Several reasons may be advanced for the implementation inertia. One is the tardiness of the bureaucracy in both central Government and state enterprises. Indeed, it is a systemic problem that every Government in recent times has attempted to correct, without success. Several special purpose state enterprises have their genesis in attempts to remove the snail, but they too, were further incapacitated by long delay in appointments to the Board of Directors. Secondly, several of the projects identified were no more than adhoc concepts/proposals requiring further study. Of times, it is difficult to escape the conclusion that these ideas are included merely to satisfy group interest or personal egos. Some have suggested that the tightfistedness of Mr. Dookeran was another reason for slow pace of implementation.

 

The two budgets in this administration have been littered with initiatives aimed at rewarding supporters of the Government and to keep the peace among certain interests groups that have been growing increasingly restless. This is perhaps not unusual in this economy, where political survival is seen as being dependant on the manner in which rents are distributed. At a time when the fiscal accounts were already deteriorating, transfers and subsidies increased by 24 percent in the first PPG Budget, to be equivalent to a 52 per cent share of the over expenditure. The IMF warns that the 50 % increase in pension benefits announced in the 2011/12 budget could affect the sustainability of the public pension scheme.

 

The third pitfall of fiscal management is the absence of a stable cogent medium-term planning framework within which the Budget is located. The previous PPG budgets gave mixed signals about the Government strategy for economic transformation. For example, in the 2010 -11 budget the creation of a national innovation system seems to be the fulcrum around which the Government’s economic transformation strategy would rotate. That approach may have lost its appeal with the departure of its champion – former Minister Mary King. In the 2011-12 Budget statement was informed by the new Medium-Term Planning Framework 2011-14, which in many significant ways is merely a repackaging of Vision 2020. However, in some instances, the budget provided no further details on the broad generic statements made in the planning document, while others the Budget was completely silent. (e.g. food and beverage industry and the printing and packaging industry). It is apparent that, like the PNM before it, what projects to be included in the budget are more a function of pressure groups and lobbyist than a structure development plan. Moreover, while diversification remains the popular mantra both budgets seem to pin hopes of recovery squarely on the energy sector.

 

The PPG can count some successes from its fiscal and economic management over the last two years. They have worked out a solution to the Clico /HCU matters, settled the salary negotiations with some public servants, the external balance remains strong, the exchange rate is stable, and inflation is under control. Changes in the petroleum tax regime has stimulated keen interest in the upstream acreage by E&P majors. Unfortunately, there are enduring negatives which would should Mr. Howai’s attention. The economy remains sluggish and is likely to record its fourth year of decline. Falling oil production and the softening of natural gas prices have weakened the contribution of energy to overall economic health there has been only one new major investment in downstream energy since 2007 (AUM 1), and only one more seem probable over the next two to three years. The concepts of growth poles and new economic sectors have not taken root; the distribution trades continue to be significant net users of scarce foreign exchange. In context of the above, what can we expect from Mr Howai? In interviews held immediately after his appointment Mr. Howai appeared to be saying the right things. He spoke of the need increase the revenues while restraining expenditure. He hinted at austerity measures as necessary to stabilize the economy and build a platform for growth. He has championed diversification. But as the saying goes” talk is cheap”. Mr. Howai already seems to be hemmed in by both economic and political constraints.

 

We now must ask. Can he escape the common pitfalls of fiscal management? Will he be able to strike the balance between consuming, saving and investment of energy wealth? Will he bring renewed focus to the transformation challenge? How would his decision to address party supporters at the “Budget Rally” affect citizens confidence in his leadership and judgement? The answers will be provided today.