FISCAL POLICY AND ECONOMIC DEVELOPMENT

TOPIC: AN ASSESSMENT OF FISCAL POLICY INTRINIDAD AND TOBAGO OVER THE PERIOD 2010-2014.

1

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.

2

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

4

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

5

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.

6

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

7

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

9

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,

11

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.

12

13

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.

14

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

15

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

16

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

17

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.

18

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

19

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

20

$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.

21

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

23

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.

24

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-

25

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

26

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.

27

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

28

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

30

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

31

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

32

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

65

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

THIS IS AN EXCEL SHEET SO I WILL PRINT IT AT HOME.

69

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

Bibliography.

Central Bank of Trinidad and Tobago. January 1, 2014.

Accessed February 13, 2015.

http://www.central-bank.org.tt/content/data-centre.

Dookeran, Winston. "Budget Statement 2011." Government of

The Republic of Trinidad & Tobago. September 8, 2010.

Accessed February 4, 2015.

http://www.ttembassy.org/uploads/pdf/Budget_Statement_2011.p

df.

Dookeran, Winston. "Budget Statement 2012." Government of

The Republic of Trinidad & Tobago. October 10, 2011.

Accessed February 16, 2015. http://finance.gov.tt/wp-

content/uploads/2013/11/Budget-Statement-2012.pdf.

http://databank.worldbank.org/data/views/variableselection/

selectvariables.aspx?source=world-development-indicators#

http://myelearning.sta.uwi.edu/file.php/24986/

The_Changing_Role_of_the_State_in_the_Economy_-_Tanzi.pdf.

Howai, Larry. "Budget Statement 2013." Government of The

Republic of Trinidad & Tobago. October 1, 2012. Accessed

75

February 19, 2015.

http://finance.gov.tt/wp-content/uploads/2013/11/Budget-

Statement-2013.pdf.

Howai, Larry. "Budget Statement 2014." Government of The

Republic of Trinidad & Tobago. September 9, 2013. Accessed

February 23, 2015.

http://finance.gov.tt/wp-content/uploads/2013/11/Budget-

Statement-2014.pdf.

Howai, Larry. "Budget Statement 2015." Government of The

Republic of Trinidad & Tobago. September 8, 2014. Accessed

March 7, 2015.

http://finance.gov.tt/wp-content/uploads/2014/09/Budget-

Statement-2015.pdf.

Ministry of Finance and the Economy. Review of the Economy. Port

of Spain: GORTT, 2010-2014.

Morrison, Thomas. "Structural Determinants of Government

Budget Deficits in Developing Countries." US Agency for

International Development. Accessed March 10, 2015.

http://myelearning.sta.uwi.edu/file.php/24986/Structural_Det

erminants_of_Government_Budget_Deficits_in_Developing_Countr

ies_-_Morrison.pdf.

Musgrave, Richard. "Reconsidering the Fiscal Role of

Government." American Economic Association. February 8,

2010. Accessed February 28, 2015.

76

http://myelearning.sta.uwi.edu/file.php/24986/Reconsidering_

the_Fiscal_Role_of_Government_-_Musgrave.pdf.

Tanzi, Vito. "The Changing Role of the State in the Economy:

An Historical Perspective." Myelearning. Accessed March 12,

2015.

Tanzi, Vito. "The Role of the State and the Quality of the

Public Sector." International Monetary Fund;working Paper.

January 1, 2000. Accessed March 10, 2015.

http://myelearning.sta.uwi.edu/file.php/24986/The_Role_of_th

e_State_and_the_Quality_of_the_Public_Sector_-_Tanzi.pdf.

"World Development Indicators." World Bank. November 11,

2013. Accessed November 20, 2014.

Statista Inc. Statistics on WTI, price. 2015.

http://www.statista.com/search/?

statistics=1&forecasts=1&studies=1&industryReports=1&dossier

s=1&infos=1&subCategory=0&interval=0&category=0&subCategory=

0&region=0&archive=0&q=wti+price&sortMethod=idrelevance&accu

racy=and&itemsPerPage=25 (accessed March 23, 2015).

77