Trinidad and Tobago’s Finance Minister, Colm Imbert has revealed that the crash in oil prices and lower projected revenue from natural gas will lead to a budget shortfall of an additional TT$3.5 billion.
“Our calculations tell us that this will result in a loss of revenue somewhere in the vicinity of $TT3.5 billion dollars,” Imbert told a news conference yesterday at his office at the Eric Williams Financial Centre in Port-of-Spain. Imbert said the shortfall will now result in a budget deficit in excess of $8.5 billion.
He also revealed that the Dr Keith Rowley-led administration had revised downward its projection for the price of crude oil and natural gas. According to the Finance Minister, “The Government has done its projections and we are now using an average price for the year of forty dollars for oil and a wellhead price for gas.”
He blamed the fall in crude prices on the drain on global demand caused by the COVID-19 and the price war between Saudi Arabia and Russia, lamenting that T&T was a price taker and could do nothing about it.
In that case, Imbert said Government was still formulating strategies on how to deal with the loss of $3.5 billion in revenue but was confident that it can handle the challenge. “We have gone this way before and we have been able to successfully come out of it by very careful management of the economy,” Imbert told the news conference.
“…we are putting a plan right now on how to deal with the three and a half billion dollar shortfall we had already projected to finance the five that was stated in the 2020 budget.”– Colm Imbert
He sought to explain how the government could finance the shortfall. “If we keep our expenditure as we planned, we obviously will have to finance it through two mechanisms, no actually three. One would be borrowing … Secondly draw-down on the Heritage and Stabilisation Fund, Imbert explained.
Continuing Imbert argued, “We will have to do some restructuring of the manner in which the fund operates. Thirdly, will be extraordinary revenue from sale of assets and so on, we are putting a plan right now on how to deal with the three and a half billion dollar shortfall we had already projected to finance the five that was stated in the 2020 budget.”
The T&T Finance Minister defended the decision to keep expenditure at $52 billion and not cut expenditure in keeping with the falling revenue streams. Imbert said to do so would stifle the economy and could impact jobs.
“We are still planning to keep our expenditure target as is. One of the problems with slashing expenditure is that it stifles the economy,” he added. The Finance Minister also revealed that Government was now working with a natural gas production figure of 3.6 billion cubic feet per day. This is 200bcf/d less than Imbert had projected during the 2020 budget debate.
“So our natural gas figures for 2019 averaged out at just below 3.6 billion. We expect that to continue in the foreseeable future, 3.6bscf of natural gas per day, that’s the production we expect,” Imbert said.
He rubbished suggestions that he is often wrong in his budgetary projections for crude prices, saying in terms of oil revenue last year the country exceeded its projections.