The rainy day has come


HOW SHOULD the State use the Heritage and Stablisation Fund (HSF) in the covid19 crisis? The Government indicates it is prepared to pass legislation to increase drawdowns on the fund, which is itself affected by the global financial crisis now triggered by the pandemic. But how much money should be taken out, under what kind of legal formulation (should it be viewed as an emergency, one-off measure or long-term modification of access rules?) And what is the future of the fund itself? All these matters require careful consideration. Now is not the time for knee-jerk reaction, but decisive, strategic action.

What is clear, however, is that the “rainy day” for which this fund was designed has come. There is no question that the fall in petrochemical revenues, the bleak global economic outlook, the decline in consumer spending, the reduced productivity brought on by workplace adjustments and overall economic disruption now serve up a toxic cocktail. The strongest economies in the world are still reeling from the effects of the 2008 global financial crisis. But that crisis, as disastrous as it was, was brought on by a very specific enemy and was eventually contained by a series of (expensive) bailouts. This time around, the remedy is less clear.

There is an arguable case for utilisation of the full extent of the fund, which is at about US$6.5 billion or TT$40 billion. However, such a drastic drawdown would rid the State of what has been a key buffer in the past. Our economic outlook has, for decades, always been enhanced by the knowledge of the existence of an HSF cushion. But with markets tumbling and value being reportedly being shaved off the fund, it may well be time to err on the side of spending, as opposed to saving.

A compromise between both principles will still raise questions. What parameters will be used to govern the amount and frequency of access? Will there be a minimum level that can be used to sustain interest revenue?

Is this the moment for the long-standing proposal that the fund be separated into two distinct components – heritage preservation versus fiscal stabilisation – to be implemented? Doing so could allow a portion of the fund (heritage) to remain untouched for the time being, while giving the State the flexibility to utilise the full extent of the remaining balance. In other words, a split into an account for chequing and another savings. If so, what proportions will this split involve? And what rules will govern access to the spendable side?

Given the importance of this fund, its longstanding role in our economic health, the spirit in which it was set up, and the pressing needs presented by this global economic malaise, the State must take decisive action but do so with as much transparency and consultation as possible. It needs to reassure the nation that State funds will be used wisely while also fulfilling its duty to shelter the economy from the storm. A non-partisan approach, in this time of crisis, would also go a long way to boosting confidence.

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