President of the Rotary Club of Central Port-of-Spain Ruben McSween, second from right, presents a gift to Central bank governor Ewart Williams in expression of the club’s gratitude to him for accepting the invitation to deliver the feature address at the club’s luncheon meeting last Thursday at Goodwill Industries, Fitz Blackman Drive, Wrightson Road Extension, Port-of-Spain. Looking on at left is district governor nominee District 7030 Astra Da Costa and immediate past president Janice Roberts. PHOTO: DILIP SINGH

By Raphael John Lall

Central Bank governor Ewart Williams says that lagging agricultural production in T&T is a consequence of unbalanced development.

He pointed to double-digit inflation, high and rising real estate prices, and serious constraints in the country’s labour supply, public utilities and its road networks as the downside of the major economic boom the county is experiencing.

“At the same time, with rising incomes and buoyant domestic demand, lagging agricultural production has shown the consequences of unbalanced development,” he said.

He made the comment last Thursday while delivering the feature address at a luncheon meeting of the Rotary Club of Port-of-Spain Central.

Speaking about the Heritage and Stabilisation Fund (HSF), Williams said it was set up to avoid the sharp economic adjustment which had been necessary in the past when oil prices fell. He reminded his audience of the first oil shock of the late 1970’s and early 1980’s when oil prices rose and the country experienced a boom.

“When oil prices collapsed the economy went into recession and we were forced to tighten our belts in a disorderly and painful downward adjustment.

“Having leant our lesson, when oil prices started to rise in the late 1990s the Government established an Interim Revenue Stabilisation Fund...in March 2007 the Heritage and Stabilisation Fund was set up,” he said.

Recognising that the country’s oil and gas resources are exhaustible assets, he said the intention of the fund was to “transform the assets under the ground (in our case oil and gas) into a diversified portfolio of financial assets, which can be managed to provide an independent source of foreign exchange income. This income will be available to the budget when the oil and gas resources have dwindled or have completely run out.”

Williams said that building up the fund sufficiently and investing it wisely would allow the country to preserve the capital while living off the interest.

He said that the deposit rules of the fund mandate that at least 60 per cent of the excess between actual and budgeted energy revenues must be credited to the fund while the Government is allowed to use the fund to cover 60 per cent of any revenue shortfall.

Williams also said that there must be a role for the people of T&T in the administration of the Heritage and Stabilisation Fund (HSF).

“The fact is that it is not the Central Bank’s fund, it is the country’s fund for you and your children’s children. In addition to ensuring that the purpose and the operations of the fund are well understood, it is important that the public feels social ownership for the fund, as this will foster vigilance and ensure accountability, transparency and compliance,” he said.

Williams also said it is important that the public understands the importance of the fund.

He said the public must be encouraged to save for future generations.

“The public should be convinced of the need to put aside savings for future generations rather than to spend for current consumption.

“The communication strategy is important to counter mis-information and misperceptions, for example, by explaining the rationale behind the transfers to the fund and withdrawals from the fund, when they become necessary,” he said.

“We need to manage expectations in line with market realities, since there are going to be questions about whether we are taking too little or too much risk, or whether the fund is earning enough,” he said.