Post on 28-Apr-2023
FISCAL POLICY AND ECONOMIC DEVELOPMENT
TOPIC: AN ASSESSMENT OF FISCAL POLICY INTRINIDAD AND TOBAGO OVER THE PERIOD 2010-2014.
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ABSTRACT
This paper gives a critical assessment of fiscal policy in Trinidad and Tobago over the
period 2010 to 2014. It looks at the policies outlined on both the expenditure and
revenue side of fiscal policies and seeks to examine the impacts that each policy have
on the economy.. The paper also attempts to investigate the relevance of the oil price to
the Trinidad and Tobago economy, government’s dependence on one sector, whether
the government should have borrowed and if they did whether it was done in a timely
manner. Additionally, it focuses on attempts by the government to diversify revenue
collections and the need to review the land and building taxes.
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TABLE OF CONTENTS.
Contents
Page Number
Title
page…............................................................
.......................................................1
Abstract………………………………………………………………………………..2
Outline of the budget………………………………………………………………….3
Review: Expenditures in various Ministries
3
Education……………………………………………………………………...6
Health…………………………………………………………………………10
Energy………………………………………………………………………...11
Safety, Security and defence…………………………………………………12
Highway Infrastructure……………………………………………………….14
Housing……………………………………………………………………….15
Social Services………………………………………………………………..16
Public Transport………………………………………………………………17
Water Resources………………………………………………………………18
Agriculture…………………………………………………………………….19
Tobago House of Assembly…………………………………………………...21
Review: Revenues in various Ministries
Energy…………………………………………………………………………22
Tourism………………………………………………………………………..23
Fines for illegal activities……………………………………………………..24
Alternative energy sources……………………………………………………26
General taxation policies……………………………………………………...28
Relation to the various readings in the course……………………………………….29
Additional Analysis.
Relevance of oil prices………………………………………………………32
Government’s dependence on one sector…………………………………...32
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Should the government have
borrowed?...................................................
.....33
Did the government wait too long to
borrow?...............................................33
Attempts to diversify revenue collections…………………………………..33
Review land and building tax………………………………………………34
Current Account Balance…………………………………………………...34
Replica of Tanzi's table……………………………………………………………..35
Main Findings………………………………………………………………………38
Recommendations…………………………………………………………………..40
Conclusion…………………………………………………………………………..41
Appendix 1………………………………………………………………………….42
Appendix 2………………………………………………………………………….43
Appendix 3………………………………………………………………………….44
Appendix 4………………………………………………………………………….45
Bibliography………………………………………………………………………...52
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Outline of the Project.
This project will be divided into various sections to ensure the
ease of understanding and the capturing of as many areas as
possible.
1. This analysis will seek to examine government's expenditure
in the various ministries or sectors; education, health,
safety, security and defence, highway infrastructure,
housing, social services, public transport, energy, water
resources, agriculture and the Tobago house of assembly
respectively.
2. The revenue collecting activities of the government will be
investigated. Various activities will be investigated
through which the government receives its revenues. The
order of the activities will be dependent on taxation, fines
associated with illegal activities, revenue from the energy
sector, revenues from the development of alternative sources
of energy as well as borrowing from the International
Monetary Fund (IMF).
3. Following that, a table will be provided indicating the
projected government's expenditure and revenues over the
five years under review.
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4. This analysis will tend to link the activates of the budgets
to the theory learnt through relating the analysis to
various theoretical readings.
5. The analysis will seek to give an insight on the following
issues pertinence to the budget ; the relevance of the oil
price, government's dependence on one sector, whether the
government should borrow and if they did was it too late,
were attempts made by the government to diversify revenues,
the need to review the land and building tax and the
importance of their current account balance.
6. A replica of the table found in the article, "Reconsidering the
fiscal role of the government: The International Perspective," by Vito
Tanzi is provided to analyse the various indicators for the
Trinidad and Tobago economy over the period 2010 to 2015.
7. A table showing various economic indicators is presented
using data available through the reviews of the economy over
the period 2010-201
Expenditures in Various Ministries.
EDUCATION
This section of the analysis of the budgets over the years 2010-
2015 seeks to place heavy emphasis on the expenditure side of the
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budget in various Ministries. This review will place emphasis on
the most prominent sectors of the economy. These sectors are;
Education, health, safety, security and defence, highway
infrastructure, housing, social services, public transport,
energy, water resources, agriculture and the Tobago house of
assembly.
At the onset, this review will attempt to trace the development
of the education sector over the period 2010-2015. The
government's commitment to education and human capital
development of the country is one of the fundamental pillars that
leads to economic development and thus Education and Training
have been allocated the highest expenditure in each of the
budgets over the five years, accounting for a range of between $8
million to $10 million. Policy measures outlined under this
sector of the budget is indicative of expansionary measures or
policies outlined by the government.
The establishment of early childhood care centres is the
preliminary focus of the government. This was not a major focus
of the government until the 2013/2014 and the 2014/2015 budgets.
As a result, no mention was made in the previous budgets of
2010/2011 to 2012/2013. In the 2013/2014 budget however, saw the
establishment of over 50 early child hood centres(ECC) in the
first half of the fiscal year with continued commitment to
increase the number of ECC in the fiscal year of 2014/2015. Under
the pillar of education, injustice was not done to the8
differently able. Schools for the differently able is another key
component of the budget and these schools have started
construction and many are new completion. Furthermore, there were
policy initiatives on the way to have more constructed. In terms
of the ECC and the schools for the differently able, the country
saw the construction of these schools in the subsequent budgets.
The budget also made a commitment to have such existing schools
undergo repairs. However, even though these policies were
outlined in the 2013/2014 budget, they were not accomplished in
the 2014/2015 budget as all of these measures are long term which
will require more than one fiscal year for its completion.
To add to this the government over the 5 year period also
implemented policies and carried out these policies to create a
technologically advanced education system through the provision
of laptops as proposed in each budget over the 5 years. This was
done through the distribution of laptops to all primary school
children upon completing the Secondary Entrance Assessment (SEA)
examinations. By implementing this policy the government will
ensure that every child has access to a laptop to keep up the
pace of the technologically changing world and some children may
not have been able to afford a laptop on their own. Additionally,
under the area of primary school education, a commitment was made
by the government to have all necessary schools undergo repairs
over this 5 year period and this period even saw the construction
of additional school in rural areas. This policy was seen as
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completed in each of the subsequent budgets followed by the
government's proposal for the same in the next year's budget.
Shifting focus to secondary schools, the major focus of the
government in terms of secondary education is the granting of
scholarships to deserving children. From the year 2010 to 2015,
there was a consistent increase in the amount of open and
additional scholarships being awarded. The awarding of
scholarships started at a total of 329 scholarships 57 open and
272 additional and increased each year. This increase each year
was visualized as the government's continued commitment to a
better education to develop the human capital of the country.
Scholarships is an ongoing policy proposal of the government.
However, in relation to the policy being met, one can see it was
achieved as indicated in each year's subsequent budget and
further proposals were made for it continuation in the subsequent
budgets.
Moreover, over the period 2010 to 2015, the government also made
pertinent policies in the area of tertiary education. In addition
to making these policies, they also made a strong commitment
towards achieving these policies. Firstly, in the fiscal year
2010/2011, the Government promised to continue the Government
Assistance for Tuition Expenses (GATE) programme for all tertiary
institutions, along with having it extended to include vocational
training with the hope of increasing the participation rate in
higher education. Commitment to this policy was also instrumental10
in the 2011/2012 budget where the government pledged to continue
its support of the GATE programme to assist tertiary level
students a better opportunity of attaining a higher level
education. Furthermore, in the fiscal years 2012 to 2015, this
policy was again outlined as a major focus of the government and
the government was spending approximately $757.9 million each
year on this GATE programme that would benefit over 67,000
students every year in the five years under analysis. The GATE
programme was achieved as indicated by the budgets of the
following years. For example, the budget of 2012/2013 indicated
that the policy proposals were met as it was indicated by the
2013/2014 budget.
