T&T navigating economic crossroads

As Trinidad and Tobago approaches its annual budget presentation on Monday, October 2, Dr Marlene Attzs, economist and The Catholic News columnist recently shared her insights on the paper’s Altos programme on Trinity TV.

The Budgeting Jigsaw Puzzle

Trinidad and Tobago’s annual budget presentation is a complex puzzle with numerous pieces contributed by various stakeholders. Dr Attzs illuminated the key players and their roles in shaping this fiscal blueprint.

At the heart of the process lies the Ministry of Finance, home to the Budgets Division. This department serves as the epicentre of budgetary deliberations, collaborating with a diverse array of stakeholders, including private sector representatives and chambers of commerce.

Dr Attzs described this phase as akin to gathering “wish lists”, where stakeholders present their demands, each reflecting a unique set of priorities.

However, the challenge arises when these demands resemble “everything but the kitchen sink,” prompting the Budgets Division and the broader Ministry of Finance’s technical machinery to carefully sift through and prioritise them.

This pivotal step ensures alignment with the nation’s financial capacity and economic reality.

The Energy Sector: A Double-Edged Sword

Central to Trinidad and Tobago’s economic landscape is its petrochemical industry, encompassing oil and natural gas. Approximately 80 per cent of the country’s foreign exchange earnings originate from this sector.

However, the energy sector has faced turbulence in recent years, marked by declining production and the unpredictability of global energy prices.

“What has happened certainly between 2015 and the present time is that there has been a decline both in production in Trinidad and Tobago and also in terms of activity in the energy sector. So, we’ve not been earning as much,” Dr Attzs said.

Trinidad and Tobago, like other energy-dependent nations, is a “price-taker” in the international energy market, with external factors influencing its economic fate. Prices are often set by the “big wigs… the OPEC countries, the Russias, the Saudi Arabias, even Venezuela…”

She further explained that depending on what was happening among those players, prices either increase or they fall, “and we benefit if the prices increase and of course, we suffer significantly if the prices fall.”

Government, she said, will earn taxes, royalties, and other income through their engagements with different multinational companies. So, “all of that goes into the kitty and that forms the main revenue stream for the government of Trinidad and Tobago….that also constitutes foreign exchange.”

The challenge arises when foreign exchange consumption continues at a steady pace, even during periods of limited earnings from the energy sector.

She explained the issue was just not credit card use, but also, “Many of our supermarkets and the bulk shopping that we do in Trinidad and Tobago is in fact foreign exchange…we’re not earning, but our consumption of foreign exchange has continued unchecked.”

Minimum Wage Quandary

The minimum wage in Trinidad and Tobago has been a topic of contention and debate. Dr Attzs acknowledged that the current minimum wage is relatively low, standing at TT$17.50. She discussed the implications of this wage on the quality of life for many citizens.

Calls for an increase in the minimum wage have grown louder in recent times, with some advocating for it to reach TT$30. However, Dr Attzs urged caution, emphasising that such a decision should be made with a thorough understanding of its potential consequences.

She pointed out that while increasing the minimum wage may seem like a step towards improving the lives of workers, it could lead to cost-push inflation, where businesses pass on higher labour costs to consumers through increased prices. Thus, the economic ripple effects of such a decision must be carefully considered.

Food Security

Dr Attzs underscored the importance of food security in Trinidad and Tobago, particularly in the context of changing economic conditions and foreign exchange limitations.

Historically, the nation has heavily relied on food imports, a practice that has been sustainable due to its robust foreign exchange earnings. She said, “Our diet is one that is predicated on our earning of foreign exchange. So, we can import food because we were getting plenty foreign exchange. If that has changed, we have to make very serious structural changes in Trinidad and Tobago. And food security is absolutely one of those things we need to look at.”

Dr Attzs advocated for a shift towards self-sufficiency in food production, echoing the mantra of “eating what we grow and growing what we eat.”

The nation’s diet, once heavily dependent on foreign imports, must adapt to ensure food security in times of economic uncertainty.