T&T cuts $5B in spending, faces $741M deficit

Prime Minister Patrick Manning told the nation Sunday night that his government would cut expenditure by more than $5-billion for the 2008-09 fiscal year and have a deficit of $741 million. But he said he is not touching wages and salaries, social spending and the URP and CEPEP programs.

He also announced that he won't stop major development projects. At the same time he said the axe would fall on spending on new hospitals for Couva and Port of Spain and the start of construction of the Carnival Centre.

“We have now determined that, at current projected commodity prices, instead of $6 billion dollars, we would actually fall short by $5.3 billion. Considering everything, difficult decisions were required,” he told the nation. But he did not explain how he arrived at the new figure and what projected oil price he used in his calculation.

However he said the measures that he is taking would insulate the economy against a recession.

Apart from the Carnival centre and the hospitals Manning also announced a slowdown in construction of new schools and a halt on new housing development. He said the government would complete those projects that are already underway as well as infrastructure and other preparatory work for projects that have been planned.

The prime minister also announced that the street lighting program in public places would be slowed down and there would be a reduction in infrastructural improvements in communities.

Overall his economic measures would mean recurrent expenditure would be trimmed by $3.6 billion and capital expenditure by $1.4 billion. That would result in a deficit of $741 million.

Manning said his government would keep food prices and interest rates in check. He said he would ensure that measures in place that would guarantee that people won't lose their houses because of a mortgage crunch.

He stressed that in making adjustments the government was careful to do it strategically in order to maintain the right amount of economic activity to ensure that the country is not pushed into a recession.

"The country must be kept going, even though at a slower pace...Government has a special responsibility under these circumstances to ensure that our economy is kept in motion, the people kept employed and the social fabric kept strong," he said.

He said the cabinet rejected options such as dipping into its savings, borrowing from international lending agencies or removing the $2 billion gas subsidy. Manning called on everyone to make an effort to help during this belt-tightening period and appealed to citizens to be thrifty. "Do not spend money you don't have," he said.

He also called for greater efficiency and productivity and promised that he would continue to review the situation and make any adjustments that are necessary. He reminded the nation that contrary to accusations of "wild spending" his government has been spending wisely. He noted that for the last fiscal year, there was a saving of $10 billion.

He shared the optimism of global leaders who have suggested that the financial crisis could be over by 2010.