The Central Bank ought to be congratulated for its decision to host a round table on the Heritage and Stabilisation Fund (HSF) last week. Among the objectives of the round table was to review the performance of the HSF since its inception on March 15, 2007. The purpose of the Fund is outlined in its enabling legislation as being to "save and invest surplus petroleum revenues derived from production business" in order to cushion the impact of lower oil and gas prices, generate an alternate stream of income and to provide a heritage for future generations. In the four plus years since its establishment, the fund has accrued nearly US$4 billion in "rainy day" savings for T&T.
One of the important aspects of the HSF Act is that it contains a clause which mandates that the provisions of the legislation "shall be subject to review by the minister who shall submit a report to Parliament every year." As the Minister of Finance is due to submit a report on the HSF Act by March 2012, it makes a great deal of sense for the technocrats at the Ministry of Finance and the Central Bank, in collaboration perhaps with an external consultant, to conduct a review of the provisions of the Act in the next six months. As last week's round table would no doubt have discovered, there is a great deal to review in the Heritage and Stabilisation Fund Act. One issue that needs to be clarified goes to the heart of the raison d'etre for the Heritage and Stabilisation Fund.
Section 13 1) of the Act states:
"Where petroleum revenues collected in each quarter of any financial year-
"a) exceed the estimated petroleum revenues for that quarter of the financial year by more than 10 per cent, the currency of the US equivalent of the excess revenue shall be withdrawn from the Consolidated Fund and deposited to the (Heritage and Stabilisation) Fund in accordance with Section 14 1)."
Section 14 1) of the Act stipulates that a "minimum of 60 per cent of the aggregate of the excess revenues shall be deposited to the Fund during a financial year."
The common man's understanding of these two sections of the Act is that if the actual amount of petroleum revenue collected by the Board of Inland Revenue is greater than the estimated revenue by more than 10 per cent, that excess "shall" be deposited to the Heritage and Stabilisation Fund.
The legislation makes clear that this calculation must be done on a quarterly basis and that the minimum that should be assigned to the Fund on an annual basis is 60 per cent. In the annual reports of the Fund for 2008, 2009 and 2010, the Auditor General has pointed out that Section 13 1) and Section 14 1) of the Act "are open to interpretation," and she has recommended on three occasions that "suitable amendments be made to the Act to provide greater clarity with regard to deposits to the Fund." Given the extreme variability of petroleum revenues, it may be impractical to tabulate the allocation to the Fund on a quarterly basis.
The peculiar nature of energy accounting, in which the companies involved in exploiting T&T's natural resources are allowed to offset investments they make against they taxes they pay, may also militate against quarterly tabulation of excess revenues. But it is unacceptable for the Auditor General to make recommendations for amendments to the Act to provide for greater clarity in three annual reports and for those recommendations to be ignored. Clearly, there is much that needs to be tightened up in the Heritage and Stabilisa-tion Fund Act and we call on both the Cen- tral Bank and the Ministry of Finance to make the amendments to the Act a high priority. It would be a shame if the good work that the Fund has achieved in its first four and a half years were reversed by some loophole in the legislation.