AT ONE level, Finance Minister Davies' latest decision to put the implementation of the proposed steep hike in the duty on imported cement on hold could be viewed as positive. This is so as it shows an apparent willingness to listen to opposing positions. Nonetheless coming at this time, Dr. Davies' decision to retreat, at least temporarily, from his original position, merely reinforces the uncertainty and tentativeness existing in the broader economy.
For one thing, this latest decision of Dr. Davies is reminiscent of the uncertainty associated with the new taxes imposed in the immediate post-budget period. This uncertainty persists, as it is still not clear how the announced environmental tax will be levied. Additionally, details of the promised increased taxes in the premium income and investment portion of life insurance policies are not yet hammered out, with the newest players in the sector said to be leading the resistance charge.
Even more fundamentally, however, there are still question signs concerning critical fundamentals in the macroeconomy. A number of examples come to mind. First, as the realities of the fiscal imbalances hit home government recently admitted in Parliament that it had experienced a temporary liquidity crunch and was experiencing difficulty in paying road contractors. Yet only days before this admission Dr. Davies was on record as denying reports that government departments were experiencing serious cash flow problems.
Then there were reports that the government had turned to the Trinidad market to raise funds to cushion the budget shortfall. Late last week the Finance Minister issued a statement confirming this and argued that "the factors" were not yet in place to return to the overseas markets.
All this is occurring in the context of the traditional peak demand for "live dollars", and against the background of some forecasts - one from the Economic Intelligence Unit - that the currency could start moving near to the $70 mark early next year. Of course, BoJ has stepped up its activities to protect the local dollar that is now trading in the $60 range by selling some of its foreign currency and its securities.
The Finance Ministry and the Central Bank must give clear signals that they have strategies in place to deal with the issues mentioned above that foster a climate of uncertainty. More dialogue involving the authorities and the social partners is one pragmatic strategy that would help to build confidence.
The authorities must not bury their heads in the sand or give the impression that the system is on automatic pilot. We definitely need to feel that they are in charge at this time.`
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
