Imbert: Energy windfall, fiscal prudence behind $2b budget surplus

The content originally appeared on: Trinidad and Tobago Newsday

Colm Imbert

FINANCE Minister Colm Imbert has announced that Trinidad and Tobago achieved a surplus of $1.98 billion at the end of April, instead of a projected deficit of $5.7 billion. This was one of several pieces of “good news” on the performance of the economy which Imbert made public as the House of Representatives sat to debate a motion to approve its Standing Finance Committee’s Report and the Finance (Supplementation and Variation of Appropriation) (Financial Year 2022) Bill, 2022, on Monday.

The latter is known as the Mid-Year Budget Review. The motion and the bill were subsequently passed by the House.

Imbert said Government had to borrow large sums of money to keep people employed, support the health sector, acquire covid19 vaccines, provide relief to vulnerable people and initiate a fiscal stimulus to help the economy recover from the effects of the covid19 pandemic.

“This caused the total public debt to climb from $104.7 billion at the end of 2019 to $130.6 billion at the end of 2021.”

Government’s fiscal stimulus, increased oil and natural gas prices owing to increased global demand as covid19 restrictions were eased across the world and further increases in those prices as a result of the ongoing Russian invasion of Ukraine, was the first bit of good news for TT.

Imbert said, “It has allowed us to stabilise our debt and to reduce borrowing.” Government MPs thumped their desks as Imbert declared, “The Government has not borrowed any money, locally or externally, to finance government expenditure since December 2021.

Public debt is falling. “As of today, stands at $129.8 billion, $800 million less that it was in Dec 2021.”

Imbert said this was contrary to doomsday predictions from some commentators about public debt spiralling out of control.

The budget deficit was the second piece of good news.

“Based on the projected pattern of income and expenditure in fiscal 2022, it was estimated that the fiscal deficit at the end of April 2022 would have been $5.7 billion.” After experiencing a surplus of $654 million in March, instead of a $4.75 billion deficit, there was further cause for celebration at the end of April.

Imbert declared, “Instead of a deficit of $5.7 billion, at the end of April, instead of a deficit of $5.7 billion, we have achieved a fiscal surplus of $1.98 billion.”

Imbert reminded MPs that when he presented the budget last October, the projected deficit then was approximately $9 billion.

“We are therefore on target to achieve a much lower deficit in 2022 than originally expected.”

Reducing the deficit is one of the first things which Government will do with the increased revenues it has received. Another is making a deposit into the Heritage and Stabilisation Fund (HSF), Last October, Imbert said no one would have predicted then that global oil prices would pass the US$100 per barrel mark.

On Monday, Brent and West Texas Intermediate (WTI) crude oil were trading as US$ 113.69 and US$ 113.6 per barrel, respectively.

The increase in government revenue for the first six months of this year was attributed to higher than expected receipts of taxes, incomes and profits; taxes on goods and services; taxes from international trade, other taxes; increases in the unemployment fund and increases in green fund receipts of $3.2 billion, $17.8 million, $22 million, $15 million, $122 million and $207 million.

Imbert said, “This will improve our standings with credit rating agencies and will mitigate the possibility of a downgrade.”

Government also received an additional $1.17 billion in revenues from energy companies. Imbert attributed this mainly to “an increase in the prices of oil and gas and payments from companies under production sharing contracts which have totalled $25 million for supplementary pet (petroleum) tax and $310 million from petroleum profit tax.”

He thanked petrochemical companies for being a lifejacket for TT, with increased revenues from products such as methanol, urea and ammonia over the last two years.

Gross Domestic Product (GDP) has also improved, with data from the Central Statistical Office confirming it to be $170 billion for the third quarter of 2021 and not the projected figure of $150 billion.

Imbert said, “This means the debt-to-GDP ratio in 2021 was in fact 77 per cent.” Recalling the projected debt-to-GDP ratio in 2021 was 87 per cent. Imbert opined this was bad news for the Opposition UNC.

He disclosed the current debt-to-GDP ratio was now 72 per cent and extremely manageable.

“This is one of the best debt-to-GDP ratios in the world at this time.”

What will government do with these additional revenues? Imbert read out a list of things.

This included paying arrears owed to the Water and Sewerage Authority (WASA), TT Electricity Commission (T&TEC) and Telecommunications Services of TT (TSTT); paying off Value Added Tax (VAT) refunds owed to businesses; payments of arrears owed to suppliers and contractors across the public sector; social welfare payments and increased wages for public servants, once agreement is achieved between the Chief Personnel Officer (CPO) and the respective trade unions: subsidising motor fuels and liquefied petroleum gas (LPG) to the tune of $800 million (which Imbert mentioned on April 8 when he announced increased fuel prices to take effect from April 19, major road repair and upgrade programme and a desilting programme.

The VAT refunds will help several businesses that were negatively impacted by the pandemic. Imbert said a total of $4 billion in these refunds will be paid this year.

As Imbert made his presentation, there was grumbling and crosstalk from Opposition MPs. He appealed to Speaker Bridgid Annisette-George for protection four times.

“For some of them, when the sun is shining, the rain is falling.”

He asked Annisette-George, “Why are they behaving like this? Is it that they are allergic to good news? May I speak in silence?” Annisette-George appealed to Government and Opposition MPs to respect the House’s decorum, after the former came to Imbert’s defence. “Control your volumes.”