Subsequently, GATE was not the only measure implemented by the
government to assist with the tertiary level education in
Trinidad and Tobago. The government intended to restructure the
On the Job Training (OJT) programme to expand private sector
placement, as well as, re-evaluated technical vocational
programmes such as the ‘Multi-Sector Skills Training Programme
and the ‘Helping Youth Prepare for Employment’ programme in the
year 2010/2011. These initiatives were continued in the year
2011/2012. However, in the fiscal year 2012/2013, the government
sought to introduce different policies with respect to the level
of tertiary education. They proposed that skills training be
developed which can be done through the National Energy Skills
Centre (NESC) and by the construction of the College of Science,
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Technology and Applied Arts. Commencement of these measures began
but it should be understood that these policies are long run
measures and as such none were completed as indicated by the
budget of the following years. Additionally, a few of the
measures outlined were not completed even at the end of the more
than one fiscal year.
To continue this trend, the establishment of the University of
the West Indies south campus has begun and will continue into the
next two to three fiscal years. In the year 2013/2014 there was
also the building of the COSTAATT campus, Skills Technology
Centers, the expansion of the YTEPP and the construction of
nursing training centers. None of these measures were completed
as indicated by the 2014/2015 budget. However, construction of
these facilities are on the way and it should be noted that
completion will require more than one fiscal year so to judge the
policy on a one year basis will be unfair.
Moreover, additional initiatives introduced by the government in
the year 2014/2015 were the expansion of the School of Dentistry
in UWI, construction of Open Campus in Chaguanas, introduction of
the Business Education and Training Campus in Carapichaima,
establishment of a Technology Campus at La Horquetta and the
construction of an Aviation Campus in Couva. The success of these
facilities and initiatives cannot be gauged as yet since these
were measures outline in the 2014/2015 budget, the budget of the
current year.
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HEALTH
Subsequently, the health sector is the other sector that plays a
central role in the economy. The government have employed various
expansionary fiscal policies with expenditure involved throughout
the five year period of 2010 to 2015. These fiscal policies
included the construction and upgrade of health facilities and
the expenditure on the provision of enhanced healthcare and
medical services which were the aim in all five budget
statements. To be specific, the government decided to continue
assisting and supporting the most vulnerable patients to access
medical procedures and medication under the Financial Assistance
to Necessitous Patients Programme and the Adult Cardiac Surgery
Programme. In the other fiscal years, the Ministry of Health was
operational in the progressing stage in providing for oncology,
cardiac surgery and organ transplants. In the middle of the five
year period, there was the implementation of a health card to
ensure citizens have access to the best health services as an
expansionary fiscal policy measure. These policies cause high
degrees of expenditure by the government. On a positive note,
these initiatives will increase the quality of life of citizens,
decrease the death rates and the unemployment rate will decrease
since skilled and unskilled workers will be needed in the health
sector.
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Furthermore, another expansionary policy implemented was The
National Oncology Centre that is still under construction with
the investment by the government of $891 million which began in
the fiscal year 2013/2014 and will be fully completed in 2015.
Additionally, a National Diabetic Retinopathy Screening and
Treatment Service is an ongoing project for a period of 4 years
that started in 2013 with an investment of $85 million. This
project is already improving the quality of life of citizens with
diabetes. Also, the private health care institutions that have
adhered to best practices will begin providing dialysis services
to citizens. According to the 2014/2015 budget this initiative
has been completed and patients are receiving this type of health
care as promised.
ENERGY
Additionally, the energy sector should not be forgotten as it is
the most pertinent sector in the economy of Trinidad and Tobago.
It is often the view that the energy sector of Trinidad and
Tobago is its major economic driver. From being the supplier of
fuel to the entire Caribbean region to being one of the oldest
hydrocarbon producers in the world, the energy sector has been of
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major discussion within the budget statements from 2010-2015.
Initially, in the 2010/2011 budget, the idea of
sustainability was introduced when the Trinidad and Tobago
government joined with the Venezuelan government to provide for
better outcomes with respect to hydrocarbon reserves which led to
the exploration of alternative energies such as solar and wind.
In order to ensure revenue is raised, government used a
contractionary fiscal policy where proposals such as energy tax
audits up to 150 % will be incurred by companies. In the
2011/2012 statement, contractionary fiscal policy was continued
to increase revenues via licensing fees and fines. An increase in
the fees for licenses has moved from $4,000 to $40,000. The
alternative energy section in this period focused more on
reducing the carbon footprint by enforcing solar and hydro power
machinery.
Furthermore, in the 2012/2013 budget, $20.038 billion was
projected revenue from oil. The proposal of a fiscal regime
offered an oil and gas exploration will generate revenues via
exports. In this period, the minister said “this year the economy
will be heavily dependent on taxation and revenue from the energy
sector.” In order to remain competitive, a proposal of an
expansion of the provisional tax incentive has been made, which
is a contractionary fiscal policy. The idea of this tax regime is
so that the government can ensure the payments are collected so
that other projects can be financed. In the 2014/2015 budget, the
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proposal of an expansionary fiscal policy to ensure revenue gains
was done. To reduce the fuel subsidy, the transition of the usage
of gasoline and diesel to CNG and other alternatives was
proposed. Overall, the state at which the economy was in at each
period determined what proposals were made in terms of energy
decisions, also, given the volatility of price shocks.
SECURITY, SAFETY AND DEFENCE
At this time, emphasis will now be shifted from the health
sector, to the sector representing security, safety and defence.
The safety and security of the citizens of Trinidad and Tobago is
of paramount importance to the government. A total of $4, 187.18
million dollars was allocated to National Security in the
2010/2011 budget. Part of this expenditure was to establish the
National Security Operation Centre (NSOC). This special unit will
focus on intelligence gathering through a comprehensive
electronic database of all criminal related activities.
Additionally, the Government also introduced a monthly special
non-taxable Duty Allowance of $1,000 initially to the Police
Service and which was then extended to all members of the
Protective Services. Additionally, a Special Criminal Court, the
Sangre Grande Magistrates’ Court and the Arima Judicial Complex
are also key priorities of the Government. It was found that the
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Government’s promise to build the Sangre Grande Magistrates’
Court was kept.
In the following fiscal year of 2011/2012 the budgetary
allocation for the Ministry of National Security was $4,762
million. Emphasis on expenditure on National Security was placed
on expanding the use of modern technology for tracking crime and
ensuring connectivity between law enforcement agencies. The 21st
Century Policing Project is a major initiative which introduces a
new delivery system for policing that builds partnerships with
communities and provides a high level of customer service.
The 2012/2013 allocation for security saw a relatively steep
increase from the previous two fiscal years to $5,503.7 million.
The government established the goal of reducing violent crimes by
50% within the next three years. According to the Finance
Minister this objective relied on three distinct strategies:-
strong law enforcement; sustained social interventions and
strengthening of the criminal justice system. Some areas of the
expenditure included police vehicles being equipped with GPS
technology, 75 police charge rooms being computerized and video
conferencing being made available so methods for solving crime
will be strengthened. Moreover, there was also the construction
and outfitting of a National Security Training Academy to provide
all aspects of training required to bring our law enforcement
officials up to the required standard for 21st century policing.
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In the 2013/2014 budget presentation, Mr. Larry Howai, was very
critical of the nation’s expenditure on safety and security.
According to Minister Howai, “why should a country of 1,980
square miles, or 5,128 square kilometers with a population of 1.3
million spend on average $5.0 billion annually or 3.3 percent of
our GDP on national security? This money could be spent on more
pertinent issues. As far as I am aware, Trinidad and Tobago is
not at war with another sovereign state.” These were very
powerful words but the reality is that crime will always be
prevalent in any society no matter how developed the society is.
Hence the government made a commitment to adopt a zero-tolerance
approach to crime. Coupled with the stringent measures that were
put in place in the previous budgets in terms of security, in
fiscal year 2013/2014 the government expanded its focus on border
protection and the illicit drug trade between the borders of this
country. The Government acquired the multi-mission helicopters
to address safety and illicit drug trafficking so that they are
able to conduct air operations in Trinidad and Tobago. This
emphasis on border protection increased further in 2014/2015 as
the Trinidad and Tobago Coast Guard added to its platform a
number of harbor patrol vessels and plans are afoot to acquire
for the Coast Guard coastal patrol vessels and interceptors.
