask is nothing short of a necessity for the country?
[00:05:08] Speaker A: Well, I'd imagine so. I mean, I guess in the short term what is really happening here is that the new government has come in and found itself in a situation where for some reason, and I think this is where the explanation is required, for Some reason the $58 billion that, that were I guess passed in Parliament only about what, eight, nine months ago have already been exhausted. And what has really happened to the estimates back then? Where has the money?
And I think perhaps what the government is attempting to do is to tidy over these ministries until the next budget. But Devi, I think the time has come for us as a nation to sort of face the facts. We cannot continue with this level of expenditure.
And I think we need to start looking at how we reduce this level of expenditure. And I'm not saying to the new government that you should just Simply go there and slash budgets left, right and center. But there needs to be a process and there needs to be a messaging and communication to the population that, look, we need to start looking at reducing expenditure. But in order to do so, what we want to do first of all is to seek investment so that we can get jobs in the private sector. So that when we begin reducing public expenditure, which inevitably will lead to some loss of jobs in the public sector, that those people who lose their jobs can then find employment in a growing private sector economy.
So I think this is what we need to see. And I, and I think I am really hoping that when the actual budget is read later this year, that we see the provisions in that budget whereby we will start seeing the government putting things in place to encourage more investment. Because ultimately that is what we need. We do not need more government borrowing, we need more investment. Investment so that we can see more private sector jobs being created. And then after that starts to happen, the government can start reducing its expenditure. Because as I'm saying, we have to face the facts. Once the government starts to reduce its expenditure, we will see a reduction in public sector employment. But those people who might be unfortunate to lose their jobs can now find employment in a growing private sector economy.
That has to be the sort of messaging that the government sends when it reads its ultimate budget in later this year, perhaps in September or October.
[00:07:35] Speaker B: Early October.
[00:07:37] Speaker A: Yes. Yes.
[00:07:38] Speaker B: Well, then let me ask you, what does that look like? As an economist yourself, how does government partner with the private sector in order to have it growing? Where, if and in fact when we do reduce our government expenditure that these, I would say employees that would be unfortunate to lose their jobs can seek employment and will be guaranteed of employment.
What other areas can government do use in terms of diversifying the economy to sustain the budget allocations for the year? I mean, we understand the investment opportunities needs to be there, which are not really there at the moment. We understand one investment opportunity would be that in tourism to attract persons to this island. We have a failing industrial sector in terms of oil and gas. We have those sectors seem to be diminishing for us at this moment. So what, in your respected opinion can be done for government to foster this partnership with the private sector? What does that look like?
[00:08:39] Speaker A: Yeah, well, it's a really good question and I think I just want to say one thing. The government will not diversify the economy. They need to facilitate the diversification. Yes. And so government has to understand what is its proper role in this economy. And I think the proper role Is of course, to facilitate the diversification. And that means has to happen, and I think it has to happen very, very quickly, is that you almost need to, you need to have a big tent forum, as it were, where the government, the private sector, labor as well as civil society, we come together and hash out what type of vision we want for this economy and where we want it to go. Where do we want to see this economy in 5, 10, 15, 20, and even 50 years and start putting things in place to achieve that.
Now, I think what has to happen is that we are at a critical juncture for us in our development whereby we need to start encouraging much more local production and consumption of that local production at home.
If, you know, if you look at the numbers and you look at what's been happening in the news recently, David, there's a lot of discussion around foreign foreign exchange, or forex, as we all like to call it.
And we're trying to understand who's using more forex and why.
Now that, for me, signals that there's something fundamentally wrong in this economy because all we are concerned about is earning foreign exchange so that we can import to consume. And I think that that type of economics needs to be turned on its head, whereby we need to say, you know what, we need to start thinking about what we produce more at home and consume more of that at home and therefore start producing more meaningful jobs at home. Why?
Because we cannot sustain the level of public expenditure. Because a large amount of public expenditure, Davy, about 50% of it is spent on transfers and subsidies. And those transfers and subsidies are really spent to help households to consume. And what are those households consuming? 70% of what you and I consume in Trinidad and Tobago is actually made up of imports that is unsustainable.
So we have this economic model that focuses on foreign exchange, which means that we are constantly trying to consume 70% of foreign goods and services.
