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Monday, 06 June 2016 15:50

Economist: Withdrawing $$ from HSF unfortunate but necessary

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Former Senior Economist at Republic Bank Limited, Dr. Ronald Ramkissoon, says Government's move to take $2.5 billion out of the Heritage and Stabilisation Fund to pay public servants' back pay is unprecedented, but necessary at this point in time.

The HSF has not been touched since its establishment in 2007 but Dr. Ramkissoon reminded that the Finance Minister had signaled in April's Budget and Mid-Term Review that the Government was going to take money out of the Fund.

Dr. Ramkissoon is of the opinion that withdrawing money from the HSF could have been avoided if prudent measures were taken over the last five years.

"The signal is that these funds are going to be used for recurrent expenditure and we had warned, as an Economist and as Economists we would have warned about increasing recurrent expenditure over the last five years. We had warned about that so it is really unfortunate."

Nevertheless, Dr. Ramkissoon acknowledged that the move is a necessary one at this point.

"We have not had prudent expenditure for quite some time now, we therefore had little choice but to dip into the Fund. Whereas the alternative might have been to borrow, that would have increased the Debt to GDP ratio and I think we are getting very close to that threshold that we don't want to get to. So it is not an easy decision."

The Senior Economist said there's a need to separate the Heritage component from the Stabilisation element of the Fund - a move which Government has already said it plans to legislate.

Read 404 times Last modified on Tuesday, 21 June 2016 09:17
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