By Raffique Shah
January 04, 2017
IF asked what is the number one problem facing the nation as we enter 2017, the overwhelming majority respondents would say violent crimes, especially murders. My beleaguered fellow citizens, having survived another bloody year during which killers showed utter contempt for law and order, see a slide into anarchy looming large.
But I submit that the perilous state of the economy is the biggest threat to national stability, and the Government’s apparent inability to formulate strategies and plans to resuscitate it is the gravest danger the country faces.
With huge fiscal deficits and mounting debt, Government is broke. The Prime Minister and the Finance Minister know that, but they have chosen to borrow their way out of bankruptcy in order to satiate the population’s voracious appetite for non-essential goods and services it has grown to expect as an oil- and gas-economy with the third highest per capita GDP in the hemisphere (approx US$20,000 in 2014…it will be lower now).
True, Dr Rowley has warned people about lowering their expectations in the face of plummeting energy revenues, and Mr Imbert has soft-touched a few taxes and subsidies in his budgets. I need add that I am not among those who clamour for the immediate removal of all subsidies and the dismantling of programmes like the URP and CEPEP.
As a citizen, what I expect of the latter are productive labour and fixed time-lines for absorption into the mainstream labour force (agriculture, manufacturing, commerce). And subsidising those who can more than afford to pay to gas-up their SUVs and other expensive rides, as well as pay for their children’s tertiary education, just does not make sense.
The stark realities facing us are the collapse of revenues, and more importantly foreign exchange earnings, from the energy sector. Provisional figures for fiscal 2016 show that out of total current revenue of $41 billion, a mere $7.9 billion came from energy. Contrast that with $19.7 billion in 2015 (when oil prices started falling), $28 billion in 2014 (buoyant prices), and $26 billion in 2013, and what you see is a staggering 75 per cent drop in earnings.
It’s like the breadwinner of a household who takes home $10,000 at the end of the month suddenly finding his pay-slip reading $2,500: adjustment becomes a nightmare.
Meanwhile, exports for 2015 (I haven’t seen 2016 numbers) brought in US$10.8 billion, of which US$8.4 billion came from energy products, while imports amounted to $9.4 billion, of which $3.3 billion was energy-related—mostly crude oil for refining, much of which will have been re-exported and contributed to energy export earnings. In 2014, all exports fetched US$14.5 billion while imports cost $11 billion.
On average, we import US$6 billion in non-energy goods, meaning foods and beverages, clothing, appliances, pharmaceuticals, furniture, electronics and so on. Also included are substantial components of the $5 billion-a-year fast-foods business as well as raw materials for the manufacturing sector. The latter is a net earner of foreign exchange, exporting finished products, mostly to Caricom countries. The former are net users of foreign exchange, repatriating a range of fees to the franchise owners.
So, in 2016, and in the immediate future, even with some recovery in oil prices, our export earnings will be between US$3 and US$4 billion, but our imports will hover around US$6 billion. The disparity grows worse when you add non-visible items such as foreign travel and education, a multiplicity of services that attract fees (think Amazon, Netflix, Norton, etc) and multi-million-dollar consultancies that the public and private sectors engage year-round. Add maybe another US$500 million for these items.
Looking at the “sums”, as my primary school teacher used to say, “six cannot go into three”. Either we increase our export earnings to more than US$6 billion, we reduce our imports to US$3 billion or less, or we do a combination that will close the foreign trade gap. Or, as our politicians and other leaders are urging us to do, pray to “Gaad” for petroleum prices to miraculously double-up.
I don’t believe in miracles: if there is a biblical injunction I endorse, it is “by the sweat of thy brow thou shall eat bread”, or to modernise it, “exercise thy brain to save thy body, thy soul and thy nation”.
This year will be decisive in many respects, requiring radical changes—reversing the crime spiral, restructuring the economy, reviving the work ethic, reducing the income-disparity gap, restoring pride in country, redefining, as well as identifying, real leadership.
Regarding the economy, if we fail to get our “sums” right, to level with the population and rally all patriots to the noble cause of saving the nation from a fate worse than death, meaning life under IMF torture, then 2017 would be the year we slide into the netherworld of a failed state.
I shall offer my two cents thoughts on some solutions next week.