And we really need to consider how we turn that on its head. And it's not about diversifying only to earn more foreign exchange. It's about diversifying so that we can start producing more of what we consume at home and then to have excess production and which we can then export because obviously we're not going to be able to produce everything that we need to consume. I think we have to start looking at consuming maybe 50 to 70% of what we consume should be locally produced. That's the type of diversification which will not only mean that government revenues will start to be on a more sustainable footing, but it also means that we'll start creating much more meaningful jobs for our local population. Because, Davy, I want to say this to you, and I think the audience needs to hear this.
Trinidad and Tobago is the only legal labor market for the majority of workers in that. In. In Trinidad and Tobago. And that is true for most countries. Yes, of course, if you are skilled, you might be able to work in other Caribbean countries legally via the CARICOM Skill Certificate. But if you are not so privileged, Trinidad and Tobago is the only labor market that you can work in. We need to start thinking about how we produce more good jobs locally so that those people can earn a good employment, earn a good wage and be able to take care of their families at home, rather than having to depend on subsidies and transfers from the government, which we now know is unsustainable, because our governments have been running fiscal deficits for well over a decade in Trinidad and Tobago, and that's not good. And so the entire economy needs to be shifted. And what we tend to focus on, this foreign exchange is for me, one of the major reasons why we are in this current predicament, as it were.
[00:13:05] Speaker B: We have been unable for the better part of a decade or so to not attract foreign investors. We had the onslaught of COVID 19 that was unleashed globally. This is not just a Trinidad and Tobago disease, but it's something that happened on a global scale. Now when we look at our, the one industry that we look to for forex for that investment, it comes from the oil and gas sector. We are having a peril there.
Can we look at the green economy? Can we look at the orange economy?
Those economies are thriving. The Caribbean Film Festival was being conducted in Trinidad and Tobago over the last week. Right.
We saw movie and filmmakers from as far as Nigeria in Trinidad and Tobago and they were unable to even get foreign exchange in this country.
When they arrived.
They brought in whatever limited they had and then it was exacerbated. And then one was telling me he had to leave and he couldn't get anything to leave with. He wanted to get rid of the TT dollars that he had on him to get some foreign exchange to get back to Chicago, back to his homeland. So is it, has the time come for us to start looking at these other economies in terms of attracting investment by government boosting? Now, I know the question a little long winded, but I felt the need to explain it because when I look at the fact that we're putting all our eggs in one basket and they are such a looming, vibrant orange and green economy, that is very Much untapped and only paid attention to when the outside market look at it, that how does government get involved to stop that? Because I believe if that happens and what you said, government can then reduce expenditure and take the dependency syndrome away from the people because they'll be able to sustain themselves through these green and orange economies. Your thoughts?
[00:15:01] Speaker A: Yeah. Well, it's, you know, all of this is, is very much related.
Oil and gas has sustained this economy for a long time.
But any first year economic student can tell you that there are perils associated with that because there's something called the Dutch disease or the resource curse, as some people might call it.
Or as my late mentor, Professor Dennis Panton liked to tell me, you know, he said it's really called the mechanism of an open petroleum economy.
What is that, David? And let me just explain this to the audience.
When you, when you are exploiting a resource like oil and gas, it leads to substantial rents not only for the government but also for those who are able now to get that money into, in, into their pockets. It leads to inflation. It then means that every worker in the economy starts to beg for higher wage rate. What does that mean? It leads to uncompetitiveness of other sectors and therefore the eventual decline of those sectors. So there is no mystery in Trinidad and Tobago as to why some of these other economies, that orange, that green, the agriculture, the manufacturing, even the financial sector have not blossomed as much as they were because we really didn't have any need for it.
We were flush with money from the oil and gas sector.
But again, back in, early, back in the late 1990s, I did some research back then which indicated that by mid to mid-2020s we would have been in difficulties because we decided to go into LNG. And that meant that back in the late 1990s, Davy, and those current production levels of gas, we had enough gas to last us until about 2070, the moment we decided to go into LNG and therefore transform that gas into money very quickly. It meant that we knew that our gas was going to start being exhausted in the 2000s and by 2000s.
So this was all predicted. What should have happened was that a lot of the rents that we received from the oil and gas because we decided to monetize the gas via LNG should have then been invested in these other sectors. Yes. Okay, that has not happened. We now need to do that. Now. I also attended the Caribbean Film Festival over the weekend and I attended a wonderful workshop on the Saturday morning and I heard the lamentations of the panelists who were all saying that, you know, it's very difficult to get this sector going in this economy.