Expenditure on these acquisitions will be in excess of $1.0
billion. These assets will effectively blockade the Gulf of Paria
against the illegal shipment of narcotics, arms and ammunition
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and human trafficking. The protection of our internal and
external waters will be improved. Lastly, with all of the high
risk involved in protecting the citizens of the country, the
Government proposes to establish a Fund from which $1.0 million
could be drawn for assistance to families arising out of death of
a member of the State protective services killed in the line of
duty.
HIGHWAY INFRASTRUCTURE
Too add to that, the area of highway infrastructure will now be
dealt with. Policies were mentioned over the five year span to
deal with developments in this area. However, it must be noted
that the developments with respect to highway infrastructure were
all long term and as result were mainly re iterated in the
successive budgets. Expansionary policies are taking effect in
the form of construction and refurbishment of highways such as
the Tarouba Link Road, the Southern Main Road. This represents a
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$7.5 billion dollar investment. Additionally, the government will
be working to rehabilitate other infrastructure such as bridges,
overpasses and walkovers. These developments will enable better
access for goods and services to be transported in an efficient
manner in the distribution sector. This will increase current
expenditure by the government and domestic borrowing will have to
facilitate this, hence the government will have an increase in
public debt which may lead to balance of payments deficits due to
the high interest rates on borrowing. No mention was made as to
the status of projects such as walkovers in the 2014/2015 budget
but the rehabilitation of infrastructure have began in some cases
such as the Golconda to Debe segment of the highway.
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HOUSING
Moreover, keeping in line with the government's expenditure in
terms of expansionary policies, the housing sector will be
examined under which the government seeks to provide affordable
housing to citizens and public servants. In the Housing and home
ownership sector for a period of five years from 2010 to 2015,
the government have remained committed to providing affordable
and quality housing to citizens of low and middle-income groups
since it is an essential element for maintaining an appropriate
standard of living. For the fiscal year 2011, the Government
increased the Rent-to-Own programme for tenants to purchase their
own homes and they had also reintroduced a contractionary policy
last year with a tax allowance of $18,000 which assisted in
generating revenue. However, in the fiscal year 2012, the
government implemented an expansionary policy with the decision
to extend the subsidised interest rate of 2% to be accessible
through all financial institutions for the purchase of HDC
houses, thereby increasing the number of persons using that
facility. The government continued to promote home ownership
within the national community over the rest of five year period
by aiming to focus primarily on poor and low- and middle-income
households through increased mortgage rates and reduced interest
rates in the mortgage programme, which was administered by the
Trinidad and Tobago Mortgage Finance Company.22
In addition, the government is continuing to sustain the Squatter
Regularization of unplanned settlements and the Land for the
Landless programme for the five year period being analysed, in
which the latter is provided at subsidised rates for low-income
earners and to no benefit to the government. The most recent
proposal by the government in the Housing sector is for the
fiscal year 2015, in which there will be the provision of 110 new
home-improvement and construction-matching subsidies to low-
income families under the Neighbourhood Upgrading Programme with
an investment of US $40 million from the Inter-American
Development Bank which will lead to achieving the establishment
of sustainable communities in Trinidad and Tobago.
SOCIAL SERVICES
Emphasis will now be placed on the area of social services. The
fiscal policies regarding social services have contributed to a
large portion of government expenditure over the five years
analyzed. Being a nation that is yet to achieve a developed
country status, it is understood why the government would
allocate such large expenditures to social services primarily to
those who are financially vulnerable, so that they too can enjoy
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a high living standard and bring the population closer to
equality. In 2010, the Ministry of the People was introduced to
deal with social programs and an aim to reduce the number of poor
persons in the country each year by 2 percent. While this goal
has not been achieved, with each year from 2010 to 2014 an
increasing portion of expenditure has been allocated to transfers
and subsidies with respect to social welfare programs. For
instance, over the period there have been increases in disability
grants, senior citizens’ pensions, retirement pensions, maternity
grants and the introduction of a Milk Feeding Programme. These
new measures along with previous incentives have contributed to
an increase in welfare for those who are poor and vulnerable. In
addition to the policies to relieve citizens of their financial
burden, it is also important to acknowledge education and health
care as social services. They are both free services offered to
the public which allows all persons in society to benefit equally
from them. In the budgets for all five years education has been
allocated the highest expenditure, with health also responsible
for a great allotment.
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PUBLIC TRANSPORT
Furthermore, to continue analysing the trends witnessed on the
expenditure side of the budget, this review will now seek to
focus on the vital and dynamic area of public transport. The
public transportation system over the period of 2010 to 2014 has
seen the construction of new bus facilities, the provision of new
buses and the introduction of compressed natural gas (CNG) as an
alternative transportation fuel to power buses and maxi taxis.
While it is not a free service (but there are few exceptions),
the government has developed the public transportation system to
improve the movement of citizens within Trinidad and Tobago. The
2011/2012 budget developed the idea of CNG as an alternative fuel
to reduce transportation costs, and began construction of 22 CNG
stations. In the following year, the budget primarily focused on
CNG conversion to 90,000 vehicles, and with this came a reduction
in the fuel subsidy offered on premium gasoline. Furthermore, new
bus facilities have been established and existing ones upgraded
throughout Trinidad and Tobago. The introduction and installation
of GPS devices on buses have allowed passengers to obtain real-
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time information on arrivals and departures. The budgets also
proposed the inclusion of new buses and water taxi services for
public transportation.
WATER RESOURCES
Subsequently, the focal point will now be shifted from the area
of energy to the sector of water resources. It would be remiss
not to mention that the aims and objectives of the government in
relation to water resources were consistent over the period under
review and hence, a summary can be given on their aims and
objectives. Efficient public utilities system in the form of
water resources is a critical component for a growing economy. At
the beginning of the period, it was established that the services
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provided by the Water and Sewerage Authority (WASA) are neither
reliable, nor financially sustainable, since only 18 percent of
customers in Trinidad and 41 percent in Tobago receive a
scheduled supply of water, ranging from 6 days a week to less
than 2 days a week. Hence, the government proposed to devise
strategies to deal with the unacceptable unfulfilled demand of
water, to expand and improve the wastewater treatment, collection
and disposal systems. This fiscal policy will seek to ensure,
that there is water for everyone and as a result, it would be a
stepping stone towards a developed country. Approaching the end
of the period it was said that since WASA is a monopoly, the
government would have had to intervene to ensure that policies
and measures were put in place to ensure that everyone gets water
and at the same price, as well as, of the same quality.
Additionally, the government tried to ensure that price
discrimination was eliminated and there was equity among all
members of the society. The expenditure by the government was
high however it was compensated by the water rates charged. This
initiative was in fact completed.
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AGRICULTURE
It goes without mentioning that agriculture is an important
sector in the economy of Trinidad and Tobago and hence expenses
in this area should be incurred for its betterment and the
overall betterment of the financial accounts of the economy and
its citizens. The period 2010-2015 saw numerous developments in
this sector. Agriculture is a major sector in all countries
because of food security and the need to reduce a country’s food
import bill. A vibrant agricultural sector would mean less money
would be spent on importing food from abroad and more food would
be produced domestically. More importantly the heavy dependence
on the energy sector for the past few decades has seen the urgent
need for diversification in other sectors because of the recent
volatility of oil prices. In the 2010/2011 the aim was to
revitalize the dormant agricultural sector of Trinidad and
Tobago. A total of $1,836 million was given to the Ministry of
Agriculture to make it profitable. As such, an ambitious
infrastructure programme is at the core of our Public Sector
Investment Programme (PSIP). Moreover, according to then finance
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minister, the Agricultural Development Bank (the ADB) must return
to its proper mandate: to finance agricultural entrepreneurship
by allocating $75-150 million for Greenhouse and other similar
technologically driven agricultural projects.
In the following fiscal year of 2011/2012 a total of 1,954.3
million was budgeted for agriculture. The Government initiated
the Agricultural Incentive Programme aimed at assisting local
farmers in overcoming their major challenges The Programme
provides support to farmers in the form of percentage rebates on
activities such as the purchase of irrigation equipment and land
preparation. Subsequently incentives are in place to encourage
youth in agriculture which can lead to the achievement of the
food security goal.
