Declaring that this is not the time for “sudden changes in the direction of economic development policies,” Prime Minister Kamla Persad-Bissessar last night announced that the national budget will now be pegged on a price of US$45 a barrel for oil and US$2.25 per mmBtu for natural gas.
She did so as she unveiled a series of measures to deal with a $7.4 billion budgetary shortfall caused by falling energy prices in an address to the nation on the state of the economy in light of the continuing falling oil prices.
The cost cutting measures announced in an address broadcast live from the Diplomatic Centre, St Ann’s, include ongoing reviews of the Public Sector Investment Programme and recurrent expenditure to yield $4.5 billion in savings, a 15 per cent reduction in expenditure on non-critical goods and services in selected ministries and a halt to infrastructure projects for which funding has not yet been confirmed.
Additional revenues are to be generated through Government’s ongoing public offering programme.
The latter initiative, she said, follows the success of the First Citizens bank’s initial public offering which added approximately $1 billion to the public coffers. As a result, the programme will continue with the National Gas Company of T&T Limited (NGC) offering 49 per cent shareholding in T&T NGL Limited, which holds the 39 per cent shareholding of the NGC in Phoenix Park Gas Processors Limited.
“This will be the first ever listing of an energy stock on the local stock market, giving citizens a direct stake in our energy sector,” she said.
Persad-Bissessar said since last October, Government had been evaluating a number of scenarios to be prepared for possible challenges resulting from falling oil prices
“It is worth noting that our fiscal discipline has allowed us to deliver a budget deficit for 2014 of $2.6 billion. This figure is $3.7 billion or 55 per cent less than the budgeted $6.3 billion,” she said.
There will also be intensification of collaboration for public/private partnerships. According to the PM, to create “a fully transformed and diversified economy” there are plans to “increase the private sector footprint in our economy.”
Energy corridor
Persad-Bissessar said the San Fernando to Mayaro Highway remains a key investment for creation of an energy corridor in south Trinidad, “where, for decades, a great deal of our energy wealth has been extracted and/or generated.”
“By providing a strong link between the marine operations in the south east and the industrial operations in the south west, we will be securing energy for today, and for future generations with the energy corridor.”
She said the macroeconomic indicators by which T&T’s economic strength is measured are far better than in 2010:
Unemployment is historically low at 3.6 per cent
Foreign reserves stood at US$11.3 billion (TT$73 billion)
Import cover is up from 10.4 months in 2012 to approximately 12.7 months in 2014
The Heritage and Stabilisation Fund has increased by over US$2 billion since 2010 to US$5.5 billion
New Investment in the energy sector is projected in 2015 to be well over US$2 billion (TT$13 billion)
Inflation remains in single digits.
The PM said Ministry of Finance and the Central Bank will work closely to ensure fiscal policy and monetary policy are “calibrated and aligned.” In addition, she said the Central Bank has stepped up its supervisory vigilance to respond to any emerging risk to domestic financial stability caused by falling energy prices.
“I have instructed the Minister of Finance and the Economy to collaborate with the relevant stakeholders in our country to monitor the state of the economy in the coming months and report on a regular basis to Cabinet,” Persad-Bissessar said.
She added: “We can withstand the lower oil prices and the right Government is in place at the best possible time. Since 2010, whilst the world reeled from recession, this administration has curbed wanton spending and redirected resources in the best ways.This has kept us strong and progressive.”