Finance Minister Larry Howai says the Government has started an internal conversation about the possibility of deeper cuts in spending due to the continued decline in the international price of oil, and the fact that T&T is likely to receive less tax revenue for its LNG exports. The minister said last week that those discussions focused on the need to reduce or delay purchases of goods and services, and limit new hiring in the public sector. He said there was already a 30 per cent vacancy level in the public service.
Howai, in a statement to Parliament on November 28, signalled that the Government wanted to reduce its expenditure in the 2015 fiscal year by $1.3 billion, which was about two per cent of the $66 billion the Government expected to spend from October 1, 2014, to September 30, 2015. The Government’s original budget was based on an assumption that oil prices would average US$80 a barrel and T&T’s netback price for LNG would be US$2.75 a unit.
The reduction of $1.3 billion was based on a scenario in which oil prices would average around US$65 a barrel for the year, while the natural gas netback would be US$2.75. West Texas Intermediate for January delivery rose US$2.41 to settle at US$56.52 a barrel on the New York Mercantile Exchange on Friday. The February future closed at $57.13, which was US$22.87 below the price on which the current budget was predicated.
He said the discussion about deeper cuts in spending arose because natural gas prices have come down with the most recent netback price being US$2.90, which is just US$0.15 above the price on which the current budget was predicated.
Howai said the Government intended to ensure that expenditure on social programmes was not cut, and there was a commitment to ensure that rent arrangements and debt payment were untouched. He said some of T&T’s capital expenditure projects might be deferred, but he was reluctant to go down that road because of the multiplier effect of infrastructural spending.
The minister said that, as of last week, the country’s revenue stream remained “fairly good” and that the Government hoped to get a clearer picture of the 2015 budget by the end of January. He said he did not see a contradiction between his call for spending restraint on November 28 and the Prime Minister’s subsequent announcement of a $55 million gift to Christian churches.