Mar­i­ano Browne

The Min­is­ter of Fi­nance will de­liv­er his Mid-Year Bud­get Re­view on June 15. It will re­view the Gov­ern­ment’s rev­enue and ex­pen­di­ture po­si­tion for the six months end­ed March 31. Its pur­pose is to as­sess the coun­try’s fis­cal per­for­mance halfway through the fis­cal year and, if nec­es­sary, in­tro­duce a Fi­nance (Sup­ple­men­tary Ap­pro­pri­a­tion) Bill to ad­just gov­ern­ment spend­ing and rev­enue al­lo­ca­tions. Con­duct­ing this re­view is im­por­tant for four rea­sons.  

First, it is an im­por­tant ex­er­cise in pub­lic ac­count­abil­i­ty and trans­paren­cy. The min­is­ter ac­counts to Par­lia­ment, and by ex­ten­sion the pub­lic, for how rev­enues have been spent and where and why ad­just­ments are nec­es­sary. This is al­so a pre­lude to the 2027 Bud­get ex­er­cise and the pro­grammes that will be car­ried over to the next year.

Sec­ond, at its sim­plest lev­el, it is an ex­er­cise in bud­get arith­metic. The min­is­ter re­quests ad­di­tion­al funds for spe­cif­ic min­istries, state en­ter­pris­es, or lo­cal gov­ern­ment bod­ies fac­ing fi­nan­cial short­falls or ris­ing op­er­a­tional costs. This some­times en­tails shift­ing be­tween min­istries.

Third, the min­is­ter’s speech pro­vides an in­ter­im overview of the coun­try’s eco­nom­ic per­for­mance, the for­eign ex­change po­si­tion, in­fla­tion, and fis­cal deficit to de­ter­mine whether the rev­enue pro­jec­tions were ad­e­quate. This is par­tic­u­lar­ly im­por­tant giv­en the de­lay in the pub­li­ca­tion of of­fi­cial sta­tis­ti­cal da­ta. Fourth, it is a mech­a­nism that al­lows the Gov­ern­ment to adopt new ini­tia­tives or re­tool ex­ist­ing pro­grammes in re­sponse to chang­ing eco­nom­ic con­di­tions.

This re­view is high­ly sig­nif­i­cant, giv­en that the 12-month eco­nom­ic out­look for T&T is cloud­ed by glob­al un­cer­tain­ty stem­ming from the war in the Gulf. The world is where it was on April 8th: a messy cease­fire that avoids full-scale war but al­lows low-lev­el con­flict, with no im­mi­nent so­lu­tion. The Strait of Hor­muz re­mains closed, and en­er­gy prices have been sup­pressed as the US brings its strate­gic re­serves to mar­ket. The IMF’s World Eco­nom­ic Out­look base­line sce­nario as­sumes that war dis­rup­tions end by Ju­ly 2026, with glob­al growth at 3.1 per cent (Trinidad and To­ba­go at 0.7 per cent). This looks rea­son­able at this stage. Things will change by the  Oc­to­ber bud­get speech.

How­ev­er, there are mat­ters that the min­is­ter must ad­dress. First, the price of su­per gaso­line was re­duced by $1 (14.3 per cent) in the 2026 bud­get speech. How­ev­er, since the clo­sure of the Strait of Hor­muz, en­er­gy prices have been ris­ing. US gaso­line prices have in­creased by rough­ly 50 per cent on av­er­age since the start of the con­flict in Iran in late Feb­ru­ary. The En­er­gy Cham­ber cal­cu­lat­ed that in Cari­com mar­kets where prices in­creased, the av­er­age in­crease was 14.9 per cent. Fu­el prices in Trinidad and To­ba­go re­main un­changed. This sug­gests that while the re­gion was not in­su­lat­ed from high­er in­ter­na­tion­al prices, gov­ern­ment pric­ing poli­cies, sub­si­dies, tax­es and reg­u­lat­ed pric­ing mech­a­nisms mod­er­at­ed the im­pact.

Mean­while, the en­er­gy trad­ing gi­ant Trafigu­ra, the ma­jor sup­pli­er to the Caribbean ter­ri­to­ries, re­port­ed a 51.8 per cent net prof­it.

The clear in­fer­ence is that im­port­ed fu­el prices have in­creased due to changes in glob­al con­di­tions. Since T&T pump prices re­main un­changed, one can safe­ly con­clude that they are be­ing sub­sidised. There was no pro­vi­sion for this in­creased ex­pen­di­ture in the 2026 bud­get speech. Since the hos­til­i­ties start­ed on Feb­ru­ary 28, the sub­sidy would af­fect on­ly 32 days of the midyear fig­ures. But the price ef­fect will con­tin­ue. This means an in­creased sub­sidy for the rest of the 2026 fi­nan­cial year. What is the ef­fect of this?

Sim­i­lar­ly, the Fi­nance Min­is­ter ad­mit­ted that the back­pay for the Pub­lic Ser­vices As­so­ci­a­tion union agree­ment was not in­clud­ed in the 2026 es­ti­mates be­cause he was be­ing “con­ser­v­a­tive”, as he did not know when the agree­ment would be set­tled. Al­so ex­clud­ed from the bud­get es­ti­mates were the in­creased Na­tion­al In­sur­ance Board of Trinidad and To­ba­go (NIBTT) con­tri­bu­tion rates, which took ef­fect on Jan­u­ary 5. The es­ti­mat­ed fig­ure was $3.8 bil­lion. The Prime Min­is­ter now in­di­cates that $2.8 bil­lion will be in­clud­ed in the mid-year sup­ple­men­ta­tion.

Are the new salaries in ef­fect, and are the new NIS rates be­ing ap­plied?  Gov­ern­ment re­ports on a cash ba­sis, mean­ing it ac­counts on­ly for monies spent or re­ceived and ig­nores amounts due and un­paid. How will the back­pay el­e­ment be ac­count­ed for, es­pe­cial­ly since the par­ties are still in dis­cus­sions over the amount to be paid in cash ver­sus non-cash?

Then there are the trans­fers to the Statu­to­ry Au­thor­i­ties, of which T&TEC and WASA are the largest. The lat­est avail­able fi­nan­cial state­ments for T&TEC that I was able to dis­cov­er are for 2021, and the au­dit re­port was “clean.”

The state­ments showed an op­er­at­ing loss of $1.4 bil­lion for 2021, with fi­nance costs of $1.1 bil­lion, and a net ac­cu­mu­lat­ed deficit of $10.4 bil­lion. The sim­ple con­clu­sion is that T&TEC is sur­viv­ing by virtue of its cred­i­tors, as its elec­tric­i­ty rates can­not cov­er its costs.

WASA’s fi­nan­cial state­ments were avail­able up to 2023, and the au­di­tors gave a dis­claimer of opin­ion. There was an op­er­at­ing loss of $556.5 mil­lion for the year af­ter a sub­ven­tion of $1.75 bil­lion, mean­ing that with­out the sub­ven­tion, the loss would have been $2.3 bil­lion. The ac­cu­mu­lat­ed deficit amount­ed to $4.995 bil­lion.

Wa­ter, elec­tric­i­ty, and a prop­er­ly func­tion­ing civ­il ser­vice are vi­tal to a coun­try’s sur­vival. The sim­ple con­clu­sion is that not every­thing can be sub­sidised, and sub­si­dies can­not last for­ev­er. The mod­el that pre­sumed the en­er­gy sec­tor would gen­er­ate the rents to fi­nance the sub­si­dies is over.

Mar­i­ano Browne is the CEO of the UWI Arthur Lok Jack Glob­al School of Busi­ness