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Atlantic LNG, Point Fortin. Photo by Jeff K. Mayers
The Heritage and Stabilisation Fund (HSF) reported a profit after tax of US$494.6 million for the financial year ending September 30, 2023, a complete turnaround from the corresponding period in 2022 when it reported a loss of more than US$900 million.
Its statement of comprehensive income showed the HSF earned US$500.5 million, but a deduction of operating expenses of US$1.64 million led to a profit before tax of US$498.8 million. A further deduction of a withholding tax of US$4.3 million resulted in an after-tax profit of US$494.6 million.
In the corresponding period in 2022, the HSF reported a US$913.4 million loss.
Despite an investment income of US$128.6 million and a gain of US$259.4 million from the sale of financial assets, the HSF reported a loss of US$369.2 million on the sale.
The 2022 report showed total operating expenses of US$1.59 million, which added to an income loss of US$907.6 million, resulting in a net loss before tax of US$909.2 million. An additional withholding tax of US$4.2 million led to the after-tax loss of US$913.4 million.
In the executive summary of the 2023 investment report, the HSF saw a 10.59 per cent return, as compared to 2022 when the fund declined by 16.52 per cent.
The report said a curtailment of record inflation, durable economic activity and the optimistic view that global central banks would level off their rates, supported gains across both developed equity and fixed income assets.
“The fund’s positive performance was mainly driven by its equity investments, which returned 9.24 per cent as stocks rallied in excess of 20 per cent,” the report said.
The HSF reported approximately US$5.4 billion as its net asset value for the year ending September 30, 2023, up from US$4.7 billion for the corresponding period in 2022.
The highlights of the report said the net asset value of the fund up to September 30 is US$5,390.2 million (estimated US$5.4 billion). It also said government made US$2,900.8 million (US$2.9 billion) in contributions to the fund, while it withdrew $2,500.2 million (US$2.5 billion).
The figures were revealed in the HSF 2023 report, uploaded to the Ministry of Finance’s website on Wednesday.
Finance Minister Colm Imbert. – Photo by Angelo Marcelle
The report, laid in Parliament on April 12, noted that in December 2022 a government contribution of US$182.2 million was made to the HSF, in accordance with section 14 of the HSF act.
“Consistent with the board’s stance to reduce the downside risks to the fund and similar to the government’s deposit made in September 2022, the contribution was held in USD fixed deposits,” the report said. “The board continued to evaluate market conditions in order to determine the appropriate time to allocate the HSF’s USD fixed deposit holding to its approved investment mandates,” the report said.
The government contribution was also noted in the Auditor General’s report included in the HSF report.
“A deposit to the fund of US$182.2 million was made on the 23rd December, 2022. This deposit related to the quarter, July to September 2022, and the date of calculation provided by the Ministry of Finance was the 26th October 2022.”
The Auditor General claimed that the timing of the deposit was in contravention of the act.
The report also raised the matter in relation to section 13 of the act which states, where petroleum revenues collected exceed estimated revenues by more than 10 per cent, the excess will be withdrawn from the Consolidated Fund and deposited in the HSF. The act also stated a minimum of 60 per cent of the aggregate of excess revenues must be deposited into the fund during a financial year and deposits for each quarter are to be made no later than the end of the month following the quarter.
“The above quoted sections are open to interpretation,” the report said. “It is recommended that suitable amendments be made to the act to provide for greater clarity with regard to deposits to the fund.”
In a post-Cabinet media briefing on Thursday, the Finance Minister and acting Prime Minister, Colm Imbert agreed that there may be a need to solidify interpretations of the act.
“It is impossible for everyone to report on the 30th of September; some people are still receiving revenue on the 30th, and that is the end of a quarter,” he said. “So if one has to deposit into the HSF, the surplus revenue for the fiscal year, and you are required to do it virtually immediately, by definition it is going to be inaccurate because you don’t know what the actual surplus revenue is… so that the act appears to have some ambiguity in it, and perhaps the act should be amended.”