Furthermore, in the 2012/2013 budget statement, the increased
levels of inflation stemming from our increasingly imported food
requirements have had a harmful impact on our most vulnerable
citizens as they managed the business of their everyday lives.
Consequently it is proposed on a temporary basis that Value Added
Tax would be removed from food items excluding luxury items and
alcoholic beverages. Moreover, to combat the increased global
prices for food the National Agriculture and Marketing
Development Corporation (NAMDEVCO) has established a Commodity
Stabilization Fund which will initiate measures to stabilize both
the supply and the price of identified produce on the market.
Initiatives are also ion the cards for the Ministry of Food29
Production such as leasing land to the farming community for
small and large farms on Caroni and Tucker Valley lands .
Agriculture also went beyond the borders of T&T and into Guyana
as the government signed a Memorandum of Understanding with the
Guyana government to establish a Food Security Facility whereby
T&T will fund the activities and Guyana will provide vast
agricultural lands.
Additionally, in the 2013/2014, the distribution of state lands
at Caroni (1975) Limited and Tucker Valley were divided into
small and large farms for distribution to farmers, 3 of the
large farms are already in operation. Additionally, investment in
the sector was heightened as the ADB approved new loan
applications and disbursed loans valued at approximately $150
million to assist farmers in agricultural cultivation.
With reference to the 2014/2015 budget presentation, the centre
of the government’s policy is the National Food Action Plan 2012-
2015. The plan aims to raise productivity and production among
local farmers such that the local rice industry is being
revitalized with a mandate to increase production to 50.0 percent
of total consumption by 2018. Additionally, fishing centres in
Trinidad are being upgraded in areas such as Blanchisseuse and
Cocorite.
Over the long-term the government seems to be committed to
enhancing the enabling environment for growth in the agricultural
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sector. They have established the right policy framework for this
sector and have sought to mitigate the effects of food security
in the economy.
TOBAGO DEVELOPMENTS
Lastly, our twin island has not be forgotten as this analysis now
attempts to investigate the expenditures that are allocated to
this area for the development of the tourist attraction and
destination of Tobago. Allocations to the improvement of the twin
island state of Tobago are not to be forgotten. The policies
mentioned with respect to Tobago throughout the period 2010 to
2015 are indicative of expansionary measures outlined by the
government. During the period, the amount of expenditure allotted
to the island for upgrades increased continuously. Not all
promises were fulfilled such as, the Integrated Campus Facility
which was expected to consist of various campuses of UWI, UTT and
COSTATT was to date not yet constructed. However, the proposed
Loan Guarantee programme was established to benefit hoteliers in
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Tobago who needed to upgrade their facilities in order to
revitalize Tobago’s tourism sector. Moreover, the ANR Robinson
International Airport was expanded in the context of a Public
Private Partnership and further upgraded with increased shopping
options and a new control tower.These initiatives will guarantee
Tobago as being a developed tourist destination and hence this
will generate more foreign revenues from tourists and also result
in a surplus on the balance of payments account. The revenues
earned from these policies can also be used to repay the public
debt so as to emerge from the fiscal indiscipline problem.
Overall, the inflow of foreign capital from tourists would help
to develop Tobago, as well as, generate employment for persons
within the tourism sector leading to economic growth and
increases in the overall GDP of the country.
Revenues in various Sectors
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This portion of the analysis will now shift focus from its
previous focal point of government expenditures to government
revenues. It can be noted that the revenue to finance the budget
will be dependent on taxation, fines associated with illegal
activities, revenue from the energy sector, as well as, borrowing
from the International Monetary Fund (IMF).
ENERGY
At the onset, revenues from the energy sector are the major
revenue generating source for the economy. This is so because
Trinidad and Tobago is a major exporter of oil and natural gas
and as such when these commodities are exported to other importer
nations, the revenues received are tremendous. Over the five
years under review, revenues from the energy sector played the
dominant role in the economy. This is seen even though attempts
were made by the government to diversify revenue sources as will
be seen further in the analysis.
33
TOURISM
After energy, tourism is a main revenue generating sector of the
twin island republic. The tourism sector has shown major
advancements throughout the five year span, which is favourable
for the economy. Upgrades were done to sight-seeing attractions
in order to list Trinidad and Tobago as a premier leisure
destination, whereby visitors would be left astounded by the
recreational activities the country has to offer. The
establishment of a Sugar Heritage Village and Museum at Sevilla
House in Caroni consists of a Sugar Museum, Archive & Document
Centre, Model Sugar Factory and Heritage Village. This was
successful and improvements are constantly being made to honour
and preserve the memory of Trinidad and Tobago’s sugar industry,
paying homage to all those who were involved. Up until
2013/2014, one of the Government’s main aims was to increase room
stock of hotels. This was eventually done in the fiscal year
2013/2014. In addition, the airlift proposal and the expansion in
the cruise industry was also achieved. The Trinidad and Tobago
34
Tourism Development Fund was also established to provide
guarantees to financial institutions as the debt is restructured
and new loans are provided to hotels and hotel-related
businesses. The amount of money allocated for this was $19
million. On 31st July, 2014, the government also proposed another
three year incentive programme which was aimed at upgrading work
in small tourism properties. In general, constant improvements
were always being made to revitalise the tourism sector.
SANCTIONS FOR ILLEGAL ACTIVITIES
Additionally, another source of government revenues originates
from the sanctions or fines that are associated with various
illegal activities. In the fiscal year of 2010/2011, in an effort
to increase revenue the government looks at the environment. The
35
Litter Act of 1973 was conceived to protect the environment from
the harmful effects of citizens and corporations in the disposal
of waste and effluent. As such, in this fiscal year 2010/2011,
the government proposes to increase fines by a whopping 100%.
Individuals are now liable to pay $2000 for littering whilst
corporations who commit the same act will have to pay $4000.
These measures will take place from October 1, 2010. Moreover,
the Government will also examine the feasibility of establishing
a recycling industry which will complement its many Green
initiatives. These proposals came to light for the economy as
stated in the 2011/2012 budget statement.
Additionally, in the following year 2011/2012 increased penalties
were espoused for breaches of the Petroleum Act. A breach of
Section 6 has experienced an increased fine of $300,000 from
$30,000 while in the case of a continuing offence, a further
$5,000 per day is required as opposed to the previous fine of
$1,500 while the Petroleum Levy and Subsidies Act has been re-
examined, by which an increase in the fine for breaching the act
has increased from $1,000 to $100,000.
In the year 2012/2013, the government made no proposals in terms
of increasing fines for illegal activities nor was any mention
made of this area in the budget representing that fiscal year.
On the other side of the coin, though, in 2013/2014, a policy was
implemented with respect of improving energy efficiency and
36
discouraging the illegal export of subsidized fuel. The
government proposes to have sanctions and the forfeiting of
vessels and goods in the event of illegal exports of subsidized
fuel. This action will help the government to discourage the
production of negative externalities that can be harmful to an
economy.
With respect to illegal quarrying activities, policies will be
seen in increased fines for those engaged in legal quarrying but
pollutes the watercourse while undertaking his activity as well
as the failure to report the discovery of any minerals for which
a license does not cover Furthermore, for anyone who breaches the
acts and regulations where fines have not been stipulated will
now have to pay dearly a fine $200,000. There will be legislation
and sanctions for the prohibition of asphalt removal anyone
engaging in the removal of any material other than asphalt. This
can be seen as an attempt by the government to diversify its
revenue and move away from being dependent on the energy sector
alone. These measures were not indicated as completed at the end
of the fiscal year.
To add to that, in 2014/2015fiscal measures were found in the
Agricultural sector where the government proposed to increase all
fines in relation to praedial larceny by 50 percent with the
enforcement by the recently-established Praedial Larceny Squad in
order to improve the confidence of farmers.
37
Another policy was implemented on Road Usage by the government
for the fiscal year in Trinidad and Tobago. It can be identified
by the proposal to increase fines by 50 percent for speeding,
driving under the influence, driving without insurance,
possession of fraudulent motor vehicle certificates, driving with
expired license; and for individuals producing or selling
fraudulent insurance certificates. If this proposal is
implemented effectively then there will be a significant
reduction in the number of road accidents and fatalities in the
country.
