Finance Minister Colm Imbert yesterday defended his position on the withdrawal of $2.5 billion from the Heritage and Stabilisation Fund (HSF), saying if this was not done the country would have faced a crisis while Government would have been guilty of fiscal irresponsibility.
He said T&T’s overdraft had reached 100 per cent of its limit “and unless urgent action was taken, the Government would have been unable to pay salaries or pay for critical and essential goods and services.”
Speaking during yesterday’s sitting of Parliament, Imbert said the Government cannot whimsically use the HSF as a “bran tub” as claimed by the Opposition Leader Kamla Persad-Bissessar, since there are strict legal rules for drawdowns. He added, however, that the HSF legislation does not require parliament’s approval for a withdrawal, a fact Opposition members were aware of.
“To have a divisive parliamentary debate at a time when quick fiscal action is required cannot be good policy, or practical, and this fact was clearly envisaged by the Parliament in 2007 and by all governments since then,” Imbert said.
While Imbert envisaged no further drawdowns in fiscal 2016, he said if it becomes necessary to provide the required support for government expenditure in 2016, they would consider all options for financing the service of T&T, including the remaining available drawdown from the HSF. He said the maximum permitted drawdown for 2016 was US$675 million and Government only withdrew US$375 million. The HSF has over US$5.3 billion in its coffers to date, he noted.
“And with specific reference to the Heritage and Stabilisation Fund, it must be emphasised that the purpose of this fund is to offset serious shortfalls in revenue in periods of depressed petroleum prices. It is not, as some believe, a trophy to be kept on the shelf and never to be touched,” he said.
“In fact the legislation that established the Heritage Fund caters for drawdowns when the revenues from petroleum are lower than projected by a factor of ten per cent, whereas at this time we are facing a 75 per cent reduction in revenues from petroleum in 2016.”
For the period October 1, 2014, through September 30, 2015, Imbert said the revenue from petroleum was only TT$11.6 billion, below the projected petroleum revenue of TT$19.1 billion for fiscal 2015.
In totality, the projected shortfall in income from all revenue streams in 2016, Imbert said, was close to $10 billion, when compared to the September 2015 figures. In reality, Imbert said, the Government had over $9 billion in credit in its account at the Central Bank in 2008/2009, as a result of budget surpluses over the years.
“As a result, the Government was able to draw down on these surpluses in 2008/2009 to deal with the shortfall in revenues at that time. We have no such luxury,” he said.
“In its first two years in office, the previous UNC government used up all of the surpluses left by the PNM in the Central Bank, and then sent the government’s account into permanent overdraft. We came into office meeting a situation, in 2015, where the previous UNC government had burned through over $6 billion in credit it found in 2010 and had used up virtually all of the $9 billion.”
Fund separation coming
In delivering his statement, Imbert also sought to clarify his reason/s for the drawdown, which led to a lot of confusion and misconceptions by the national community.
“This was the only available source of funds in May 2016. If we had not done this the Government would have been guilty of fiscal irresponsibility and the country would have been in crisis.
“The HSF drawdown therefore was simply to finance the well-known budget deficit, not for any item in the Budget in particular. When I used the term for the service of Trinidad and Tobago in 2016, that is exactly what I meant.”
He said the drawdown “was simply added to the revenues we collect from other sources to help meet our expenditure commitments—all our expenditure commitments—both current and capital expenditure ... to pay bills.”
In answering the query that no indication of the HSF withdrawal was given to the country, Imbert said in his mid-budget review in April he had indicated that in 2016 Government would close the “$15 billion gap with borrowings and one-off items of extraordinary income, such as proceeds from sale of Clico assets, repayment of past lending from TGU, dividends from NGC, drawdowns from the HSF, the proceeds of the Phoenix Park IPO and so on.”
He explained that the HSF Act, which was approved by Parliament in 2007, called for a five-year review, which should have been completed by March 2012.
“I am told that sometime in early 2012 there were discussions with the World Bank in which the then minister of Finance (Winston Dookeran) participated and that a draft of an amendment to the HSF had been prepared. Between March 2012 and June 2015, the previous government had more than ample time to introduce the amendment, but it did not happen. It is, however, this government’s intention to undertake the necessary public consultation and bring the amendment to Parliament before the end of this year.”
He said Government will also move to separate the Heritage from the Stabilisation element.
Purpose of the HSF:
•Cushion the impact on or sustain public expenditure capacity during periods of revenue downturn whether caused by a fall in prices of crude oil or natural gas
•Generate an alternate stream of income so as to support public expenditure capacity as a result of revenue downturn caused by the depletion of non-renewable petroleum resources
•Provide a heritage for future generations of citizens of T&T, from savings and investment income derived from the excess petroleum revenues.