Chairman of the Heritage and Stabilisation Fund's (HSF) board of governors Ewart Williams has called for a review of the HSF Act as an "urgent imperative" given recent volatility in the domestic and external economic environment.
In his statement for the fund's 2019 annual report, Williams, a former Central Bank governor, said since 2016, after public consultation, there was the view by many that considerations should be given to reviewing the objectives of the HSF and the way it contributes to fiscal and public debt sustainability and a resumption of economic growth – especially in light of structural changes in the global oil and gas markets.
Since 2014, these changes would have signified a new normal, likely to be characterised by significantly lower petroleum prices.
This, along with the uncertainties surrounding the domestic outlook for oil and gas production, suggested, that the prospect for accumulating large surpluses in the HSF was likely to be extremely limited over the next few years.
"Section 22 of the (HSF) Act of 2007 states that 'the provisions of the Act shall be subject to a review by the (Finance) Minister, who shall submit a report to the Parliament every five years.' However, in the twelve years of the fund’s existence, there has not been a comprehensive review by the Parliament. In light of the changes in the external and domestic environment discussed above, a review of the objectives and the operational mechanisms of the HSF Act of 2007, as required by the law, would now seem to be an urgent imperative."
Covid19 has brought the HSF to the forefront in debates about the economy, specifically how it is to be used. While there was not a comprehensive debate and review of the entire HSF Act this year, in March government introduced an amendment Miscellaneous Provisions (Heritage and Stabilisation Fund, Government Savings Bonds and Value Added Tax) 2020 to allow government to make withdrawals from the fund outside the previously mandated period of just once annually at the beginning of the financial year.
This change meant Government was able to withdraw some US$600 million (TT$4 billion) from the fund to help with fiscal stability since the covid19 pandemic wreaked havoc with the economy.
The fund, which is primarily invested in US equities and bonds did take a hit earlier when US stock markets plummeted, losing about US$300 million (TT$2 billion) or five percent of its value. As the markets recovered, so did the fund.
However, after closing the 2019 financial year (ending September 30, 2019) with a value of US$6.255 billion (TT$42.2 billion), the current value, according to a tweet from Finance Minister Colm Imbert on Wednesday, is US$5.9 billion.
Imbert added that the country's foreign reserves are now US$7.3 billion (TT$49.3 billion), or eight-and-a-half months of import cover. The HSF annual report was released on Wednesday and is available on the Ministry of Finance's website.