Imbert: Revenue shortfall could reach $5b

The revised revenue shortfall for 2020 could be as high as $5 billion, Finance Minister Colm Imbert said Monday, as the country reels from the collapse in international commodity prices, as well as the possible economic fallout from the precautions taken to mitigate the covid19 pandemic.

"We have two problems we are facing right now – a collapse of commodity prices and the business slowdown that will naturally come from the precautions taken to deal with the pandemic," Imbert said at a media briefing following an emergency Cabinet meeting at the Diplomatic Centre in St Ann's. He gave an overview of the economy, noting the signs of recovery. But in the last two weeks, that outlook drastically changed when, because of investor uncertainty over covid19, international stock markets tumbled, and then, compounding that, an oil price war between Russia and Saudi Arabia in a bid to drive American shale producers out of the market, saw oil prices nosediving from US$63 per barrel in January to US$29 per barrel on Monday. Natural gas prices, which averaged about US$2 per mmbtu in January are now US$1.81 per mmbtu on Tuesday. Last week, Imbert announced that the government would revise its price estimates for oil from US$60 per barrel to US$40 per barrel and natural gas from US$3 to US$1.80 per mmbtu. He had also then estimated the revenue shortfall would be $3.5 billion.

"Based on our calculations, so far, in terms of what has happened to oil and gas prices we expect to lose $4.5 billion. Between last week and this week, when you factor in Green Fund and Unemployment levy, another billion goes. We are now at -$4.5 billion. This takes no account for the slowdown in business activity and the natural declines in activities because of the (covid19) precautions. If I have to make my best estimate we will lose over $5 billion in revenue from the oil price shock and also the conditions arising from the precautions taken regards to the virus," Imbert said.

Imbert did say last week the government would have to consider alternative means of financing the budget deficit, which would now be projected at $10 billion, including borrowing, dipping into the Heritage and Stabilisation Fund, and selling state assets.

At the post-Cabinet briefing, he noted that the Andean Development Bank (CAF) has made available a US$400,000 (TT$2.7 million) grant to support its members (of which TT is one) in dealing with the covid19 pandemic. As a full member of CAF, he added, the country can also access a US$50 million loan with a grace period of two years for immediate emergency funding.

The Prime Minister, also at the briefing, added that whatever option is available to help the country deal with the pandemic via international institutions like the International Monetary Fund, the Inter-American Development Bank or the World Bank, "to the extent that there are support mechanisms, we will access every single one of them."

"This is something that would require this kind of intervention. We were going along managing our expenditure and our debt, our revenue. Our debt profile was getting a little steep. then this thing came up on us," Dr Rowley said.