Government has priced the $3 billion in VAT bonds it intends to issue to defray part of the $7.8 billion in VAT arrears so that recipients of the bonds will receive 100 per cent of what they are owed, Finance Minister Colm Imbert said yesterday.
Opening the debate on the supplementation and variation of the 2023 Budget, Imbert explained that VAT bonds will be paid to companies who are owed arrears in excess of $250,000. Those who are $250,000 or less in VAT refunds will be paid in cash.
He said the VAT bonds will be for three years and will pay a fixed interest rate of 3.15 per cent per annum. That is higher than the current yield-curve rate for three-year Government paper of 2.90 per cent.
“We are going to clear off every single outstanding VAT refund that is of the order of $250,000 or less in cash in the months of May and June. And that is because we are committed to the SME sector,” Imbert said.
He said the Government is seeking to supplement the original 2023 appropriation by an additional $3.85 billion, which affects 22 heads of expenditure. The supplemental appropriate comprises $3.49 billion in recurrent expenditure and $355 million in development programme expenditure.
The original expenditure allocation in the 2023 Budget was $57.68 billion, which would result in a revised expenditure of $61.53 billion in the 2023 fiscal year.
Imbert said the original estimate of revenue for the 2023 fiscal year was $56.17 billion and the estimated fiscal deficit for 2023 was $1.50 billion.
“The projected revenue now for the year is expected to be somewhere in the region of $1 billion less than original estimates,” said Imbert.
That would take revenue from $56.17 billion down to $55.17 billion, and with revised projected expenditure of $61.53 billion, could result in a fiscal deficit of $6.36 billion
Imbert said the source of funds for the supplementary appropriation will be met from the Consolidated Fund, as well as from loan financing “if required.”
He said he was pleased to announce that the Government’s overdraft is in very good shape. This is unlike the lean years, when officials in the Ministry of Finance looked at the overdraft every day and became quite anxious when it ballooned to as high as 99 per cent, meaning there was only money to run the country for a couple days.
“Today, the overdraft is at 39 per cent and for a few weeks prior, it was at 35 per cent. So we have available to us another $5 to $6 billion in the overdraft, so we may not need to engage in loan financing. We will if necessary.”
The overdraft involves the Central Bank, as the banker to the Central Government, advancing money to the State based on a percentage of the year’s projected budget revenue.
Imbert also debunked statements made by the Opposition that the Government intended to withdraw money from the Heritage and Stabilisation Fund to finance the country’s operations.
“Nothing could be further from the truth,” he said.
In an attack on “uninformed people who make comments that have no basis in reality and make up their own data,” Imbert read out the weighted average price of local crude and the actual country weighted average netback prices for natural gas for the first six months of 2023.
“It’s a fallacy, perpetuated by people who know better, that when a Minister of Finance–whether it is me or my predecessors–states an oil price and a natural gas price in the budget, the oil price is the weighted average price of local crude. And therefore, it is WTI (West Texas Intermediate). It is not Brent or any other international price. It is the actual price that is estimated for our local crude,” Imber said.
The data revealed that T&T’s crude oil averaged US$81.27 a barrel for the period October 1, 2022 to March 31, 2023, “which is just about US$11 a barrel less than our budget projection,” Imbert said.
In presenting the 2023 budget, Imbert projected an average oil price of US$92.50 and an average natural gas price of US$6 per unit.
Imbert also read out the netback price for LNG in T&T and the monthly weighted prices for natural gas for petrochemicals for the first six months of the fiscal year.
“The end result of all of this is that–taking into account the netback prices of gas from October 2022 to March 2023, the domestic price of natural gas from October 2022 to March 2023, the monthly weighted average for the first half of the fiscal year for gas netback prices was US$6.98 per unit.
“The price we are getting for our natural gas is better than the budget estimate. So the oil price is lower, but the natural gas price is higher,” Imbert said.
He said, as a result, the revenue projected based on the budget estimates for the first six months of the fiscal year was $28.8 billion and the actual revenue received was $27.4 billion.
“We are not doing as badly as some people would like the country to believe,” he said.
Imbert said the reason T&T was doing well in terms of its energy revenue was because of visits made by Prime Minister Dr Keith Rowley and Energy Minister Stuart Young to negotiate with the energy majors who do business in T&T.
“And it is as a result of those honourable gentlemen that we have been able to negotiate prices for revenue of natural gas that are not a function of the Henry Hub natural gas benchmark.
“Our netback prices for natural gas for which we get our revenue as a country are now based on three benchmarks–Henry Hub (American), NBP (European) and JKM (Japan/Korea),” said Imbert, adding that the prices in Europe and the Far East are much higher than the prices in the US.
“When you take all those benchmarks together, that is why we are getting these natural gas netback prices of US$6, US$7 or US$5 per unit, whereas if you look only at Henry Hub, you will see only US$2.30,” Imbert said.