The price at the pump has in­creased, but from Jan­u­ary the per­son­al in­come tax ex­emp­tion will al­so rise.

Fi­nance Min­is­ter Colm Im­bert said both of these changes, which were an­nounced in the 2023 Bud­get pre­sen­ta­tion are in the best in­ter­est of Trinidad and To­ba­go’s econ­o­my and net each oth­er off.

While ad­dress­ing the Trinidad and To­ba­go Man­u­fac­tur­ers As­so­ci­a­tion Post Bud­get dis­cus­sion at the Hy­att Re­gency ho­tel on Tues­day, the Fi­nance Min­is­ter felt too lit­tle fo­cus had been giv­en to the de­ci­sion to raise the per­son­al al­lowance ex­emp­tion from $84,000 to $90,000 per an­num ($7000 to $7500 per month) giv­en its’ size­able cost to the trea­sury.

“That’s go­ing to cost the trea­sury $450 mil­lion, it’s not a small thing. If we had in­creased it from $7000 to $8000 it would have cost us $900m, so we have de­cid­ed to give up that $450 mil­lion in rev­enue to put more dis­pos­able in­come in­to the hands of con­sumers,” said Im­bert, who added this would ben­e­fit the re­cov­ery of the econ­o­my, as the pub­lic would now have more spend­ing pow­er.

“We be­lieve the mul­ti­pli­er ef­fect in terms of GDP, in terms of that ex­tra $450m in the hands of tax­pay­ers, will re­sult in an in­crease in GDP in ex­cess of $450 mil­lion dol­lars,” said the Fi­nance Min­is­ter, “ That’s the whole point. More dis­pos­able in­come in the hands of con­sumers, boost­ing sales, boost­ing trade, boost­ing eco­nom­ic ac­tiv­i­ty, but we couldn’t give up that $450 mil­lion if we de­cid­ed to leave the price of fu­el at the low­er rates, we just wouldn’t have the mon­ey.”

This was a pos­i­tive move which he be­lieved could off­set the rise in fu­el prices as the gov­ern­ment sought to ad­dress the ris­ing cost of the fu­el sub­sidy.

“So it’s a trade-off, that’s one of the trade-offs we did in this bud­get. We de­cid­ed to give back that $450 mil­lion and we de­cid­ed to cap fu­el prices at a cer­tain lev­el,” he said.

The gov­ern­ment has for some time ex­pressed that the fu­el sub­sidy need­ed to be ad­dressed, and long be­fore Mon­day the gov­ern­ment sig­nalled that the sub­sidy would be capped at $1 bil­lion.

Dur­ing Mon­day’s bud­get pre­sen­ta­tion, Im­bert an­nounced in­creas­es with im­me­di­ate ef­fect which saw Pre­mi­um Su­per and Kerosene in­creased by a dol­lar to $7.75 per litre, $6.97 per litre and $4.50 per litre re­spec­tive­ly while Diesel saw a 50-cent in­crease to $4.41 per litre.

Im­bert gave a bit more in­sight in­to the in­creas­es dur­ing the ques­tion and an­swer seg­ment of Tues­day’s event.

“We set a cap at a bil­lion dol­lars, and that is based on an es­ti­mat­ed oil price and the known con­sump­tion of fu­el in Trinidad and To­ba­go. Trinidad and To­ba­go con­sumes one bil­lion litres of fu­el more or less. Of which 400,000 thou­sand litres is diesel, so 600,000 litres of gaso­line, 400,000 litres of diesel. So we know how much fu­el mo­torists con­sume in Trinidad and To­ba­go. We al­so know what the cost of price of gaso­line and diesel, based on an oil price. So the $1 bil­lion cap is based on an as­sump­tion that the oil price will be some­where be­tween $80 to $90, that’s the $1 bil­lion cap,” he said.

