Política

Delineante Jorge Plaza Marquez Invetubo ||»»//
UWI lecturer: Wake-up call for T&T

The Government is putting the economy on a sure path to a cre­dit rating agency downgrade that will trickle down to hurt everyone through higher interest rates on loans and credit card payments, University of the West Indies financial economics lecturer Vaalmikki Arjoon said yesterday in an e-mailed response to queries. He was responding to Standard & Poor’s (S&P’s) Friday-evening decision to downgrade Barbados further into what the industry calls “junk status” or non-investment grade, to “CCC+” from “B-”. Unabated borrowing without raising revenue to service the very debt created from said borrowing, to allow the Government to keep spending beyond its means, builds an economic house of cards that will inevitably collapse and prompt a further downgrade by the credit rating agencies, he said.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

demasiadochevere.com
“The Barbados downgrade is a wake-up call for us. If we continue this listless economic management, a future downgrade is inevitable,” Arjoon said.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

economiavenezuela.com
To prevent this from happening, the Government needs to take “ambitious leaps to lift revenue earnings, exports, foreign exchange, foreign direct investment and lower unemployment”, he said.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

dolarve.com
Arjoon, who lectures at both the St Augustine and Arthur Lok Jack Graduate School of Business, Mt Hope, campuses, said: “Our key risks for a downgrade stem from, but are not limited to, our persistent fiscal deficit, staggering debt, our lax approach to earning additional foreign exchange, a worsening current account balance, illicit financial inflows and crime.” Limited employment levels When ordinary people connect the dots, they see that credit rating agency downgrades eventually translate to job losses, he said.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

dolarve.com
“Future local investment and entrepreneurial activities will be deterred, which in turn will limit employment levels and export diversity, further restricting economic growth.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

www.entornointeligente.com
“Our earnings of foreign exchange will also be stymied, and we could also find ourselves facing further currency depreciation.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

noticias-venezuela.com
The loss in confidence will also prompt greater capital flight, where locals will invest more of their finances abroad rather than locally.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

“International investors may also bypass us, thereby lowering foreign direct investment, which also has negative implications for employment and diversification,” he said.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

He continued: “As we will be deemed riskier, we will find greater difficulty in attaining loans from the international market, or if we are successful in getting these loans, the interest costs will he high.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

This high cost of debt will limit future savings and investments, as we will have to apportion a higher amount of money to repay the debt.” Downgrade will hit the poor the hardest “The consistent under-perfor­mance and un-profitability of our State-owned enterprises will ultimately result in a downgrade, especially since the State carries a significant financial burden in supporting the losses of these companies.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

This was indeed part of the reason for our Moody’s downgrade in 2015. “Since 2014, these contingent liabilities have averaged over 20 per cent of our gross domestic product (GDP), which is staggering and contributing to our debt levels.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

When these companies are aware that they can rely on Government bailouts, there is less incentive to be self-sufficient and operate efficiently, as they know when they make losses they can always rely on the Government’s support,” Arjoon said.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

He said: “Some also absorb substantial amounts of forex, but do not earn much if any at all. What is needed is some divestment and privatisation of some of these entities, which will foster better operations, more efficient use of resources and better cost effectiveness.” The UWI lecturer sees little effort by the Government to avoid credit rating agencies’ downgrades, which affect the poor the most, as they, more than others, need to borrow to buy homes, cars and sometimes monthly supplies.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

As T&T continues to pull the same downgrade triggers as Barbados, the US Virgin Islands (downgraded to junk in December) and Bermuda, which last week said it had to cut back its Health Ministry budget to find money to service debt repayments, Arjoon condemned “our worsening reliance on debt”.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

We borrowin’ still In Parliament on Friday, ­Finance Minister Colm Imbert tabled for second reading a bill entitled “An act to provide for the membership of Trinidad and Tobago in the Corporación Andina de Fomento (also known as ‘the Andean Development Corporation’) and for the raising of loans from the Corporación Andina de Fomento (Andean Development Corporation) by the Government of Trinidad and Tobago for the purposes of financing development projects in Trinidad and Tobago and for matters incidental thereto”.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

Arjoon was also deeply concerned for small and medium ­enterprises (SMEs). He said: “Our persistent current account deficit, which is projected to be -7.17 per cent of our GDP in 2017 can certainly also contribute to a downgrade.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

“This can be inhibited by allowing the private sector more autonomy in controlling capital projects for economic diversification and strengthen the position of SMEs by assisting them to ­penetrate into new international trade zones.”

.

© Jorge Plaza Marquez

© Jorge Marquez Plaza

© Jorge Plaza

© Jorge Marquez