Dipping into the piggy bank

It seemed surprising that Minister of Finance Colm Imbert would have to argue about the need to use the Heritage and Stabilisation Fund to tide the country through the remarkable and almost unprecedented circumstances of today.

Imbert was piloting the Miscellaneous Provisions (Heritage and Stabilisation Fund, Government Savings Bonds and Value Added Tax) Bill last week, an amendment to the bill that adjusts the normal terms under which money can be accessed from the fund.

Those changes add three emergency situations to trigger a withdrawal, a disaster area is declared, a dangerous infectious disease is declared or a precipitous decline in revenue based on the budgeted price of crude oil or natural gas. The bill passed unanimously with an authorisation to borrow an additional $10 billion.

The current drop in prices is the result of a split between Saudi Arabia and Russia who formed the OPEC+ cartel in 2016 after oil prices dropped to US$30 a barrel. The two major producers could not agree on the Saudi decision to increase oil production, and the coalition collapsed into a price war that’s impacted oil markets globally.

TT has long been warned about the impact of volatile petroleum markets beyond its control or influence but continues to lean heavily on oil and gas to justify large budgets and to buttress its exchange rate. The country now faces a staggering confluence of challenges, with revenue collapse smashing into the economic freeze that will inevitably follow the stalling of our economy that must – in the interests of safety – shutdown until the transmission of covid19 can be brought under control.

It’s a challenge that the whole world will be facing, but as is true with so much of the coronavirus pandemic, we must prepare to face the specific problem in our country on our own. That preparation must begin early in a situation in which the Finance Ministry’s best estimates suggest a revenue drop of $6-7 billion over the coming months coupled with demands on the state to ensure stability, and in many cases survival, in a shuttered economy that’s likely to cost more than $2.5 billion.

If there were ever a time for a national dip into the piggy bank, this is unquestionably it.

Government spending to support the economy during this time must encourage projects that not only address the current situation, but offer potential, through innovation and the potential for diversification, to bring future rewards in a world that will change after covid19.

There must also be a solid commitment to ensure that the fund is replenished when the economy returns to firmer ground.