(Trinidad Express) A TT$7.4 billion shortfall is what Prime Minister Kamla Persad-Bissessar last night identified as a result of falling oil prices.
The PM reaffirmed that the support grants, senior citizens’ pension, new minimum wage and baby grants will be untouched. But she provided no precise cost-cutting details or any sacrifices that the population might be called upon to make.
What the Prime Minister did announce was the Government’s 2015 budget would now be pegged on a revised oil price of US$45 a barrel, a 44 per cent reduction from the original benchmark of US$80 a barrel.
The gas price on which the budget is premised was also revised, from US$2.75 per mmbtu to $2.25 per mmbtu, she stated.
This points to a major realignment in Government revenue and therefore adjustments in spending.
However, delivering her address to the nation on the economic situation, in light of the new budgetary and fiscal situation, Persad-Bissessar identified savings in Government expenditure from one source—$1.4 billion from a lower fuel subsidy outlay.
“What (areas) are we adjusting? In moving forward there’ll be areas where we must moderate or redirect our spending in order to manage the present situation, always making sure that we keep people and country first—Reviews of our PSIP and current expenditure are ongoing, with the aim of identifying savings of approximately $4.5 billion,” the Prime Minister stated.
“Amongst the areas identified for redirectional spending and indeed in helping us to make up the shortfall of the $7.5 billion…these are the areas that we would consider—infrastructural projects for which funding has not yet been confirmed; lower expenditure on non-critical goods and services; and cuts in allocation in selective ministries by about 15 per cent.
“Any additional shortfall will be met from revenues generated as a result of our continued public offering programme,” she added, referring to the IPO to be held for the public sale of shares in Phoenix Park, Gas.
“This would be the first-ever listing of an energy stock on the local stock market, thereby giving the citizens a direct stake in our very important energy sector.”
The Prime Minister said the international credit rating agencies, Standard and Poors and Moody, have all projected that oil will rebound to between US$62.7 and US$70 a barrel in the near to medium term.
However, she said, Government decided to use the “more conservative assumptions” (of US$45 a barrel) for oil and gas.
“What this means is that the shortfall we may experience in Trinidad and Tobago would be in the region of TT$7.4 billion,” she said.
The price of oil has moved from a high of US$107 per barrel in June 2014 to US$48.65 at the close of business yesterday, representing a 55 per cent decline, Persad-Bissessar pointed out.
But in noting that the country had to adjust its spending, she committed her Government to continue expenditure on “the things that matter most to you (the population)”.
Persad-Bissessar singled out the energy corridor—San Fernando to Mayaro highway, describing it as a “key investment”.
She also cited her Government’s committment to the “provision of protection to the vulnerable and disadvantaged; to ensuring the pace of business activity continues; to preserving jobs and personal incomes; to intensifying its efforts in making our nation safer; to maintaining successful investments in education; to making improvements in the quality of health care so urgently required; and to keeping our committment to critical infrastructure projects, including schools, hospitals and the housing programme”.
The Prime Minister gave the assurance that her Government will navigate safety through these turbulent times.
She trumpeted the achievements of her Government, stating that the economic fundamentals were stronger today than ever and that her Government’s economic policies had halted the decline that it inherited.
Persad-Bissessar recalled that when she was a member of the government in the 1990s the oil price fell to as low as US$9 a barrel, yet the economy was kept strong and investor confidence high and stability was maintained.
“I make this reference to reinforce the reference that Trinidad and Tobago has been here before and was able to overcome the challenges faced. The population can feel confident that once again the nation is fortunate to have a Government in place that has demonstrated responsible fiscal policies, that has balanced investment in social programmes and people-centred development whilst simultaneously turning the fragile economy we inherited in 2010 into the stable and strong one that it is today,” she said.
“The same prudence with which we managed the economy since 2010, to bring us to a position of resilience and stability, will be used in shifting our priorities and maintaining stability,” the Prime Minister stated.
“History will record this period as one of our finest when we stood strong, made the right choices, exercised the right amount of restraint, held the right course and indeed saw the right results,” Persad-Bissessar said.
The address was made live from the Diplomatic Centre, St Ann’s.
Before delivering it, the Prime Minister met with senior executives of the energy companies in the state sector and the Ministry of Energy and held another meeting of a sub-committee of the Cabinet.