The Fi­nance Min­is­ter al­so ex­plained the price could be ad­just­ed down­ward if the oil price al­so drops in­ter­na­tion­al­ly. How­ev­er he said ei­ther way it would cre­ate a prob­lem for the gov­ern­ment as if it did drop, so would gov­ern­ment rev­enue.

“We have based this bud­get on $92.50, so the prices that we used are based on that oil price. The cap is go­ing to work both ways. And there is a prob­lem both ways. If the oil price goes up, our rev­enue goes up of course but the price of fu­el goes up so we have a prob­lem there. But if the price of oil goes down, the rev­enue goes down, the price of fu­el goes down. But we are com­mit­ted to the 1 bil­lion dol­lar cap, so if for some rea­son, and we hope that it won’t hap­pen too se­vere­ly, let’s say the price drops to $80 or some­thing like that it will go be­low the fig­ure that we have put for the cap and we will make an ad­just­ment in the oth­er di­rec­tion. That’s the plan,” he said.

The Fi­nance Min­is­ter not­ed that if the price of oil moved up or down by even a few dol­lars, the coun­try’s rev­enue stream is im­pact­ed by hun­dreds of mil­lions of dol­lars in ei­ther di­rec­tion.

“For every five dol­lars that oil price fluc­tu­ates the ef­fect on our rev­enue is about $600m. If oil goes up to $100 we get an ex­tra $600m. If it drops five dol­lars we lose $600m. We have used the best avail­able ad­vice and picked $92.50,” said Im­bert.

Min­is­ter Im­bert said the high prices in­ter­na­tion­al­ly had con­tributed to a far bet­ter fis­cal per­for­mance last year than ex­pect­ed and had the sub­sidy cost not been a fac­tor, the gov­ern­ment could have even bal­anced the bud­get.

“We had ex­pect­ed a deficit in 2022 of $ 9 bil­lion, we end­ed with a deficit of $2 bil­lion. We have done very well. In terms of the fis­cal deficit, this is prob­a­bly the low­est fis­cal deficit the coun­try has had for about 12 years. It’s prob­a­bly the low­est,” said Im­bert, “We could have bal­anced the bud­get. If we didn’t have to put mon­ey in­to the her­itage and sta­bil­i­sa­tion fund we put in $1.1 bil­lion and if we didn’t have to spend $2 bil­lion on sub­si­dis­ing fu­el we would have bal­anced the bud­get, but we de­cid­ed to do it. We had to do the her­itage fund by law be­cause that’s the law and well the fu­el sub­sidy is an­oth­er sto­ry.”

The min­is­ter al­so ex­plained that the bud­get was set with an oil price of $92.50, which was be­low the pro­jec­tions made by sev­er­al rep­utable fi­nan­cial in­sti­tu­tions around the world.

“We looked at about 10 or­gan­i­sa­tions that fore­cast oil prices and vir­tu­al­ly every sin­gle one of them was fore­cast­ing an oil price in 2023 of $95. So we de­cid­ed to be a bit con­ser­v­a­tive and go with $92.50. We don’t have a crys­tal ball, we’ll see how that works out,” he said.

The trade-off con­cern­ing the price of gas and the tax ex­emp­tion was not the on­ly fork in the road en­coun­tered by the Fi­nance Min­is­ter as he al­so ex­plained that there was the pos­si­bil­i­ty that more mon­ey could have been al­lo­cat­ed to Pub­lic Sec­tor wage ne­go­ti­a­tions as op­posed to be­ing in­vest­ed in the de­vel­op­ment of the man­u­fac­tur­ing sec­tor.

“We could have de­cid­ed ok, we would in­crease our of­fer to the unions by $2 bil­lion, and use the $2 bil­lion for that. But we didn’t think it made any sense, we made our of­fer, and we think our of­fer is very rea­son­able. We de­cid­ed in­stead to put an ad­di­tion­al $2 bil­lion in­to the pro­duc­tive sec­tor,” said Min­is­ter Im­bert.

The gov­ern­ment has cur­rent­ly tabled an of­fer of four per cent to the unions.