Moody’s Investors Service’s rating of T&T does not truly reflect the country’s strong macroeconomic fundamentals, Finance Minister Larry Howai said yesterday.
Howai was responding in Parliament to Moody’s downgrading of T&T’s government bond rating and issuer rating to Baa2 from Baa1 and the changing of the outlook to negative from stable.
Among the key reasons listed by Moody’s for the downgrade were persistent fiscal deficits, challenging prospects for fiscal reforms, decline in oil prices and limited economic diversification.
But Howai said the Heritage Stabilisation Fund stood at US$5.6 billion and official reserves at the end of the first quarter stood at US$10.8 billion. The country’s external debt ratio remained manageable at approximately nine per cent, while inflation remained in single digits at 3.6 per cent, he added.
He said when the Government came into power in 2010 it inherited an economic slump from the previous year. This required an expansionary fiscal framework.
Howai said the drop in oil prices had made the achievement of deficit reduction challenging, but the first half of this fiscal year showed a marked improvement in the budget with a deficit of $3.9 billion.
The Government actually showed a surplus of $47 million at the end of March, he noted.
Howai said the energy sector had seen an upsurge in activity and continued to perform.
The Juniper Platform, a US$2 billion investment by bpTT, is being constructed and new rigs are in the country drilling for new reserves of oil and gas.
“We have signed 21 production-sharing contracts and licences in the last five years,” he said, adding this would mean a high level of drilling for the rest of the decade.
“Drilling is now twice what it was in 2010.”
Oil prices have increased from a low of US$43.39 per barrel on March 17 to US$59, the minister added.
“With increasing energy prices Government will be able to improve its fiscal performance in the coming quarter,” he said.
He said the Government had also developed a macroeconomic fiscal policy designed to meet the country’s requirements and this was already being used as a target.
Incomplete info
He said Moody’s comments in regard to the Central Statistical Office (CSO) also appeared to be based on incomplete information.
Howai said progress was made by the CSO over the past year in the timeliness and production of critical economic statistics.
The Central Bank has provided 19 statistical officers to the CSO, he added.
“Government is mindful of the need to find the right balance between maintaining strong fiscal financial fundamentals while making the necessary investments to develop physical infrastructure,” he said.
“Over the past three years, Government has been able to deliver a considerable level of improvement in goods and services to the nation as a whole.”
Howai also listed a number of major projects done by the Government, which included the following:
• Chancery Lane Teaching Hospital and Scarborough Hospital.
• Delivery of a 24-hour water supply to 70 per cent of the population 24 hours a day compared to 13 per cent in 2010
• Completion of 93 schools with a further 91 under construction
• Completion of the Carenage Fishing Depot
• Refurbishment of 105 health centres
• Construction of eight new police stations, with another three under construction
• Delivery of 6,999 homes between 2010 and 2014 and another 3,112 under construction
• Start of construction of the Point Fortin and Couva hospitals
• Near completion of the cycling and swimming complexes
• Construction of the Diego Martin Highway and Valencia by-pass
• Paving of 1,709 kms of roadway throughout the country
Howai said Government remained committed to improving the lives of citizens, transforming the economy and creating new jobs without a deterioration in the country’s finances
He also noted that in Moody’s rating, T&T remained comfortably within the investment grade.
He said Moody had taken similar rating action against South Africa, Russia, Bahrain, Japan and Costa Rica.