Maroc - NEWSDAY.CO.TT - A la Une - 14/Aug 06:09

Is Marla Dukharan wrong?

THE EDITOR: We have followed with concern the current discourse emanating from economist Marla Dukharan’s article, specifically referencing the Central Bank’s (CB) errors and omissions account. Dukharan asserts (using as proof the IMF’s E&O 2011 to 2022 report) that an annual leakage of US$2 billion over the past 12 years is unaccounted for from our country’s balance of payment’s errors and omissions account, totalling US$23 billion. This assertion and the bank’s counter-response merely serve to highlight the urgent need for establishing the National Statistical Institute. This institute has been on this Government’s agenda since entering office in 2020 and has yet to be implemented. To put this in context, the balance of payments comprises the outflow of money from a country and the inflow of money into the country. It is published annually by the bank and is a statistical statement that summarises the transactions between residents and non-residents during a specified period. More significantly, balance of payments statistics are essential to analysing and forecasting a country’s economic performance and formulating economic policy. It consists of various accounts, including accounts specific to TT’s economy. These include the capital account; goods and services account; energy exports account; non-energy account; the primary income account; services account; and direct investment account. It is the errors and omissions account which was the focus of Dukharan’s article. The errors and omissions account constitutes an additional item in the balance of payments accounts and reflects imbalances that can result in practice as a result of imperfections in source data and compilation of the balance of payments accounts. To put it simply, the net balance in the errors and omissions account constitutes in effect a balancing item in the BoP accounts to ensure that the balance of payments always balances. The Central Bank, in an indirect response, noted that while they have recovered US$2 billion for 2022 and 2023, the net errors and omissions account for 2019 to 2023 accounted to over US$227 million. The bank acknowledged that the main reasons for this incomplete coverage include: * Apparent challenges in measuring travel expenses, in particular credit card payments, relying on historical averages for spending abroad, as well as no complete source of information; and * Fifty per cent non-compliance of firms’ responses to the bank’s survey for balance of payments purposes, “posing a difficulty in getting broader coverage of firms’ financial transactions with the rest of the world.” This is no small sum of money, particularly given the revenue position of this country for the past several years. It is no secret that some of the unaccounted money is believed to constitute capital flight. As noted in a working paper, "Net Errors and Omissions," by Boris Kilibarda of the Central Bank of Montenegro, “it may be a signal to the economic policy creators that a considerable part of economic flow is illegal, thus depriving the State of a certain amount of taxes due to various forms of tax evasion.” It is unacceptable, even taking into account Dr Terrence Farrell’s recommendation in addressing the issue, that the Central Bank appears not to have taken any proactive and measurable efforts to stem this yearly occurrence. Collaboration with the IMF and CARTAC (Caribbean Regional Technical Assistance Centre) is clearly not adequate. Surely, penal policies and laws for non-compliance and a more robust and rigorous effort at measuring travel expenses, minimising timing gaps and weaknesses in methodological approaches will result in a more reliable and timely assessment of our country’s balance of payments position. In light of this current disclosure, challenged or otherwise, it is imperative that the Government stops stalling and establishes the National Statistical Institute without further delay. The importance of such an institute is highlighted by the following quotations: “No modern government can conduct its normal functions and deliver its services and implement its development agenda without relying on good quality statistics.” (Shahjahan Khan, founding professor of the Statistics School of Agricultural, Computational and Environmental Sciences, Australian Centre for Sustainable Catchments – https://www.researchgate.net/publication/292732616_Statistics_in_planning_and_development “Poor-quality, outdated, and incomplete data lead to poor decisions…and over time presents a critical challenge” (M Nilashi, O Keng Boon, G Tan, B Lin, and R Abumalloh (2023), Critical Data Challenges in Measuring the Performance of Sustainable Development Goals: Solutions and the Role of Big-Data Analytics, Harvard Data Science Review, 5(3). https://doi.org/10.1162/99608f92.545db2cf KAREN NUNEZ-TESHEIRA deputy political leader, HOPE The post Is Marla Dukharan wrong? appeared first on Trinidad and Tobago Newsday.