Rajneesh Toolsie
As economists and financial experts continue to call for Government to step up its diversification efforts, former energy and finance minister Conrad Enill has come up with quite an interesting suggestion on how this could be done, by using the Heritage and Stabilisation Fund (HSF).
"If for all our energy resources we simply put it in the fund, because right now we are not getting any money from the energy sector, so we put it in the fund and we run the country on non-energy resources, almost immediately the country will understand, in a real sense, that we have a gap that we have to fund and the way we have to fund that gap if we want to save energy resources, is to become more productive, more efficient, having less waste and creating more value," he advised.
What Enill is saying makes a lot of sense, however, his views are the total opposite of what the Government intends to do in their current capacity in dealing with the HSF. For instance, all economists have been saying that if they need to withdraw from the HSF, they are well within their rights since our economy has met the qualifying criteria to withdraw.
However, tapping into the fund should only be acceptable if it is done for the purpose of using the money for revenue-generating purposes such as boosting the non-hydrocarbon sectors or boosting activity in areas which can help the creation of jobs and facilitate the creation of more revenue.
According to the T&T Heritage and Stabilisation Fund Annual Report of 2008, Section 3 of the Heritage and Stabilisation Fund Act No.6 of 2007 provides that the purpose of the fund is to save and invest surplus petroleum revenues derived from production business in order to:
a. cushion the impact on or sustain public expenditure capacity during periods of revenue downturn whether caused by a fall in prices of crude oil or natural gas.
b. generate an alternate stream of income so as to support public expenditure capacity as a result of revenue downturn caused by the depletion of non-renewable petroleum resources; and
c. provide heritage for future generations, of citizens in T&T, from savings and investment income derived from the excess petroleum revenues.
And so, based on this act, government is within their rights to withdraw from the fund.
Contrary to the views of the economists and now to the views of Enill, government has revealed that their intention to withdraw from the fund according to Imbert is for "financing of the 2015 budget." Where in the budget did Imbert stress on diversification?
The answer is nowhere! And thus his statement reflects government's intention to use the HSF funds purely for short term expenditure purposes and not for investment purposes.Enill says makes complete sense and lies in line with the views of our country's top economists.
If we are to increase our indebtedness we need to do so while simultaneously improving our capacity to repay the debt.
However, we also must consider the risk associated. If government is to use to HSF for diversification measures, we must know that we are guaranteed to generate significant returns on any investment. We therefore need strategic critical thinkers at the helm and not have a repeat of the countless examples of mismanagement, wastage and cost over-runs that the PNM is famous for.
Anything otherwise would mean that we would have exhausted our savings and will be unable to replenish. In other words we are almost guaranteed to end up in an IMF programme, the very thing we have been trying to avoid.