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Trinidad & Tobago faces $3.5 billion budget hole from oil price crash

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.

Trinidad and Tobago’s Fi­nance Min­is­ter, Colm Im­bert

“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.”

The oil price crash will reduce in a revenue shortfall of $3.5 billion. (Photo: london.ac.uk)

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.

Imbert blamed partly on the fall in crude oil prices on the dthe price war be­tween Sau­di Ara­bia and Rus­sia.

“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.