Home' Trinidad and Tobago Guardian : December 30th 2015 Contents PUBLIC SECTOR CUTS, EXCLUDING JOBS
HOW WE GOT HERE
AVOIDING THE IMF, JOB CUTS
USE MORE TT$ THAN US$
Wednesday, December 30, 2015 www.guardian.co.tt Guardian
First, we will bring legislation to Parliament
to separate the Heritage and Stabilisation
Fund into two distinct funds. We intend to
leave the bulk of the existing fund in the
Heritage component and allocate the
remainder to the Stabilisation Fund.
We intend to use approximately US$1.0
billion for stabilisation purposes in FY 2016
and perhaps another US$0.5 billion in FY
2017. Using the Stabilization Fund will also
help to finance the projected budget deficit
and minimize increases in government
There are specific activities that
Government will seek to encourage. We
have already had extensive discussions with
the authorities in Venezuela in respect of
producing gas from the Loran-Manatee Field
which straddles our common border.
The relevant companies are engaged in
discussions and we anticipate that work in
developing that field can begin in the not too
distant future. We will continue investment
in infrastructure projects to be funded by the
IADB and other multilateral and bilateral
agencies. These projects will help to sustain
a reasonable level of construction activity
Third, the rationalisation of the VAT
regime will take particular note of those
items which may be included in the basic list
or must be retained in the list in light of
This will cushion the effects of any
increases in prices of basic food items.
However, imported salt and fat dietary items,
their local counterparts and luxuries will all
be subjected to the full tax regime.
Fourth, the personal income allowance has
already been increased in the Budget and
this will give citizens in the lower income
brackets higher disposable incomes.
Fifth, Government will intensify its support
to the vulnerable in our society through the
Ministry of Social Development, Education,
the Children's Authority, the Tobago House
of Assembly and the Regional Corporations.
These will be tasked with monitoring
those households in their communities
which may be adversely affected and
providing specific assistance in a timely
fashion. Teachers will be tasked with
heightened monitoring of the children under
their care for signs of stress or difficulty
arising from loss of employment by parents
Sixth, we will maintain our expenditure on
the Unemployment Relief Programme and on
CEPEP, even as we are striving to eliminate
corruption and to make those programmes
more efficient and effective.
Together they account for approximately a
billion dollars in expenditure. This alone
demands that there be some significant
output from these programmes even as they
exist as unemployment relief expenditures.
A belt vendor looks on as a customer checks his waist size yesterday along Henry
Street, Port-of-Spain. PHOTO: MARCUS GONZALES
Grim assessment mixed with optimism
The 2015 budget was prepared on an anticipated oil
price of $80 a barrel. The prices of our major exports
have declined by as much as 70 per cent for crude oil,
and 45 per cent for natural gas. If that were not serious
enough, our levels of production of both crude oil and
natural gas have been falling.
What these developments mean is that the country's
export earnings have dropped significantly. It is also
evident that oil and gas prices will not recover any time
soon. Some analysts are of the opinion that oil prices
will recover to about US$80 per barrel in 2020, some
five years from now.
The most recent projections of the World Bank
indicate that crude oil prices will recover to only about
US $65 by 2020.
Fellow citizens, there is simply no way that other
sectors of the economy can realistically be expected to
compensate for the loss of export earnings from oil and
gas; not in the short run (one -two years) and not even
in the medium run (three-five years).
We have approximately US$10 billion in official
reserves. Residents of Trinidad and Tobago have
approximately US$3.6 billion in deposits in the local
Insurance companies, mutual funds, pension funds
and the National Insurance Board also have a
significant amount of foreign assets overseas, as
permitted by the legislation. We have US$5.6 billion in
the Heritage and Stabilisation Fund.
In addition to all of that, some experts estimate that
citizens of Trinidad and Tobago have assets and cash
overseas amounting to hundreds of millions of US
dollars. But given the rate at which we have been
consuming foreign exchange, all of our reserves and
most of our other savings would be exhausted before
oil and gas prices recover or before production levels
increase to the immediate rescue.
