The longer the slump in oil and natural gas lasts, the more likely T&T could end up in an economic slump, says lecturer and economist, Dr Anthony Birchwood. If T&T has to borrow from any international financial organisation, he said, this country have to demonstrate that it is working hard to reform the economy.
“Right now, we are not taking hard measures to reform the economy, he said in his contribution to a post budget forum hosted by the Department of Economics at the University of the West Indies, St Augustine. Also taking part in the forum, chaired by economics lecturer Dr Daren Conrad, were senior lecturer Dr Roger Hosein, director, tax services at KPMG Nicole Joseph and president of the T&T Contractors Association Mikey Joseph.
Birchwood said the budget of the last administration was pegged against an oil price of US$80 a barrel and gas price at US$2.75 per mmbtu, with estimated revenue of $60.3 billion.
“This current regime took over and, of course, some of the stats had to be adjusted, so they set the budget at US$45 a barrel but the expected revenue is just like the last regime. So in other words, a lower oil price but they still set the same revenue.
“This is something to think about. How can you expect to have the same level of revenue with lower energy prices?”
Birchwood asked whether it was feasible. On the issue of debt borrowing, he said T&T needed to tread lightly: “Borrowing is not the answer.” He said T&T’s debt was 32 per cent in 2010 and by September 2015 moved up to 46.3 per cent. External debt remained low, as it moved from 8.0 per cent of GDP in 2010 to 9.2 per cent in September
“Opec is playing a strange game. Some of its members have large oil reserves. In order to have the same level of revenue, simply increase the volume of oil production. That’s a possibility with Opec but it doesn’t lie with all Opec countries,” he said.
“There are others like Venezuela and Nigeria who are struggling with the low oil price and who do not have vast reserves.”
Birchwood said confidence in oil investments has been shattered and economies will struggle when they do not have foreign direct investment.
“This is the situation right now in the globe. Many countries are struggling because of the slump in oil prices, the slump in Chinese economy and the slump in other major economies, so all of this is making foreign direct investment difficult.”
Concern about Works Ministry allocation
President of the T&T Contractors Association (TTCA) Mikey Joseph said the association is concerned about the $1.951 billion allocation to the Ministry of Works and Infrastructure. He said the ministry has numerous ongoing projects and those funds may not be sufficient to support new projects.
At one state agency alone, Joseph said, the draft total estimate is $2.176 billion and with a further 252.2 million for consideration in fiscal 2016.
He said the TTCA recognised that the timeline between the general election and the requirement to deliver a fiscal package in Parliament did not allow the newly-elected administration enough time to consider proper strategies for realignment of the economy. On the reintroduction of the property tax, Joseph said it was welcomed and essential.