Trinidad's capital and financial centre, Port-of-Spain. - File

Trinidad and Tobago's announced budget cuts have been heavily criticised by Patrick Manning's political rivals and businesses who say the basis of the adjustments have not been fully ventilated and defended.

Manning at the top of the week said he expected a shortfall of US$1 billion or 12.5 per cent of the US$8 billion of revenues projected for 2009, and was forced to adjust spending plans given plummeting oil prices on the world market.

The budget was cast on projections of oil at US$70 per barrel, but prices have fallen well below that in past weeks to US$46 on Wednesday, down from US$147 in July. Natural gas now trades at around US$1.57 per barrel.

Danger point

Trinidad has said the danger point for oil is US$40 per barrel.

"The gravity of the situation is underscored by the fact that, despite these huge reductions in expenditure, the loss of revenue is so serious that we are now still projecting a deficit of TT$741 million (US$117 million)," Manning said in a televised broadcast.

"With fluctuating prices, we anticipate that this situation could be reversed with an increase of a mere 25 US cents per MMBTU in the price of natural gas."

There will be a slowdown in the construction of new schools while the building of two new major hospitals and government housing which have been expanding over the last six years have been deferred.

But Opposition leader Basdeo Panday says Manning has not addressed the real issues affecting the economy.

"He has addressed everything except that which is most important, and I am referring to the fact that he spoke nothing about corruption, bad administration and wastage," said Panday, the leader of the United National Congress.

The Congress of the People (COP) accused the prime minister of lacking economic judgment.

No recession

"Despite the severity of the situation, Manning continues to hoodwink the population with glib assurances that we will not experience a recession even though most of our major trading partners are already in fact in a recession," the party stated.

It added that there was a lack of transparency on how the shortfall was calculated; how much money is expected to be saved from each project and on what basis the projects were ranked for cutback.

The Trinidad and Tobago Chamber of Industry and Commerce also criticised the lack of specific details in the prime minister's statement on new budgeted oil and gas prices.

Monitoring the performance

Chamber president Ian Collier added that he expects the Government would continue to closely monitor the international situation and the performance of the local economy to ensure that there was a measured balance between spending cuts and revenues to keep the economy as robust as possible.

In his weekend statement to the nation, Manning gave assurances that the cuts would allow the Trinidadian economy to grow, albeit at a slower pace, and that unemployment would be kept to a minimum.

"We have not taken this situation lightly. Hard decisions have been made. Significant adjustments have been made in every area of the budget. Though no major developmental works will be shut down, all Ministries and other heads of expenditure in the budget have been cut," he said.

"Had we not taken this approach, we would have had to go into deficit financing, which simply means that we would be spending more than we are earning. We are determined to avoid this route at this time, because of its consequences, not the least of which is the higher cost of borrowing which affects public and private enterprises and individual citizens."

Government receives 64.4 per cent of its revenues and 78 per cent of its foreign exchange earnings from the energy sector.

Review economic growth

Falling oil, gas and petrochemical prices forced the central bank and the international monetary fund last month to review the 2008 and 2009 economic growth rate downwards. The economy is set to slow to 3.5 per cent at the end of the year and two per cent in 2009.

The energy-based economy has been growing at an average of 9.2 per cent per year over the last five years and was projected to grow by 5.6 per cent in 2008. Over the next three years, growth was set to average five per cent.

Manning said that underpinning the decisions was the fact that Trinidad was not in recession, but needed to act to avoid its occurrence.

"As expected, the projection is for reduced growth, but it speaks volumes for the strength that our economy has developed, particularly over the last seven years. Today, we can weather this storm better than many countries including developed nations," said Manning.

Indeed, just last week, regional rating agency CariCRIS said in a statement that Trinidad was among the most likely in the region to be least affected by contagion from the global financial meltdown.

A recession, said Manning, would cause significant loss of jobs, human despair and suffering that could severely threaten the social fabric and reverse many of the development gains made over the last few years.

"In our handling of the present situation, we must do our utmost to avoid sending our country into a recession. And this we shall do," he said.

"We cannot completely shut down, for example, the development programme of Trinidad and Tobago. This is the engine of growth. The country must be kept going, even though at a slower pace, but it must keep moving. We cannot stand still. Not in this situation. Stagnation leads to decline."

business@gleanerjm.com