Economist: Government on right track maintaining expenditure

Story by JESSE RAMDEO

One economist is supporting Government’s measures to cushion the economic fallout from the oil price collapse and spread of COVID-19.

According to Dr Indera Sagewan, contrary to those calling for government to reduce expenditure in light of the economic shock, maintaining expenditure is critically important.

At a news conference on Tuesday 10th March, Finance Minister Colm Imbert revealed plans to ensure government’s expenditure remained untouched.

Dr Sagewan said sourcing alternative revenue streams was the right step needed to consolidate the economy at this time.

“What we may need is not necessarily a cut in expenditure but a repositioning of the expenditure,” she explains, “to ensure it goes to purpose, in this particular crisis period. For example, the Ministry of Health may be an area where additional funds may be required given the circumstances in which we find ourselves. This is especially important if we begin having positive (COVID-19) cases diagnosed in Trinidad and Tobago.”

Dr Sagewan also called on the government to consider plans to buffer citizens from any potential price hikes resulting from the ripple effects of the economic shocks.

“We may see fallout in terms of the availability of goods and services. Even price hikes,” she points out. “Even Central Bank should consider a reduction of the repo rate, which would send a signal to banks to reduce the lending rate for businesses—particularly small businesses, who depend very heavily on a day to day basis buying what they need in terms of inputs from foreign sources.”

She adds: “A reduced lending rate for individuals also may be necessary, as they may find themselves in difficulty and need to borrow funds, in order to make it through this period.”

The economist observes that governments in other countries are adopting this kind of approach in the face of the COVID-19 crisis, and in some instances, are ramping up expenditure, in order to support their citizens and businesses through this crucial time in global history.