If we set about to rapidly consume the foreign
exchange which we have now then at that point, we
would not have sufficient reserves to finance
investment and restore growth as quickly as possible.
First, we have already used up almost US$2 billion of
our foreign exchange reserves in 2015.
We can reasonably expect that the balance of
payments will continue to be in deficit in 2016 and
2017. Therefore while some further decline in the
foreign exchange reserves is to be expected in 2016
and 2017, we have to minimise that decline as much
We have to ensure that by the end of 2017, the
balance of payments deficit is stabilised so that the
foreign exchange reserves remain stable at around
at least six months import cover.
We have to restrain expenditure overall and also
to change the mix of expenditure so that the
demand for foreign exchange is reduced whilst local
dollars are put to maximum use.
Our ability to reduce government spending
in fiscal 2016 has been severely constrained by
the overhang of unpaid liabilities, settlement
of negotiated wage increases and incomplete
projects which must be finished and put to
use. Towards this end I have today instructed
the Minister of Finance to direct the
management of every State Enterprise,
statutory body and each ministry and the
Tobago House of Assembly to review their
operations and make identifiable adjustments
of seven per cent reduction in proposed
operating expenses (eliminating waste and/or
inefficiencies) not relating to job cuts at this
Land and building taxes will be
restored from January 2016 and the
revised VAT regime will be
implemented from mid-January. The
Minister of Finance will also be seeking
to collect arrears of taxes which are
We will ensure that our debt levels
are sustainable over the medium term.
As far as is feasible we will maximise
the use of local dollars and projects
largely driven by equipment and
materials that are already within the
country, e.g, housing, road construction
and maintenance, agriculture, tourism
The Ministry of Finance, together
with the Central Bank, will monitor the
country's debt profile, including the
debt of state enterprises and statutory
bodies and ensure that the type of
borrowing and the terms of the loans
are consistent with a manageable debt
profile, even with lower export
earnings and reduced government
If we fail to adjust now, we will find ourselves as
we did in 1986 with an economy with insufficient
foreign exchange reserves and having to
restructure our debt under a series of IMF
This administration will not take this country
back to that kind of situation. But success will
require sacrifice and adjustment on the part of all
sections of the national community.
The Government will initiate tripartite
discussions with the labour movement and the
business community with the objectives of
maintaining employment as far as possible,
moderating demands for wage increases and
discouraging excessive profits. These tripartite
discussions will commence early in the new year.
There will be new initiatives which would
encourage private capital to accelerate
construction on private or state lands for
pre-arranged priced units which upon
completion the State, through the HDC, will
receive and direct these units quickly to
mortgagees who will access and service
facilities which will be readied at TTMF, etc.
The objective here is to quickly move
private capital into the housing market to
service a sector which forms the HDC client
base without initial state cash outlay.
We will encourage housing construction by
the private sector and simultaneously, we
will accelerate the implementation of the
Trinidad and Tobago Mortgage Bank through
the merger of the TTMF and the Home
Mortgage Bank to provide the financing for
the mortgages for those new homeowners.
We will encourage homeowners and
businesses to increase expenditure on
maintenance activities. New home
construction and building maintenance will
sustain employment of plumbers, carpenters,
masons and electricians and will also
lengthen the life of our buildings and
improve the appearance of our homes and
Edited excerpts of PM's
speech to the nation
OUR FOREX RESERVES
BETTER REVENUE COLLECTION, LESS BORROWING Private sector expenditure also needs to be
examined. Some curtailment will occur
automatically as overall expenditure falls.
However, the Central Bank is also expected to
evaluate current and prospective monetary
conditions and take appropriate action on interest
rates that will assist in moderating credit demand
and keeping private sector expenditure in check.
The business community can help by seeking out
cheaper sources of imports and finding cheaper
substitutes of imported goods.
We the citizens can help ourselves by shifting
more of our consumption with a recognition and
preference for quality, locally produced goods which
will have the added benefit of helping to create or
sustain employment in the local economy.
INTEREST RATES AND
THE PRIVATE SECTOR
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