ALTERNATIVE ENERGY SOURCES
38
To add even further, revenue generating policies were numerous in
the budgets over the last five years. Revenues from alternative
energy sources will be espoused. Mention must be made that the
revenue to finance the budget will be dependent on taxation,
revenue from the energy sector as well as borrowing from the
International Monetary Fund (IMF).It should also be noted that
the alternative energy source form which revenues could be
generated for the Trinidad and Tobago focused mainly on
Compressed Natural Gas (CNG). On the other hand, little emphasis
will be placed on solar energy, hydro power and Shale gas
production as these initiatives were only outlined in one of the
budgets. As stated by the budgets of the five fiscal years under
review, the economy's transition to GNG is a vision of the
government. This is validated by the policy proposals of each of
the budgets.
Firstly, in the fiscal year 2010/2011, the country could have
become producer and net exporter of energy services in
particular, Compressed Natural Gas (CNG). As such, the Government
proposes to grant Wear and Tear Allowances on 130 percent of the
cost incurred in the acquisition of plant, machinery and
equipment, excluding installation costs, for the construction of
the conversion centres so as to serve as an incentive for
individuals to smoothly transition into this CNG vision the
government.
39
Furthermore, in the budget representing the fiscal year
2011/2012, it was seen that there were propositions to intensify
investments in the energy resources by strengthening incentives.
A tax allowance of 50% of the expenditure incurred in the
purchase of retail dispensing of compressed and liquefied natural
gas to a maximum of $2 million per station was enacted.
Additionally, import duty on vehicles manufactured to use natural
gas declined by 50% while a wear and tear allowance of 150% for
machinery involved in solar and hydro-power has been enforced. As
a result it is intended to continue the reduction in the carbon
footprint created.
Subsequently, the budget also included medium term revenue
initiatives which would ensure that the country generates the
revenue to meet the required public expenditure. One of the three
important initiatives have been identified was the fuel
subsidies. For this fiscal year, the minister proposed a
reduction of the fuel subsidy on premium gasoline, making the
price of premium gasoline close to the market price. This was an
attempt by the government to discourage the use of premium
gasoline in favour of the CNG. This disincentive in terms of the
removal of the fuel subsidy on premium gas was seen as a means
through which the citizens will gravitate towards the use of a
cheaper fuel and this would have allowed the government to
achieve its proposal to make CNG the alternative energy source.
However, it must be noted that this attempt by the government was
40
unsuccessful since most individuals went ahead and paid the
increased price of the premium gasoline rather than switching.
This was indicated in the following year's budget. A reason
purported for this move was the inconvenience of having to locate
a CNG station as well as the problem of installing the tank to
hold the fuel.
Moreover, as stated in the 2013/2014 budget the government has
provided a tax incentive framework to promote a range of
alternative fuels, including CNG and when available LNG. As this
process evolves, the Government will sequence gradual reductions
in the fuel subsidy and be able to promote their vision of
transitioning to a CNG based economy. Moreover, in attempting to
address the problem of convenience the government made several
proposals in the budget related to the fiscal year 2014/2015.
These proposals range from the building of CNG stations that will
be located in convenient areas throughout the country and the
government's intervention to convert over 100,000 vehicles to CNG
Lastly, according to the 2014/2015 budget statement under the
Energy sector, the government and the National Gas Company (NGC)
is continuing with the revenue policy decision, which involves
revenue gains, that was decided in the 2013/2014 budget and the
process of advancing the transition from the high usage of
gasoline and diesel to Compressed Natural Gas (CNG).
41
GENERAL TAXATION
Furthermore, in terms of revenue generating avenues, general
taxation policies were the final. These policies were basically
similar over the 5 year period. It can be seen that during the
time line of analysis, the government of Trinidad and Tobago has
benefitted from taxation in terms of revenue increased. Over the
period 2010-2014 it showed that the government was strongly
advocating for the implementation of compliance with tax laws and
collection. Penalties and interests for late payments of income,
corporation and VAT were of most importance along with land and
building and environmental taxes. As time progressed, around
2011, the gaming industry became a target for taxation since it
has proved to be a profitable industry. The betting industry will
stand increases in the fines for violation of license requirement
and also zero tolerance for failure of submission of official
documents to the registrar of companies. Revenue collection has
spiked in 2012/2013 due to tightening of laws, fees and fines
where property tax amounted to TT$34,108.9 million.
42
Overall, most of the larger taxes came from the energy sector
which has already been discussed. The inclusive idea of general
taxes in terms of housing, gaming industry, income and profits is
so that government can diversify their revenue source so
financing other projects becomes smoother and also it helps with
any discrepancies concerning citizens and local businesses.
Relation to the readings
At the onset, it is evident that the Government adopts both the
normative and positive role; what they should do to maximize
economic welfare and what they actually do respectively.
According to Vito Tanzi in “The Changing Role of the State in the Economy: A
Historical Perspective”, in an ideal world the two would merge, whilst
43
in the real world they tend to diverge. In the Trinidad and
Tobago economy for the fiscal years 2010/2015, the roles both
merged and diverged to some extent since in some cases not all
propositions were accomplished and some were deemed successful To
add to that, due to the observations made with respect to the
magnitude of expenditures incurred by the government, it can be
said that the economic welfare is considered. According to Vito
Tanzi in his paper “The Changing Role of the State: A Historical
Perspective” he defined one form of the normative role as
attempts to secure or maximize economic welfare. Based on the
findings of this report it further postulates Tanzi’s proposal.
The budgets that speak to creating public offerings was also
advocated by Tanzi as a way in which governments return to the
market instead of trying to compete with market forces. The
government has proposed to privatize some public ventures for
raising additional revenue in order to further facilitate
sustenance.
To continue this relation, the economy during the period 2010 to
2015 experienced a fiscal disequilibrium. Fiscal disequilibrium
occurs when ‘permanent’ government expenditures are not covered
by ‘permanent’ government revenues. This is according to Vito
Tanzi in his article “Fiscal Disequilibrium in Developing Countries.” One
possible reason that could have caused the fiscal deficit is
public expenditure expansion. It was apparent that the total
expenditure in the economy exceeded the expected revenue to be
44
earned. This new Government found that additional expenditure was
needed to further develop the economy by generating employment
and redistributing income. Also, further expenditure was spent on
welfare programmes that may be was not possible to be successful
given the “level of development” of the country. As such, this
would have resulted in the proposals being futile, thus
accounting for the fiscal deficit experienced.
Furthermore, according to the literature by Morrison, structural
factors place a key role in the economic development of a
country. He proposed five factors including; level of economic
development, growth of government revenues, instability of
government revenues, government control over expenditure and the
extent of government participation in the economy. The manner in
which this budget has been structured speaks to the literature in
some fashion. Governments in developing countries that experience
rapid growth should not be resorting to debt financing as
compared to countries that has stagnant growth. In the 2011/2012
budget, it can be seen that it was reported that revenues
totalled to $47.0 billion while in 2012/2013 budget, reports
shown that revenues grew to $50.736 billion and experienced a
growing pattern over he remainder of the fiscal years. This is in
direct contrast to the literature as Trinidad and Tobago has
advocated for debt financing over these periods.
Subsequently, according to Tanzi and Zee (1998), a public sector
of high quality requires an efficient tax system and an45
expenditure system that minimizes inefficient and unproductive
spending. It also requires a budget large enough to allow the
state to perform its role in a satisfactory way.
Much of the policies proposed in the budgets can directly be
applied to the literature by Tanzi (2000), The Role of the State and the
Quality of the Public Sector. In this, Tanzi regards the state as having
four roles: Allocation of resources; redistributive role;
stabilization of economic activity; and promotion of growth and
employment. From the budgets, Education, Health and Public
Utilities represent the greatest allocation of expenditure. This,
amongst the provision of other public goods and facilities
showcase the role of allocation of resources. While the
government may provide these goods because of externalities, it
contributes to overall growth and development within the country.
An educated, healthy population would mean that there is greater
productivity taking place within the economy. It is important to
provide these goods not because private individuals would not
find it in their interest to provide them, but because it all
contributes to greater growth.
