As the oil price continued its steady fall yesterday, Finance Minister Larry Howai announced that T&T’s deficit was projected to climb by $1.3 billion to 3.2 per cent of the GDP. The initial projected deficit for 2015 was 2.3 per cent or $4.3 billion. Howai read a statement in Parliament on the impact of falling oil prices on the fiscal operations of Government and shared a negative report, including Government’s expectation that oil prices, which are now less than $70 a barrel, would decrease to around $60 a barrel.
He said Government expected the price to level out at $65 a barrel. He added: “Our own expectation is for the price to decline initially closer to U$60 per barrel but eventually averaging between US$65 and US$70 per barrel. “We expect that the price of gas will come down in tandem with this decline in the price of oil but we expect that it will remain above the US$2.75 reference price used in the budget.”
“At the present time, we are averaging better than projected gas prices and these gas prices have mitigated the effect of the lower oil prices. “T&T is today more of a gas than an oil economy, producing approximately 800,000 barrels of oil equivalent per day of which only ten per cent is petroleum.” Howai presented three different scenarios but said the scenario, which indicated oil prices would fall to around $60, was more likely.
“Using a scenario, therefore, of US$65 per barrel and US$2.75 for gas, the reduction in total revenue will be $1.879.4 billion on an annualised basis,” he added. He said the fall in revenue and increase in deficit should result in “marginal” changes to government programmes. Asked if any specific programmes would be cut, Howai said, as an example, that the net effect of the budget adjustments could possibly mean a reduction of about $45 million to each ministry.
He said while the adjustments did not pose an immediate risk to the 2015 budget, “ministries will therefore be required to review their budgets to determine areas where expenditure can be suppressed to make up the shortfall.” Howai said T&T’s financial buffers remained strong and foreign exchange reserves had increased to over US$11 billion from US$8.9 billion in 2009. “The country’s overall fiscal position and revenue flows also remain healthy.
“There is, however, no room for complacency and the ministry will continue to monitor what is happening in the global environment and to refine our remedial fiscal measures to ensure that the country can respond appropriately to changes in the market for oil and gas,” he added.