Why is it so hard for politicians to simply tell the country the truth? Why is government and governance so full of smoke and mirrors and how do those who play these games not see that it has the deleterious effects on institutions and trust in government? Do we not see that these smoke and mirrors ultimately hurt the citizenry and the country’s economy?

I ask these questions fully aware that in the words of former Prime Minister Basdeo Panday politics has a morality of its own, but as Ian Narine points out in his article that appears in this week’s publication of the Business Guardian, one of the central challenges of the country is its political economy.

Let us look at two issues, both inter-related and government’s approach the them which threatens the country’s economic survival. The forex challenge and fiscal responsibility.

The fact is the demand for foreign exchange, particularly United States dollars outstrips supply. The Minister of Finance Colm Imbert has simply told us that the Government is not prepared to depreciate the exchange rate. He defends this position based on studies showing that the country’s economy will not benefit from it because it will not add to its competitiveness and would hurt the most vulnerable in the society and individuals on fixed incomes.

What the minister fails to do is to tell us the truth. The reality that his failure to fix the fiscal side of the equation, the lack of tight monetary policy that was required prior to the covid-19 pandemic and importantly his failure to generate new growth poles or investments are why the country is in no position today to fix the forex challenge and why this unsustainable use of our official reserves will bring us to disaster if we do not act soon. Add to that the problems with the ease of doing business and we are at a virtual stalemate.

To get a better perspective it is instructive to look back at the debate when the TT dollar was floated in 1993. The debate in the Lower House of the Parliament took place on Gloria Saturday as the government used the long Easter weekend to calm the markets.

At the time of the float/devaluation ( I use the term interchangeably and admittedly loosely in an effort at simplicity) there were some crucial things which the government had done that does not now exist and compounds the country’s difficulties.

The Government and Central Bank had significantly reduced the money supply. Unlike today where there is significant liquidity in the banking system with lots of TT dollars chasing US dollars, this was not the case in 1993. There was in fact a reduction in the money supply by 6.6 per cent in 1992, the year before the devaluation.

Secondly, in 1993 the country was living within its means. The Patrick Manning administration had continued the fiscal restraint and structural adjustment of the NAR to the point where in 1993 the budget deficit had shrunk to zero.

Like today inflation remains low and similarly Capital flight took place in the years leading up to the devaluation and floating of the currency.

Former finance minister Wendell Mottley is the one who led to flotation of the dollar and as he kicked off debate in 1993 he said; “Studies which we had commissioned revealed that over the last five years, this country lost over US $1 billion in capital flight, and although the studies did not review the period before, I would imagine the situation was probably even larger then. Capital has become more fluid with all these developments such as we have illustrated here. Exchange control is an anachronism and we have to recognise that. We cannot rail against it; we have to adapt and point our ship in another direction. Exchange controls effectively only stop the small man who is trying to move a small amount of actual physical currency. It has not proved to be any restraint on larger movements of capital. That is the international experience.”

Another crucial part of the strategy that led to the successful devaluation/float of the dollar was the Manning administration’s moves to revitalise the energy sector, particularly the downstream energy sector. That meant two things, foreign direct investment, or inflows of US dollars and also jobs in a situation when the unemployment rate was closer 20 per cent.

Former prime minister Patrick Manning told the House in 1993, “In addition to the measures outlined by the Minister of Finance in the budget for 1993, which are already having an effect in stimulating construction activity, there is a field in which T&T stands out as different from the rest of the Caribbean: being able to utilise our gas resources for processing industries of one type or another. During the construction stage of many of those plants, there are higher levels of employment. It is not that alone.

“We announced a memorandum of understanding in respect of liquefied natural gas, There is every likelihood that is going to lead to an investment decision in 1994. If that should happen, again in the construction stage we would be producing jobs in excess of 1,000.

“In fact, for the LNG plant it is estimated that the figure will be about 1,500 jobs. More than that, not too long from now, Government is going to make more announcements in this regard that take cognisance of the fact that we have a resource of technical manpower here that can be applied to the construction of processing plants and in the short to medium-term, provide a level of jobs, which can cushion the impact on the unemployment levels to which the country is subject.”

Last week we had the Minister of Public Utilities Marvin Gonzales announcing major changes to the management of the Water and Sewerage Authority (WASA).

Gonzales said the Cabinet had decided on a change of the management and was not going to take the strong steps suggested by the Cabinet subcommittee.

This is another example of a government kicking the can down the road and giving people false hope that the situation can continue.

To be sure this Government is not alone and the unsustainable level of transfers and subsidies has to be dealt with urgently. As much as the government tries to play good cop/bad cop by complaining and railing about the level of wastage in the system, they are part of the problem.

They will do nothing to deal with this issue unless it’s in their political interest or collapse is upon us.

As a country we did it before. We pulled back from the brink. We face the same issues now as we did in 1993. We are an uncompetitive economy.

I end with this quote from Mottley when he spoke in Parliament on the act to amend the Central Bank Act and allow for the flotation of the TT dollar:

“This conviction in no way fails to acknowledge the difficulties and risks which inhere in this strategy. Success will require all the entrepreneurial skill, managerial talent and mastery of technology in particular niches which we are able to command. It will require us to be clever and also to have some good fortune. We will need to be resilient to deal with the disappointments which must come and humble in success, because we will need to know that the international game of competitiveness is a never-ending game, and your comparative advantage today does not last forever. The whole country needs to understand this.”

Maybe we should have heeded his warning.