Government revenue, expenditure and budget deficit 2014 – 2022. IMAGE COURTESY MINISTRY OF FINANCE –
FINANCE Minister Colm Imbert said the economy of TT was now enjoying a strong recovery, although he urged caution as future developments in global events could affect local revenues, addressing the Spotlight on the economy at the Hyatt Regency, Port of Spain on Friday.
He said TT had survived the economic fallout of the pandemic during which in April 2020 the WTI oil price fell to zero, the Ukraine War starting in February 2022 and a global economic shock caused by an action by the US Federal Reserve in June 2022 hurting emerging markets by an 18 per cent outflow.
However, Imbert jubilantly eyed current global energy prices, namely US$101 Brent oil, US$97 WTI and US$9.2 MMBtu (natural gas priced at Henry Hub.) More so he lauded the prices per tonne now fetched by petrochemicals (which are made in TT) namely ammonia at US$915, plus urea at US$525 and methanol at US$345.
“Ammonia surprised everyone. It tripled in price over the last two years.
“Expect a steady up tick in oil and gas production but it is a lot of hard work.”
He said the rise in energy prices has changed the Government’s whole revenue profile to increase the energy revenues from comprising seven per cent to 45 per cent of total Government revenues.
Imbert recalled that in 2015 he had been advised to devalue the TT dollar to ten-to-one (per US dollar) or lose all foreign reserves, but had not done so. He boasted that today TT has great foreign reserves, with citizens spared from the poverty that a devaluation could bring. He said governmental expenditure would be cut no more, saying the Government would always protect the vulnerable.
Imbert: Tax collection must improve
Citing about $7 billion in uncollected taxes, Imbert said the Government should be collecting “much more” tax than it was and hoped tax collection issues would be remedied by the proposed TT Revenue Authority.
Imbert gave figures to suggest the TT economy was doing well. He said TT has a US$19,000 per capita GDP, exceeding Barbados and just behind Bahamas. Boasting that TT’s debt-to-GDP ration had fallen to 72 per cent, he said, “Going down gives you the fiscal space to spend in the productive sector.”
Hailing TT’s inflation rate at five per cent, he attributed that to his refusal to introduce a sliding foreign exchange rate that he said could have plunged the TT dollar to 30-to-one.
Saying TT would meet Moody’s rating agency in November, Imbert hoped the country could get an improved rating.
Regarding public sector wage-talks, he said a four per cent rise for all would require back pay of $4.66 billion (including $2.43 billion for public servants) and $1 billion extra annually in wages/salaries (including $490 million to public servants). The PSA’s proposed 19 per cent pay rise would require $30.3 billion in back pay (including $15.8 billion to public servants) and $3.4 billion annually in wages/salaries (including $1.8 billion to public servants), he said, remarking, “This is not practicable, feasible or possible.”
He speculated the second negotiating period might cost $50 billion in back pay.
Noting a fuel subsidy of $2.6 billion currently and $2.1 billion for next year, he said the Prime Minister wanted a limit on this amount, to use the rest of such funds for other purposes.
Imbert listed the current government subsidies as WASA $2 billion, social grants $5 billion, fuel subsidy $2 billion and electricity subsidy $700 million.
While saying the Government was committed to the social grants, he wanted a discussion on the feasibility of the others.
Imbert did not think the global oil price would be at US$110-120 for any time much longer.
‘Don’t throw it away now’
He praised the population and business sector for helping the economy recover well from the pandemic’s effects. Imbert hailed several entrepreneurs he had met at the recent Agri Expo, hoping they could be supported financially. Overall, he said while banks had expected many businesses to fail, they were succeeding and so growing their revenues and paying their debts.
Imbert boasted that last month for the first time ever he had seen the Government’s overdraft in its Central Bank account at just 20 per cent, meaning 80 per cent was still available.
Oil and Gas revenues 2009 – 2022. IMAGE COURTESY MINISTRY OF FINANCE –
In recent years he said, the Government had often to borrow from private banks so as to pay public servants salaries or had to ask the Central Bank for an”ease up” or even slightly exceed borrowing limits. “It wasn’t easy but we managed it. We paid salaries on time. We paid our debt service. We defaulted on nothing.
“We are in a position where we can safely honour any request for funds from any ministry.”
Imbert urged caution now.
“We have to be careful. This is not the time to let go. This is not the time to throw away the good work of the last seven years.”
He recalled Central Bank deputy governor Dr Dorian Noel earlier telling the conference no-one knows the future.
“Oil might drop to US$75. Gas night drop to US$3. The war in Ukraine might come to an end. Putin might make peace with Zelensky. You don’t know.
“So we can’t bank on US$100 oil and we can’t bank on US$9 oil going forward. We have to be prudent and we have to be careful.”