There will be no deposits to the Heritage and Stabilisation Fund (HSF) for this year. This has been confirmed by Finance Minister Larry Howai who told Guardian Media Limited who explained that because the price of oil has fallen below the price identified in the national budget, "there will be no room to make any deposits this year."
Over the past 42 years that T&T has been exporting oil and gas, billions of dollars have been earned in revenue which has been used for many of the social and infrastructural projects the country benefits from today.
While there are concerns that the looming challenge of falling oil prices could take the country back to square one, Government says this will not happen. In an address to the nation early in January, Prime Minister Kamla Persad-Bissessar warned against "using the period of challenges to promote fear and panic," adding that to do so will "have the impact of creating problems where in fact no problems exist."
The HSF, a sovereign wealth fund, was conceptualised by the then PNM administration in 2000 but was only enacted in 2007. It now stands at US$5.5 billion.Conrad Enill, who was Minister of Energy when the fund started, explained: "We felt, at the time, if we were able to create a pool of money from which when we invest it will give us income. It means we can build a buffer in the event that prices are reduced. You get income from another source."
He said annual deposits to the fund depend on government's ability to run balanced or surplus budgets.
HSFchair: don't restrict savings
Chairman of the Heritage and Stabilisation Fund Dr Ralph Henry feels contributions should not only come from the energy sector as per the Heritage and Stabilisation Fund Act.In an interview at his consultancy office in Tunapuna, Henry, who has been chairman of the fund since last March, said contributions have been made as required during his tenure.
"The legislation as written focuses on oil and gas, but maybe we should have a fund period that we should be putting away for the rainy day," he said.Fellow economist Dr Ronald Ramkissoon said oil and gas has towed the local economy and perpetuated a lifestyle not had by many of T&T's non-oil producing neighbours. He said the current fall in oil prices brings the question of sustainability to the front burner.
"When we spoke about sustainability and recurrent expenditure, that subsidies and transfers were not sustainable, very often the politicians of the day would see us as prophets of gloom," Ramkissoon said.He added that a glance at decades old budgets show that as revenue increased, expenditure increased at a similar rate. This trend, means that at this point "cutting back on expenditure is critical."
Whether a government hoping for another term in office will take this harsh necessary measure will be a test of political and economic leadership, he said."It is a test to see if this government, or any government, can take the necessary measures, some of which are going to be harsh, and to get the population to appreciate the need to do that and yet win the election," he said.Ramkissoon said the time to act is always up to the state.
"If you do nothing, or do very little, or tinker at the edges, the problem is not going to go away, they are going to haunt you or another administration," he explained.Energy Chamber president Dr Thackwray Driver said the effects are already being felt within the sector.
"Energy companies are looking to cut discretionary spend, but you tend to see the major projects which have already been sanctioned and began the processes, they tend not to be cut as they would be worked out on longer term oil prices," he said.Henry, who spent a large part of his career as a senior lecturer at the University of the West Indies, said the booming economy has perpetuated a lifestyle many may not be able to re-adjust so easily.
"We have consumption habits based on an imported lifestyle and they are irrelevant and surely wasteful," he said.He said the wealth of the country could have been better utilised over the years."We use up foreign exchange to bring in a whole lot of vehicles to be in a massive air conditioned traffic jam. We could have spent a lot more as a society in a transportation system that is efficient and can get large numbers of people from point A to point B efficiently," he said
Henry said small countries like T&T, which are economically dependent on a limited number of sectors should have more commitment to savings.
Asked what he envisioned the HSF would best do for its most needy recipients, he said: "I see all areas of marginalisation, disposition and retardation in urban and rural areas. Urban like Laventille and rural like Biche and Matelot. I would like to see that a young child, girl or boy, when he or she looks into the mirror, they can see the possibility that from right there in Matelot, they can take on the world."?