Trinidad and Tobago is in a “unique” and positive position despite the economic fallout from the COVID-19 pandemic.
Finance Minister Colm Imbert delivered the good news during his Mid Year Budget Review contribution to the Motion to Adopt the Report of the Standing Finance Committee in the Lower House on Friday.
Imbert said based on the Government’s fiscal stimulus programme, he projected a decline in Gross Domestic Product in 2020 of “just 2.4 per cent” with a big jump to 4.7 per cent expected in 2021.
“It is noteworthy that there are abundant resources to face gross funding needs over the next several years under the stressful conditions created by the pandemic and there is ample financing available to cover the primary deficit and debt service,” Imbert said.
He said unlike other countries, T&T did not face any liquidity crunch.
“Indeed, at this time, Trinidad and Tobago is unique among countries of the region in that there is no liquidity crunch given the variety of funding sources available in spite of the dislocation of global market.”
He included the over $20 billion in potential funding from multilateral agencies, such as the Inter-American Development Bank (IABD), Development Bank of Latin America (CAF), World Bank, international and local banks, bilateral partners such as China and the Heritage and Stabilisation Fund (HSF).
“And on top of all of this, we also have access to almost TT$4 billion in low-cost funding rapid financing instruments from the IMF, if at all necessary,” he said.
Imbert said in order to maintain economic momentum, he expected a “temporary increase” in the debt to GDP ratio to just over 70 per cent.
“But when this Government returns to government within the next few months, having weathered the economic storm created by the pandemic, decisive and prudent action will allow to bring back net public sector debt to GDP to its pre-crisis level of 63 per cent by 2023,” Imbert said.
That, he said, was due to the “medium-term fiscal responsibility approach and the recovery of the economy” under the next PNM Government.
Imbert also praised the Government for its treatment of the HSF despite withdrawals in 2016 and 2017 and recently in May 2020.
“The HSF assets have been on an upward trend in the recent years, reaching a high of US$6.5 billion in December 2020.
“The value of the fund’s assets decreased to US$5.7 billion by May 2020 following the COVID-19 outbreak and the crash of world stock markets, as well as the recent withdrawal, but the fund continues to recover most of its losses, and as of today, three weeks later, stands at US$6.0 billion, US$400 million more than when we assumed office in September 2015,” he said.
“It is noteworthy that under this Government, over the last five years the HSF assets increased from just over 24 per cent of GDP to almost 28 per cent of GDP.”
Imbert also said the country’s overall deficit now stood at $14.533 billion, jumping five percentage points from “when all the priority areas are included and adjustments made in other areas, total expenditure for fiscal 2020 has been revised to $53.107 billion, almost the same as the original budgeted expenditure of $53.036 billion.”
Imbert said the total revenue was originally projected at $47.8 billion, which was predicated on an oil price of US$60 per barrel and a natural gas price of US$3 per MMBtu.
“The original fiscal deficit was estimated at $5.208 billion or 3.1 per cent of the Gross Domestic Product (GDP),” he said.
Imbert said taking the adjustments included in the Supplementary Appropriation Bill, the curtailment of expenditure at most Heads of Expenditure and the decrease in total revenue of approximately $9.2 billion, the country’s deficit was revised to $14.533 billion or 8.8 per cent of GDP.
He said the Standing Finance Committee met on Wednesday and agreed to the Supplementary Appropriation of $2.686 billion for 2020. That money is expected to impact 15 heads of expenditure, includes a recurrent expenditure figure of $2,518,374,800 and a Development Programme Expenditure of $167,626,000.
“Funds for the Supplementary Appropriation will be sourced from overall savings in expenditure across all ministries and departments, and from borrowings,” Imbert said.
He said the 2020 Budget projected an “overall fiscal deficit of $5,287.5 million”, which represented 3.15 per cent of GDP for the whole year.
“For the purposes of the administration of the budget, an overall deficit of $5,885.6 million was projected for the period October 1, 2019, to March 31, 2020, which would have been reduced later on, as revenue came in,” he said.
“However, based on the actual revenue received and expenditure incurred, the Government realised a deficit of $5,387 million for the first six months of the fiscal year, approximately $498.6 million less than the projected outcome.”
Imbert said this was because of the lower than projected revenue collections and lower overall expenditure.
“Further, with the adjustments included in the Supplementary Appropriation Bill, together with curtailment of expenditure within most Heads of Expenditure, as well as the estimated decrease in total revenue in 2020 of $9.2 billion, mainly due to much lower than projected oil and gas prices, now estimated at US$25 for per barrel for oil and US$1.80 per MMBtu for gas, as indicated earlier, the 2020 fiscal deficit is now estimated at $14,533.4 million,” he said.
Imbert also addressed Opposition claims that the Government accessed some $20 billion from the Treasury. He said the Government had actually utilised just over $1 billion so far in the wake of the COVID-19 pandemic.
“We have, to date, utilised just over $1 billion of the $10 billion available under the Development Loans Act and we have not borrowed $20 billion as touted by the Opposition,” Imbert said.
“Moreover, we have approached multilateral institutions and development banks to ensure that appropriate external financing is also available to meet the requirements of the expanded fiscal deficit in 2020 and 2021.”
Imbert said the Government has also taken steps to allow for “emergency drawdowns” from the HSF once it does not exceed US$1.5 billion, or TT$10 billion in any financial year “for budgetary support in exceptional circumstances, such as the current pandemic.”
He said the HSF acted as a “ foreign exchange buffer” and as of yesterday, the fund stood at close to US$6 billion.
“US$400 million more than the value of the fund when we assumed office in September 2015, despite withdrawals totalling US$1.1 billion since 2015 and the recent volatility of the US stock market,” Imbert said.
“At this juncture, I wish to announce that on May 15, 2020, the Government withdrew US$400 million from the HSF for budgetary support and not $10 billion as touted by the Opposition.”
Key Points from Imbert’s Mid-Year Review
* GDP to decline by 2.4 per cent, then rebound to growth of 4.7 per cent in 2021
* Supplementary Appropriation of $2,686,000,800 approved to fund urgent and critical Recurrent and Capital needs to September 30, 2020.
* Deficit of $5,38 million for the first six months of the fiscal year was approximately $498.6 million less than the projected outcome.
* Energy prices estimated at US$25 per barrel for oil and US$1.80 per MMBtu for gas
* Foreign reserves are now US$7 billion, or eight months of import cover
Figures on COVID-19 Relief
Finance Minister Colm Imbert also provided numbers on relief assistance granted during the COVID-19 pandemic:
* 25,000 existing beneficiaries under the food support programme have received additional funding
* 50,000 individuals who have been retrenched or who have had their incomes reduced have become additional beneficiaries under the food support programme
* 20,000 households have become beneficiaries under the food support programme – being households which receive meals form the School Feeding Programme.
* 42,000 current beneficiaries of the Public Assistance and Disability Assistance Grant Programmes have had their income support increased
* 47,000 individuals who lost their jobs or had their incomes reduced have received salary relief or income support grants
* Almost 3,000 citizens who have not yet received their Senior Citizens pension are receiving $1,500 in food support
* Almost 500 individuals who have not yet received their disability assistance grants are receiving $1,000 in food support
* 1,400 families in direct need have been provided with hampers during the stay-at-home period
* 30,000 families in direct need are receiving food vouchers
* Up to 10,000 families are receiving, or will receive, rental assistance