Additionally, expenditure on transfers and subsidies represents a
great portion of government expenditures. This expenditure
explains the redistributive role of the state as it tries to
promote equality and redistribution of income. These efforts are
largely seen by the social welfare programs that aim to aid the
less fortunate in society. In keeping with the roles advocated by
46
Tanzi, the stabilization of economic activity insinuates that the
government should provide appropriate monetary and fiscal
policies to restore equilibrium into the economy.
In the budgets, government anticipated a deficit amounting to
approximately 4.6% of GDP on average for the budgets of the 5
years. It is important that the government monitors this and
revise policies so that this disequilibrium could be resolved.
Lastly the, fourth role of the state, transformation has to do
with promoting growth and employment. In this budget, several
proposals for attracting investment were introduced and
diversifying the economy by prioritizing seven sectors was
outlined. These incentives, once successful would contribute to
economic growth and by developing industries also promote
employment opportunities, therefore resulting in economic
transformation.
47
ADDITIONAL ANALYSIS
The relevance of oil prices
Oil is a major determinant of the performance of the Trinidad and
Tobago economy. It is the natural resource and the sector to
which we depend heavily on to acquire funds to steer our economy
in the direction of first world status. Hence, Trinidad and
Tobago can be seen as mono-crop producing. The budgets over the
period 2010-2014 were all based on oil prices of that particular
year. The price of oil is of major relevance to the budgets of
Trinidad and Tobago as most revenues are estimated based on this
value. Additionally, expenditures are based on the revenue
collections and as a result the level of expenditure for the
economy during a given year will be indirectly based on the oil
price. Therefore, if the revenues and expenditures of any economy
48
depend heavily on the price of oil it is seen as tremendously
relevant to the budget statement.
The government's dependence on one sector.
The energy sector of the Trinidad and Tobago economy is made up
of its production of mainly oil and natural gas and urea and
ammonia to a lesser extent. From the 2013/2014 budget it can be
seen that total revenue from the economy was $55.041 billion. Of
this, oil revenue was $23.374 billion and non-oil revenue $32.667
billion. Therefore, one can simply say that approximately 43% of
the revenues to be earned by the government is concentrated in
one sector (mono-crop). In other words, revenue contributions
from approximately ten other sectors are accountable for 57% of
government's revenue. Therefore, it can be understood that the
government is too dependent on the energy sector to contribute to
its revenue as 43% is a lot of revenue to be derived from one
sector. As a result of this dependence, any shocks that would
affect the oil prices in a negative way will be detrimental to
the development to the Trinidad and Tobago economy. Therefore,
the government should engage in diversifying the economy so that
they will be able to reduce their dependence on such a volatile
sector.
49
Should the government have borrowed?
Considering the government having to run a budget deficit, it can
be clearly seen that the government has to borrow funds from
international institutions to finance this deficit. The financing
of this budget deficit is done via applying for loans from the
International Monetary Fund or the World Bank. Therefore to
answer the above question, is yes the government should borrow to
finance its expenditure. This is also so because the revenues
they receive from various sources is not enough to fully finance
the promised expenditures.
Did the government wait too long to borrow?
The assumption can be made that some of the proposals on the
expenditure side were not delivered by the government in the
fiscal year 2013/2014. Moreover, it can be seen that no further
mention was made of a few of these proposals. This can be as a
result of the funding required for them to which the government
did not have access. As a result, even though borrowing was done
by the government, the length of time taken before it was done
was too long and hence it created the discrepancies between the
promises and its delivery. As a result, to answer the question
purported, yes the government did take too long before they
attempted to borrow.
Did the government attempt to diversify the economy?
50
It can be seen that from the increases in fines for illegal
activities and betting levies that the government attempts to
diversify the revenue. They make an attempt to move away from
being mono crop in nature that is being dependent on the oil and
gas sector. However, it must also be noted that most of these
policies were not debated upon in Parliament and as such they did
not take effect. Therefore, it can be seen that proposals are
being made for diversification but no conscious effort is being
put towards ensuring this diversification is made a reality.
The need to review land and building tax
From the analysis it can be clearly seen that there is the need
to review the land and building tax. This is as a result of the
government spending excessive amounts of money on housing. This
move by the government benefits the citizens without them having
to pay any capital gains tax. As a result, the government loses
out when providing housing. The review of the land and building
tax should ensure that government attains revenue from the
provision of housing and this can serve as an additional measure
of revenue diversification by the government.
Current Account Balance
The current account balance is a component of the balance of
payments and can be defined as the sum of the balance of trade
51
(goods and services exports less imports), net income from abroad
and net current transfers. In other words it measures the inflow
and outflow of goods, services and investment income and is an
important indicator of an economy's health. Trinidad and Tobago
was characterised by a current account US$406 million or 10% of
GDP as of May 2014. This positive balance on the current account
is indicative of a good overall health in the economy since they
are able to finance the day to day operations with money
generated by revenue in the domestic economy. For example, this
positive US$406 million indicates that recurrent expenditures
such as wages and salaries are financed through government
revenue and not external borrowing. Therefore, as such this
indicator signals overall a good position in terms of the
economy's financial health.
52
The table in appendix 2 seeks to mimic the table 2 provided by
Vito Tanzi in his article, "Reconsidering the Fiscal Role of the
Government: The International Perspective.
From the table it can be seen that there was a remarkable
increase in the public debt for the Trinidad and Tobago economy
over the period 2010 to 2014. This can be caused by the increased
in the government expenditure as highlighted by the different
ministries in the various budgets. Most of the projects and
proposals highlighted such as the developments of highways and
the health facilities such as the Couva children’s hospital and
the national Oncology centre had to be financed by government
borrowing, both domestically and internationally. This increase
in borrowing to finance such projects is the factor attributable
to the increase in government’s public debt over the period 2010
to 2014.
From the unemployment rate, a slight decline is seen from 2010 to
2011. After this notable increases were seen for the remainder of
the years. This fluctuating pattern of unemployment can be
attributed to a fall in the demand for goods and services. This
fall in demand will cause the number of employees required to be
less and hence the economy will see a rise in the unemployment
rate.
With reference to the table, it can be seen that the value of
exports as a percentage of GDP experienced a fluctuating pattern
53
over the four year period, with the greatest value occurring in
2011 and the lowest in 2012. This pattern in exports can be
linked to the price of oil which is the major export commodity of
the Trinidad and Tobago economy. For the majority of the year
2010, the price of oil was in the range of $70.00 to $80.00. As a
result of this relatively low price, the value of oil in the
economy caused it to comprise a smaller percentage of the yearly
GDP. Furthermore, in the year 2012, the price of oil was between
$80.00 to $100.00. This could have meant that the quantity of
exports leaving the economy were less. Therefore, the value of
total exports as a percentage of the GDP will have fallen as
indicative by the table. In the year, 2013, the price decreased
slightly and hence exports would have increased and this resulted
in yet another increase in the value of total exports to GDP.
The Ease of Doing Business (EODB) is an index created by the
World Bank where higher rankings indicate a better position for
an economy. From the table, data for the ease of doing business
(EODB) was available for only two years. In 2013, Trinidad and
Tobago ranked 91 in terms of the EODB index and it fell
drastically to 79in the year 2014. This improvement is attributed
to the simpler regulations in terms of establishing a business
and stronger protection of property rights for businesses. This
drastic improvement is a step in the right direction for the
Trinidad and Tobago economy in being a developed country.
54
It can be seen from the table, that there was a fluctuating
pattern in the inflation rate for the economy over the period
2010to 2014. The highest inflation rate was recorded in the year
2010 and 2011 recorded the lowest rate of inflation. The increase
in inflation is attributable to an increase in the money supply
by the Central bank to stimulate economic growth whereas the
lower inflation rates occurred when the Central bank employed
contractionary monetary policies to combat the inflation rates
where they seen too high. For example in the year 2010 the rate
was at 10.5. In order to combat this in the next year, the
Central bank looked at contracting the money supply and hence the
economy saw a reduction in the inflation rate in 2011.
Additionally, the fall in inflation rate in the year 2013, can be
an element of the move by the government to remove the value
added tax (VAT) on basic commodities such as flour, oil and rice.
The life expectancy rates form the table remained relatively
stable throughout the years at approximately 70 years. This is so
because citizens were being consistent with their food choices as
well as their utilisation of health facilities to maintain the
life expectancy at the given age.