But you know what, that was simply a reflection of everything else that you hear from all other sectors in the economy. It's very difficult to get financing, it's not being facilitated. The government does not put the right policies in place.
Well, that tells me, Davy, that there's nothing wrong with those sectors. There's something fundamentally wrong with our overall economy which says to us that the only sector that can really thrive in this type of economy is oil and gas. And that has to change because the oil and the gas are now running out. And we need to start thinking about what mechanisms we put in place to start building, building out those sectors. Because ultimately those sectors are the sectors that will provide more meaningful jobs and employment for our people. Because remember, the oil and gas sector, while producing maybe over 50% of the foreign exchange that we need, only really employs about less than 3% of the of the workforce. So you are then using a sector that employs very few people and those people have higher earning jobs and then using the money to supplement the incomes of everyone else. Everyone else in this economy also wants to start producing and having meaningful work and employment. And I think now is the time for us to ensure, and coming back to this point, for us to ensure that we have investment in other sectors and that is how we will diversify this economy. We have so many creative people in Trinidad and Tobago who really just simply need the opportunity to operate in an economy that can give them opportunity. And I just say this as well, that this means, David, that is not just an economic issue. You know, it's around the social, it's around the governance, it's around ensuring that every boy and girl in Trinidad and Tobago and then when you get to an adult, you have access to good quality education. I can't emphasize that enough, how important it is to have good quality education for all, not just for the 20% of children who sit the common entrance exam and then go on to a prestige school. Everyone should have access to good quality education. And ultimately that is how we shall diversify this economy.
[00:20:07] Speaker B: Beautifully, wonderfully said.
I can't really refute much of what you said outside of the fact that maybe I am wondering if it's a bit too late and I'll tell you why.
We have been operating, as you rightfully mentioned, on a deficit budget for almost a decade. The Orange economy especially, we speak, let's speak to the Orange economy at this time. All Right. The Caribbean Film Festival was here.
The panelists spoke. You mentioned similarities between the ask of the and the difficulty identified difficulties identified by the panelists on the orange economy sector as opposed to all the other sectors. But everybody is looking for some sort of support, some subvention from government, some policy, some legislation in place that would see funding to them as they create and export these creativities, movie making documentaries, the clothing industry and all these different things.
Are we too late to diversify the economy with a subvention from government? Given the fact that our deficit budget continues to rise yearly and now with the change of government now in 2025, we are now asking for a further increase into the deficit budget of $3.2 billion.
Can we really and truly would the government diversify this economy?
[00:21:37] Speaker A: The answer is yes. And what simply has to happen, Devi, is that we have to start recognizing what our new priorities are.
So although I say that transfers and subsidies as a percentage of overall government expenditure needs to come down, I am not saying that it has to be eliminated entirely.
What I am saying is that if we are going to provide subsidies and transfers in this economy, it should be directed towards production.
What happens now is that it is simply directed towards consumption and more than likely it is a consumption of foreign imports. So we in effect are subsidizing jobs in other countries, which I really want people to understand that when the government spends its money now, it is really subsidizing jobs in other countries because most people, when they receive those titi dollars in their pocket, they go to the supermarket and 70% of what they purchase is actually imports. And so it's rarely being done by people in other countries. What the government needs to do is to start targeted interventions to support production. And some of those targeted interventions do not have to be actual monies going into those sectors. You can have tax incentives. So say, for example, we want to get the orange economy going, let us reduce the corporation tax on those on that particular sector. Let us also provide incentives for investment so that, for example, if I put $100 into the orange economy, I might be able to deduct from my deduct from my tax return, let's say $110. So what is then happening is that I am encouraging the money to come from the private sector and yes, the government will not receive a further $10 because I've now increased the overall deduction of my tax bill by $10. But, and so there's a subsidy in there, but not directly from the government as it were.
It's like a foregone revenue that the government has not received. And you say to the orange and sector, I will give you this type of tax holiday as just for the oil and gas sector. I just want to say no, we've done this for the oil and gas sector. We need to do the same for the orange economy and the other economies and say that maybe after 10 years, after you have been profitable then I will expect you to start paying corporation taxes.
