Finance Minister Colm Imbert's announcement yesterday that he expects the latest plunge in oil prices could result in a $3.5 billion budget shortfall is certainly worrying news for Trinidad and Tobago's economy going forward.
The situation has been brought about by two matters now drastically impacting the global economy. In the first instance, the deadly coronavirus (COVID-19) outbreak that continues to spread globally—which moved closer to home yesterday after Jamaica confirmed its first case—had already begun to disrupt global trading lines. And with scientists and doctors still unable to fully understand how the virus operates, or find a cure, it is likely to continue to have negative fallout in several critical economic sectors.
Then came the price dispute between Russia and Saudi Arabia, two of the largest oil producers in the world, which resulted in crude oil prices plummeting to its lowest level since the late 1990s. Benchmark US crude climbed back up yesterday to settle at US$34.36 a barrel but the volatility of the spat between these major oil players means there is no way of determining when there will be a resolution and if prices will rise above the low US$30 region in which they are now hovering.
Both situations will naturally impact T&T's foreign revenue stream, which has long taken a severe hit from the continuing global recession. However, it becomes doubly harsh for this country because governments have been unable, despite years of talk about it, to find alternative revenue streams to ease the dependency on the oil and gas sector's contribution to national revenue.
Having pegged the oil price at US$60 in the 2019/2020 Budget, Minister Imbert was naturally forced to revisit his projection, hence his new forecast. But what is more worrying in that despite this announcement of the expected fallout, the Finance Minister also revealed that he does not intend to cut his $52 billion expenditure plan. Rather, Minister Imbert intimated that Government will borrow to finance the deficit.
But such a thrust will also mean that the national debt will also increase at a time when there is no way to forecast whether the economy will be able to recover any time soon.
Prime Minister Dr Keith Rowley had warned citizens, upon taking office, of the possibility of having to take belt-tightening measures given the state of the local economy as impacted by global fallout. Indeed, one of the hard decisions Government took as a result of this stark reality was the sale of Petrotrin, which was labelled a major drain on the Treasury.
This media house, therefore, hopes that Minister Imbert's plan, which seems risky at best given the uncertainty of the situation, is not premised on the fact that the general election is around the corner. It is a known policy that incumbent governments up the ante on expenditure to ensure the electorate is happy heading into the voting season. We, therefore, hope that Minister Imbert will tread cautiously with his plan to borrow.