From the table birth rate data was only available for three year
s. It can be observed that over the period 2010 to 2012, the
birth rate for the Trinidad and Tobago economy increased
marginally in each year. This could be attributable to greater
accessibility to better health care facilities as well as pre55
natal care which would help mothers take care of themselves and
their baby hence increasing the crude birth rate over the period.
On the other side of the coin, from the table, it can be observed
that the death rate over the same three year period from 2010 to
2012 for which data was available, decreased slightly in all
three years. This decrease can be as a result of individuals
having greater access to health care, free medication for chronic
diseases through the Chronic Disease Assistance Programme (C-
DAP). Additionally, citizens may have been educated to make
better and healthier choices in terms of their diet which
assisted tem in living longer.
By drawing reference to the table it can be noticed that the
current account balance increased throughout all the years in the
period. This means that the economy was in a better position to
cover all day to day expenses such as the paying of wages and
salaries. This is indicative of a favourable position for the
economy and hence they strived to achieve this and as a result,
the economy witnessed gradual increases throughout the period.
The gross domestic product(GDP) hovered around US$18 million
dollars for the years 2010 to 2012 and spiked to approximately
US$19 million dollars in the year 2013. This increase in the GDP
can be as a result of an increase in the demand for goods and
services in the economy at that period which caused the value of
goods and services to increase.
56
The table also focuses on the value of imports for the Trinidad
and Tobago economy over the period 2010 to 2014. The pattern of
imports over the period is a fluctuating one that lingers around
30% to 40%. Imports will comprise a smaller portion of the
economy's GDP than that of exports since Trinidad and Tobago is a
major exporter of pertinent commodities such as oil and natural
gas and their related products. Imports are high in the years
that the economy's exports are also that is in the years 2011 and
2013 high due to the fact that the foreign revenue received from
the exportation of goods can be used for the importation of
necessary commodities. By the same judgement imports will also be
low in the years that exports are low since the export revenue to
be used to purchase foreign goods will be low.
MAIN FINDINGS
During the analysis of the budgets for the period 2010-2014,
there were certain findings which will be highlighted below.
Throughout the period being assessed, it was found that there was
a consistent increase in the amount of funds allotted to
57
expenditure in the country after every fiscal year which was
counteracted by increasing revenues as well.
Additionally, it was evident that there were three sectors
receiving the greatest allocation of government revenue in each
budget over the five years under review which were Education and
Training, Works and Infrastructure and National Security of the
economy. For the Government, education was always seen as being
of high priority that leads to economic growth and as such
received the most funds overall.
Moreover, since the budgets over the period 2010-2014 were all
based on oil prices of each particular year, it can be concluded
that the price of oil is of major relevance to the budgets of
Trinidad and Tobago as the revenues and expenditures of the
economy depend heavily on the price of oil. In addition, it
should also be mentioned that over the five year period, though
it seemed that the government were mainly dependent on the energy
sector to generate revenue for the economy, in the budgets of
2013-2015, attempts were made by the government to diversify the
revenue generating sources.
For every year being examined the Government of Trinidad and
Tobago recognized a fiscal disequilibrium, as a result of the
need to continuously increase public expenditure in order to
develop the country. This is according to Vito Tanzi in his
article “Fiscal Disequilibrium in Developing Countries.”The amount of revenue
58
being earned therefore was not sufficient to cover the costs
obtained.
Furthermore, it was found that overall, the Government attempted
to carry out their essential function and successfully adopted
the four main roles of the state; allocation of resources,
redistributive role, stabilization of economic activity; and
transformation which Tanzi (2000) presented in the article, “The
Role of the State and the Quality of the Public Sector”.
The Government adopted both the normative and positive role,
which was formulated by Vito Tanzi in “The Changing Role of the State in
the Economy: A Historical Perspective”. Based on the findings of this
report, it further postulates Tanzi’s view in his paper that
depending on the magnitude of expenditures incurred by the
government, it can be said the normative role attempted to secure
or maximize economic welfare. Not all policies were accomplished,
while some proposals were successful.
Further to this, it was also found that most of the policies
proposals were long term rather than short terms so it was
difficult to gauge the performance of the government on a yearly
basis since most of their policies were not fully implemented nor
were their infrastructure fully developed in the year of
proposal.
Subsequently, it was found that the government made outrageous
proposals in the budget of 2014/2015 which can be attributable to
59
it being an election year. These policies may not be completed if
they were to lose the upcoming General Elections and as such the
public will suffer.
RECOMMENDATIONS FOR FURTHER RESEARCH
The following are some suggestions that can be taken into
consideration if further research is to be conducted.
Firstly, much of the qualitative material extrapolated in this
study should be focused upon in a more quantitative fashion for
better comparison of whether improvements are being made or not.
60
To add to the recommendations, subsequent research could show the
effects of the recent fall in oil prices on the Trinidad and
Tobago economy with respect to the amount of revenue being earned
in the energy sector since most of the country’s revenue is
earned from this one sector (mono-crop).
Furthermore, additional research should be done to determine
whether diversification of the economy has taken place as a means
of reducing the country’s dependence on the volatile sector, the
energy sector.
It should further be advised that Government take more care in
ranking which sector gets the larger share. That is they should
assess the condition of the economy based on a set of factors
before they allocate expenditures. For example, looking at the
health state of the economy, health should be given the largest
allocation.
Finally, there are also some areas that could benefit from more
qualitative research. So often researchers decide on what issues
are of significance to the scholarly or academic. Issues of
significance should therefore be highlighted and thoroughly
analyzed to rectify any discrepancies that may have occurred.
61
Conclusion
On concluding this project focusing on the fiscal policies
implemented by the PP government for the periods 2010 to 2014. We
shall highlight the fiscal policies that were implemented for
each period whether contractionary fiscal policy or expansionary
and analyse if it coincided with the objective in which they
intended to achieve.
For the period 2010-2011 the focus was placed on issues paying
particular attention to the increasing crime rate, education,
protecting the environment, boosting out sectors such as tourism
and finally housing industry. In an effort to reduce crime
government uses expansionary policies by a $1000 tax free from
police offers salary as an incentive to work harder and other law
authorities. The GATE program had been continued, expansions were
made in the tourism industry. To implement stringent measures to
protect the environment the government use contractionary
policies by increasing the fine if catch littering.
For the period 2011-2012 the focus was placed on the performance
on the economy which targeted growth, investment and trade. The
government also focused on developing specific areas on the
geography in order to boost business activity and potential
62
investment. Expansionary policies were used to increase pension
salary of retirees while the main expenditure was focus on
education and training. In order to earn revenue government
increased taxes in the energy sector and larger fines being
implemented for delinquent businesses who fail to produce their
documents on time.
For the period 2012-2013 expansionary policies were used to
create growth in the economy focusing on two methods used by the
government through the construction sector and investing in human
capital. Expansionary policies were used to build and invest in
communications and technology industry and education. Once again
government used contractionary policies by increasing taxes as a
form of increasing revenue in the economy.
For the period 2013-2014 expansionary fiscal policies can in the
form of local government and the expansion of the unemployment
relief program which was responsible for a number of projects
such as paving roads, sidewalks and building of jogging tracks.
Expansions in the energy sector also came through the building of
22 CNG stations which was implemented with the aim to diversify
away from the petroleum subsidy. In an attempt to boost
agriculture the government had taken the initiative to distribute
state land to former Caroni workers for the purpose of
63
agriculture. Contractionary policies came in the form of
increasing taxes on goods that are being imported to be used in
the production process of final goods.
For the period 2014-2015 the government has focus heavily on
expansionary policies in all major industries and sectors into
the economy. At falling oil and gas prices the government is
still implementing expansionary policies in all sectors, this is
due to the fact that the government is heading into an election
year. One of the few contractionary policy that has been enforced
however was the increase in fines when I comes to road safety.