Now for this to happen, Davy, you can understand that there has to be an overall shift in the paradigm as to how we think what government needs to be doing. Government doesn't necessarily have to be keep spending a whole host of money but it can think about how it supports these new economies in innovative ways. And I want to highlight that it needs to think about how it can facilitate and support these in new economies, not do it itself. Right. So it's like a real public private partnership that needs to happen here. And that I think is critical and I think now is the time. We are in a time globally where there's a lot, a lot of upheaval. And you know, there's the old adage that let us not waste this opportunity to start seeking to even transform our economy Even more advanced economies are going through major upheavals because their people are demanding that there needs to be a change in how. Because many people around this world, even in advanced economies are saying we can't get good jobs, we are importing too many things. And that is an opportunity for us to say let's make a change at home as well.
[00:25:24] Speaker B: And as you mentioned, making a change of home and the fact that our 51 I would go as far as 70% of what we consume is foreign base. Then when we look at the economy right here at home, I can go to the supermarket with 20 titi dollars and I can purchase a bag of Gala apples and get six to seven apples in a bag. We don't grow apples in Trinidad. That's foreign that come, that is exported and imported into the country, exported from and imported by us. So we pay in all those taxes and we get the apples at that price. And then I take a fruit that is homegrown. Many of us grow up on it, grew up on it in the early days.
It's still homegrown starch mango and I have to spend 25 and 38 dollars for a heap. And if I do pay $20 for the same heap I am getting 20 doodles size starch mango that is growing right Here, But I can get bigger apples, gala apples, for the same $20, and enjoy the fruit that's from a foreign country.
How do we explain that to our citizens, to them to understand the need to consume local, more local when it's cheaper to buy foreign?
[00:26:45] Speaker A: Well, not that. Well, let me just explain this to you.
Those apples are probably coming from a country that is subsidizing their agriculture sector very heavily. So you are actually consuming a product that is heavily subsidized abroad.
Most advanced countries subsidize the agriculture sector, One, so that they can sustain their own population, and two, to be able to export those goods. Now, what has to happen, There are actually two things there. If I come back to your example.
One, we need to ensure that the case that what you're speaking about there is not going to be the reality. It is in no way an apple should be costing you less than, for example, some mangoes. And so there are a number of things that have to happen.
One, I think we have to increase the duties on those imported goods. Because you know why?
When you buy those apples, instead of purchasing those mangoes, you're already supporting jobs overseas. Overseas. And I really want you to start supporting jobs here at home. And so what has to happen is that our government also has to think about subsidizing our agriculture sector to help make it more productive eventually. Because you know what, those mangoes that you're probably consuming are probably just off of one tree in somebody's backyard while those apples are coming from an entire orchard in perhaps the United States. Right.
We need to start thinking about our agriculture in the city the same way improving the technology, ensuring that we have mass agriculture so that we can also lower the average cost of our production. So if, for example, you're buying mangoes that are grown in fields of mango trees, more than likely your $20 will start purchasing you maybe a hundred mangoes rather than the six or so that you can probably now purchase. That's the type of investment encouragement that we need, need, and the facilitation that our government needs to provide. Once you do that, people will start saying, okay, let's start investing at home. We also have to start thinking about buy local, encourage our people to use more of our locally produced goods at home. It's a taste thing as well. I need to encourage the taste associated with local. And it's a health thing as well. And also a climate change thing. Yes. Because it's also important for us to understand the more we're able to consume things at home. So for example, we shouldn't really be using wheat flour to do a lot of our baking. We can be using cassava flour, coconut flour, things that are more indigenous to our own agriculture, breadfruit flour. And that's so much more healthier for us. So we'd be able to reduce this supplement that we see here on health can be reduced significantly through all of this. It's all a bit of a joined up thinking that is required here as well. Yes.
[00:29:31] Speaker B: All right, I have time to squeeze in just a couple calls. With your permission, if you would be willing to take a call from one of our listeners. They have been ringing relentlessly to getting on the program. Hello, good morning.
Good morning to you.
[00:29:46] Speaker C: Hello, good morning, Good morning. Devi.
I, I came in late into your show and can you let me know who your guess is?
[00:29:56] Speaker B: This is Mr. Justin Economist. We're talking about the media budget review and what it means for Trinidad.
