Citing the collapse in world oil prices and the negative impact of the COVID-19 pandemic on the Trinidad economy, the country’sFinance Minister, Colm Imbert, has said that government now anticipates a 2020 budget deficit of TT$15.5bn (US$2.3bn). Its original budget estimate was TT$5.3bn (US$784m).
In a statement to Parliament, Imbert said that fiscal 2020 will be “exceptionally difficult” even if the pandemic begins to fade in the second half of the year.
Announcing a series of measures aimed at addressing public health requirements and the economic challenges posed by the pandemic, he said that government would deliver a targeted TT$$4.5bn (US$660m) financial support programme for the most vulnerable households and businesses for an initial three month period.
Noting that the number of known/confirmed coronavirus cases was 116 with eight deaths and 59 people discharged, he said that by acting rapidly Trinidad hoped to avoid “much of the pain and distress that other countries now face.” He however made clear that the social, financial and economic support package Government was introducing would significantly expand Government expenditure just as the country was experiencing “a serious erosion” of its tax base caused by the collapse in the price of oil.
Observing the collapse of US benchmark West Texas Intermediate (WTI) to US$0.1c per barrel and that this had resulted in Brent crude falling to US$20 per barrel, he told parliamentarians that “Such low prices were previously undreamt of.” As a consequence, government had decided to base its new revenue projections on US$25 per barrel for oil for the rest of 2020 and US$1.80 per MMBTU for the country’s natural gas. “This results in a projected loss of revenue in fiscal 2020 of TT$9.2bn (US$1.36bn), to which must be added another net TT$1bn(US$150m) in extraordinary expenditure”, he said.
The broader impact of the TT$9.2bn revenue loss, Imbert said, would be an estimated loss of US$3.8bn (US$560m) in taxes on incomes and profits, a fall of TT$2.5bn from royalties and production sharing, and a TT$1.2bn (US$370m)drop in profits from state enterprises. Government he said also anticipated a loss of TT$750m (US$11m) in income for the country’s Business Levy and Green Fund Levy, and a fall of TT$600m (US$88m) in taxes on goods, services and international trade.
Imbert said that although partial recovery in the global economy could begin in 2021, “tremendous uncertainty” remained about the outlook. Government’s objective would be, he noted, to stimulate economic activity, provide financial assistance to individuals and businesses and keep as many people employed as is possible, “including all workers in the public sector”.
To this end, the Minister said, a “reallocation of priority areas for spending is inevitable” but that government intended to maintain its original expenditure target of TT$53bn (US$7.8bn) in fiscal 2020. In order to facilitate this Government was in discussions with multilateral institutions and development banks to ensure that “appropriate external financing is available to meet the requirements of the expanded fiscal deficit in 2020 and 2021”. It would also be seeking emergency drawdowns from the country’s Heritage and Stabilisation Fund (HSF) not exceeding US$1.5bn (US$220m).
In order to try to manage a way out of the present economic crisis, Trinidad has established a ‘Road Map to Recovery’ team. Speaking at its first meeting, Dr Keith Rowley, Trinidad’s Prime Minister said that while the Republic was better prepared for the crisis than most of its Caribbean counterparts, it was vital that the country clearly identify and analysed the constraints that will continue until such time that a globally available vaccine is developed and tested.
This would, he suggested, involve setting new medium to long term goals aimed at increasing Government efficiency by reducing bureaucracy, while “remodelling and creating a new economy”. IT would also require addressing “the deficiencies and structural rigidities in the economy” and reducing the country’s high dependence on food imports.