64
Appendix 1
Table 1: Summary of Total Expenditure and Revenue for the Fiscal
years 2010-2014
2010/2011 2011/2012 2012/2013 2013/2014 2014/2015SECTORS
Education
and
Training
$8,325
million
$8,717.8
million
$9,149.1
million
$9.820
billion
$10.126
billion
National
Security
$4,762
million
$5,170.5
million
$5,503.7
million
$6.497
billion
$6.994
billionHealth $4,341
million
$4,724.9
million
$5,108.7
million
$5.096
billion
$5.545
billionPublic
Utilities
N/A N/A $3,783.1
million
$3.786
billion
$3.932
billionHousing $1,837
million
$1,970.0
million
$3,503.7
million
$2.708
billion
$2.877
billionLocal
Governmen
t
N/A N/A N/A $2.448
billion
$2.649
billion
Works and
Infrastru
$5,918 $6,995.4 $2,412.9 $2.431 $2.542
66
cture million million million billion billionTransport N/A N/A $1682.8
million
$2.324
billion
$1.984
billionAgricultu
re
$1,836
million
$1,954.3
million
$1,338.3
million
$1.324
billion
$1.328
billion
Revenue
Total
$41.283
billion
$47.000
billion
$50.736
billion
$55.041
billion
$60.351
billion
Appendix 2
A replica of the table found in the article, "Reconsidering the fiscal
role of the government: The International Perspective," by Vito Tanzi.
Table 2 seeks to analyse the various indicators for the Trinidad
and Tobago economy over the period 2010 to 2015.
INDICATORS 2010 2011 2012 2013 2014Public
debt
48,100.20 51,203.30 61,680.60 66,855.50 79,442.80
Unemployme
nt
5.9 4.7 5 5.8 N.A
Total
exports
54.8 63.4 55.6 63.2 N.A
67
(%of GDP)Total
imports
(%of GDP) 31.7 40.3 38.6 40.07
N.A
Current
account
balance
20.76 23.68 23.44 24.64 N.A
Inflation 10.5 5.10 9.3 5.2 N.AEase of
doing
business N.A N.A N.A
91 79
Gross
domestic
product
(US$
million)
189888937
31
186847369
87
189690574
22
192725742
85
N.A
Life
expectancy
rate 69.6 69.7
69.817146
34 N.A
N.A
Birth rate 9.2 9.3 9.5 N.A N.ADeath rate 15.1 14.9 14.74 N.A N.A
APPENDIX 3
68
Appendix 4
CENTRAL GOVERNMENT OPERATIONS1
Figure 1 below illustrates total government revenue and expenditureand current account2 and overall3 balances from 2010 to 2014 in TT$millions, based on annual data. It can be observed that total revenuesteadily increased from $43.86 billion in 2010 to $59.91 billion in2014, while expenditure moved almost in tandem, from $46.7 billion in2010 to $64.79 billion in 2014. This created a marginally worseningoverall deficit from $2.84 billion in 2010 to $4.88 billion in 2014.The current account balance has been kept relatively stable and insurplus over the five-year period.
(10,000.0)
-
10,000.0
20,000.0
30,000.0
40,000.0
50,000.0
60,000.0
70,000.0
RevenueExpenditureCurrent Account BalanceOverall BalanceCu
rren
t TT
$ Mn
FIGURE 1 CENTRAL GOVERNMENT FISCAL OPERATIONS; SOURCE: MINISTRY OF FINANCE
The major sources of current revenue are presented in Figure 2 below.Tax revenue increased each year over the period observed. Taxes on the
1 This analysis is based on Appendix 1: Trinidad and Tobago Central GovernmentFiscal Operations2 Current Account Balance = Current Revenue – Current Expenditure3 Overall Balance = Total Revenue – Total Expenditure
70
profits of oil companies constituted the largest source for revenuefor the country, which is highly dependent on its energy (oil andnatural gas) industry for export earnings and government revenue. Non-tax revenue rose sharply in 2014 due to a significant $4.04 billionincrease in profits of non-financial public enterprises, from theprevious year. There were also sharp increases in capital revenue aswell as grants in the final year.
-
10,000.0
20,000.0
30,000.0
40,000.0
50,000.0
60,000.0
Non-tax revenueImport DutiesVATIndividual income taxesOther companies (profits)Oil companies (profits)
Curr
ent
TT$
Mn
FIGURE 2 MAJOR SOURCES OF CURRENT REVENUE, SOURCE: MINISTRY OF FINANCE
Figure 3 below shows the levels of oil and non-oil current revenue inTT$ millions, for 2010 to 2014. Budgeted and actual4 oil prices arealso shown against the secondary vertical axis in US$ per barrel. Thefive-year period from 2010 to 2014 was characterized by generallyrising oil prices, from $79.48 USD per barrel in 2010 to $93.26 USDper barrel in 2014, together with stable natural gas prices. It can beobserved that changes in the actual price of oil directly influencedoil revenue for Trinidad and Tobago, a highly open oil-exportingeconomy, through increases in taxes and royalties. 2014, however,experienced the greatest current revenue from both oil and non-oilsectors in the presence of a slightly lower actual oil price than inthe previous year.
4 Average annual WTI crude oil spot price
71
2010 2011 2012 2013 2014p -
10,000.0
20,000.0
30,000.0
40,000.0
- 20.00 40.00 60.00 80.00 100.00 120.00
OilNon-oilBudgeted Oil Price US$/bblActual Oil Price US$/bbl*
Curr
ent
TT$
Mn
US$/
bbl
FIGURE 3 OIL, NON-OIL CURRENT REVENUE; SOURCE: MINISTRY OF FINANCE
A breakdown of current expenditure over the observed period isprovided in Figure 4 below. Expenditure on wages and salaries peakedin 2013 at $9.17 billion and then plateaued. Expenditure on goods andservices rose incrementally and then spiked in 2014 to $9.03 billion.Interest payments marginally fell mostly due to a fall in domesticinterest payments. Transfers and subsidies made up the largest portionof current expenditure throughout the five-year period and alsoexperienced the largest increase, from $23.86 billion in 2010 to$33.88 billion in 2014. Current expenditure far outweighed capitalexpenditure but some notable capital expenditure items over the periodincluded the Public Sector Investment Programme (PSIP), InfrastructureDevelopment Fund (IDF) and GATE, which all increased with each fiscalyear.
The budgeted oil price has been kept safely below actual pricesthroughout the period, with a maximum of $80.00 USD per barrel in 2013and 2014. In general, the actual price of oil has informed theconservative budgeted oil price which has, in turn, determined thelevel of government spending, both recurrent and capital. Increasingexpenditure can also be linked to growing revenues in both the oil andnon-oil sectors. It is apparent, however, that in 2014, expenditure ontransfers and subsidies experienced its largest increase within theperiod in the midst of a falling oil price.
72
2010 2011 2012 2013 2014p -
10,000.0 20,000.0 30,000.0 40,000.0
-
40.00
80.00
120.00
Wages & SalariesGoods & ServicesInterestTransfers & SubsidiesBudgeted Oil Price US$/bblActual Oil Price US$/bbl*
Curr
ent
TT$
Mn
US$/
bbl
FIGURE 4 CURRENT EXPENDITURE; SOURCE: MINISTRY OF FINANCE
The overall deficit was financed externally and domestically, asdepicted in Figure 5 below. The trend over the observed period hasbeen falling net domestic financing with rising net externalfinancing. However, the 2013 deficit was financed entirely throughdomestic financing.
20102011201220132014p
(2,000.0)
(1,000.0)
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
External Financing (Net)Linear (External Financing (Net))Domestic Financing (Net)Linear (Domestic Financing (Net))
Curr
ent
TT$
Mn
FIGURE 5 FINANCING; SOURCE: MINISTRY OF FINANCE
73
The economy of Trinidad and Tobago grew from a GDP of $131.2 billionin 2010 to $157.4 billion in 20135. Figure 6 below shows the overallbalance, primary balance and current account balance as a percentageof GDP for the years 2010 to 2013. There was a general downward trendin the primary and overall balance ratios while the current accountbalance remained in surplus between 2 and 3 per cent over the period.
2010 2011 2012 20132014p
(4.00)
(3.00)
(2.00)
(1.00)
-
1.00
2.00
3.00
4.00
Overall Balance/GDP (%)Primary Balance/GDP (%)Current Account Balance/GDP (%)
%
FIGURE 6 FISCAL RATIOS; SOURCE: OWN CALCULATIONS
5 No annual GDP data available for 2014.
74
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