[00:30:02] Speaker C: Okay, so I'm listening to what he's talking about, the foods. Right now I can't eat a mango because it's too, it has too much sugar.
Okay, Now I can eat an apple.
So if you raise the price of the apples, I would not be able to eat a fruit because I can't eat sweet fruits.
So he has to look at the health aspect also for not only one person but the whole society.
And also I can't eat cassava flour.
I can't eat those types of things. Now if you compare potato and you compare edoes, arrows is local but arrows is by far more expensive than a potato.
Now you have to look at price and you have to know that the local people are charging far too much than the imported stuff. So if the imported stuff is coming cheaper for the consumer, we need cheap, we need cheaper items.
Why should we pay more for a local product when and the imported product is cheaper? And the potato is a very important item for the consumer.
[00:31:25] Speaker B: All right, thank you very much. I have to leave the question in there.
Justin did explain a few moments ago before you called us on how government can subsidize and assist the agricultural farming industry. We talk about the mangoes from somebody's backyard versus an orchard of mangoes or a field of mango trees being harvested. At the same time one texter said to me, do we not have Trinidadians going to Canada to pick apples?
Isn't that money repatriated back in Trinidad and Tobago? Is that not helping our economy?
While those Canadian workers, Trinidadian, Canadian, Canadian workers are out there, Remember, they're helping the Canadians economy not so much Ours. We are helping the Canadians in their subsidized agricultural fields to, you know, send stuff back home to Trinidad. You are coming back with monies that you earned outside the Forex, the Canadian dollars or US dollars that you earn. So you're still not sustaining our economy, in my respected opinion. Justin can allude to that. But I want to take one serious call before we go because we have the commercial break and the news coming up. Hello, Good morning.
Very, very quickly.
[00:32:40] Speaker A: All right.
[00:32:40] Speaker B: Hello, Good morning.
[00:32:42] Speaker D: Good morning, Davy.
[00:32:43] Speaker B: Very quickly, sir. Good morning.
[00:32:45] Speaker A: Good morning.
[00:32:45] Speaker D: Mr.
Ram, since I read an article in which you were quoted on 12 June in the Guardian, I have been having sleepless nights. And finally this morning at 2:00am, I did a Facebook post on it because I am trying to understand if you are saying that if we devalue the dollar in a way whereby we have a $7 rate and then there's a crawling ban in which it reaches to 8, that's a good thing. What we're going to have is people bringing money back into the country and we will have a better economy.
I find that rather strange. Now, one other thing I want to leave you with before I go.
In Trinidad and Tobago, there's about $170 billion the private sector has just sitting in the bank.
We have to find a way to mobilize that in relation to diversification. I believe that we need to get people together. They can build hotels in Tobago, they can do many other things. One person doesn't have to take all the risk. But the money that we have sitting there, that need to be invested in order to act as a fillip to the economy. I listen to your comments, Mr. Ram.
[00:33:53] Speaker B: All right, thank you very much, caller.
I will allow Justin to respond very quickly to that.
[00:33:59] Speaker A: I think very, very good question there. And that's what I'm speaking about, investment. How the government facilitates the investment. So to encourage those monies that are sitting there that perhaps are not earning much, how do we get that money into the investment to help diversify this economy? And that's really a private sector led growth in partnership with the government. And let me just say to the caller, when I speak about a depreciation of the currency, what we are seeking here is to encourage more domestic production. Why is that? Because when you do that, when you depreciate the economy, imports become more expensive and therefore your local products become much more competitive so that people are encouraged to consume more at home and therefore that encourages more local production. It's all joined up so prices do matter. I think the price of our currency is a really important indicator as to what type of economy we want. And I think now is the time for us to start looking at the economy that produces much more of what we consume at home. And then let me just say this.
When the dollar is depreciated, it means whatever we produce at home becomes cheaper for us to sell abroad. And therefore, we can earn foreign exchange like that. Rather than having our workers go off to Canada and pick apples, we can be picking our mangoes here and allow them to earn a very good income, and they can start consuming more of what we produce at home. Just a different way of thinking.
[00:35:23] Speaker B: Yes, I want to thank you very much. I have to leave it there.
[00:35:26] Speaker A: The best insight, Instant feedback, Accountability the all new Talk Radio Freedom 106.5.
