In Fi­nance Min­is­ter Colm Im­bert’s June 3 af­fi­davit with re­gard to the ap­peal of the T&T Rev­enue Au­thor­i­ty (TTRA) Act to the Privy Coun­cil, he con­tex­tu­alised in­for­ma­tion re­lat­ing to the T&T econ­o­my in a way that he has not done be­fore, and may nev­er do again.

Some ex­am­ples of the in­for­ma­tion that Mr Im­bert framed in his af­fi­davit in­clude:

• The econ­o­my of T&T is an oil and gas-based econ­o­my, and the per­for­mance of the coun­try’s econ­o­my is heav­i­ly de­pen­dent on the in­ter­na­tion­al price for oil and for gas and the amount of oil and gas that is pro­duced in the coun­try;

• T&T has on­ly achieved a bud­get sur­plus once in the last 15 years. This was in 2022 and was due to an in­crease in oil and gas prices caused by the war in Ukraine. In that year oil prices ex­ceed­ed US$100.00 per bar­rel and nat­ur­al gas net­back prices were as high as US$8.00 per MMB­tu;

• The Gov­ern­ment’s na­tion­al bud­get for the fi­nan­cial year 2024 passed in Par­lia­ment on Oc­to­ber 24, 2023, was based on an oil price of US$85.00 per bar­rel and a nat­ur­al gas net­back price of US$5.00 per MMB­tu. How­ev­er, oil and gas prices for the first six months of fis­cal 2024 have been much low­er than the prices on which the bud­get was based. The weight­ed av­er­age price of oil pro­duced in T&T has fall­en be­low the pro­ject­ed US$85 per bar­rel, to $81.04 per bar­rel and the net­back price of nat­ur­al gas has been a mere US$3.22 per MMB­tu or 36 per cent be­low the bud­get price;

• It should be not­ed that rev­enue from nat­ur­al gas is two-thirds of all rev­enue from pe­tro­le­um (ie oil and gas), so this sig­nif­i­cant short­fall in the ac­tu­al price of gas for the first half of fis­cal 2024 ver­sus the pro­ject­ed price, is very se­ri­ous;

• The fall in oil and gas prices and low­er-than-ex­pect­ed pro­duc­tion of oil and gas has had a pro­found im­pact on the coun­try’s pe­tro­le­um rev­enues, lead­ing to a pro­ject­ed short­fall in rev­enue for 2024 of $5 bil­lion. When this sig­nif­i­cant short­fall is added to the ini­tial­ly es­ti­mat­ed bud­get deficit of $5 bil­lion for 2024, even with ad­di­tion­al one-off rev­enues from as­set sales, the coun­try’s deficit for 2024 is now ex­pect­ed to be as high as $9 bil­lion; and

• The in­ter­na­tion­al price for oil and gas is not ex­pect­ed to in­crease sig­nif­i­cant­ly in the near fu­ture. Fur­ther, T&T is a ma­ture en­er­gy province, hav­ing pro­duced oil for over 100 years, and is chal­lenged by nat­ur­al de­clines in oil and gas pro­duc­tion. In fact, oil pro­duc­tion in this coun­try is half of what it was 15 years ago, and gas pro­duc­tion is 35 per cent less than what it was 10 years ago. Such pro­duc­tion is not ex­pect­ed to im­prove un­til 2027, when it is ex­pect­ed that gas from Venezuela should be­come avail­able to the coun­try.

Mr Im­bert al­so made the point that the fall in the pro­duc­tion and glob­al mar­ket prices of oil and nat­ur­al gas “is a se­ri­ous cause for con­cern and makes the speedy op­er­a­tional­i­sa­tion of the Rev­enue Au­thor­i­ty even more im­per­a­tive.”

He re­ferred to the TTRA’s strate­gic plan, in which the statu­to­ry body out­lined that its im­ple­men­ta­tion is ex­pect­ed to achieve an in­crease in tax rev­enues of be­tween $3 bil­lion and $10 bil­lion an­nu­al­ly, with the au­thor­i­ty ex­pect­ing to re­tain its tax col­lec­tion lev­els in its first year of op­er­a­tion, fol­lowed by in­creas­es in rev­enue equiv­a­lent to one per cent and three per cent of GDP in the sec­ond and third years of its op­er­a­tion.

Giv­en that T&T’s nom­i­nal GDP of $191 bil­lion in 2024—ac­cord­ing to the In­ter­na­tion­al Mon­e­tary Fund’s (IMF) Ar­ti­cle IV Con­sul­ta­tion with the T&T au­thor­i­ties pub­lished on June 5—the 1 and 3 per cent of GDP would be equiv­a­lent to an in­crease in rev­enue of ap­prox­i­mate­ly $2 bil­lion and $6 bil­lion, re­spec­tive­ly.

Sec­ond­ly, Mr Im­bert seems to be sug­gest­ing that T&T’s pro­duc­tion of oil and nat­ur­al gas would con­tin­ue to de­cline grad­u­al­ly un­til fis­cal 2027 when “it is ex­pect­ed that gas from Venezuela should be­come avail­able to the coun­try.”

The Min­is­ter of Fi­nance ob­vi­ous­ly hopes that he will be suc­cess­ful at the Privy Coun­cil and that T&T should start reap­ing the ben­e­fits of the im­ple­men­ta­tion of the TTRA by col­lect­ing three per cent of GDP, or $6 bil­lion, by fis­cal 2027.

Read­ing Mr Im­bert’s af­fi­davit, ra­tio­nale, non-par­ti­san minds would con­clude that our erst­while Min­is­ter of Fi­nance is pin­ning the coun­try’s medi­um-term for­tunes, that is be­tween three and five years, to suc­cess at this coun­try’s high­est court AND that all of the ob­sta­cles to the de­vel­op­ment of the Cocuina and Drag­on gas fields will be hur­dled.

And he must take some so­lace in the fact that the IMF, in its re­cent re­port on T&T, states, “The bal­ance of risks is tilt­ed to the down­side in the near term but to the up­side in the medi­um term...In the medi­um term, up­side risks stem from new nat­ur­al gas projects (eg, Drag­on field) and the suc­cess­ful im­ple­men­ta­tion of planned struc­tur­al re­forms which could boost growth.”

This col­umn has nev­er been, and will nev­er be, one of those prophets of doom and gloom that cer­tain mem­bers of the cur­rent ad­min­is­tra­tion like to point to, but this ques­tion aris­es: what hap­pens to the T&T econ­o­my if the Gov­ern­ment fails at the Privy Coun­cil and there is some hic­cup in the de­vel­op­ment of the cross-bor­der and near-bor­der nat­ur­al gas fields?

What is the fall-back plan, or even think­ing, if one of those even­tu­al­i­ties oc­cur or if both the TTRA and the nat­ur­al gas de­vel­op­ments are de­layed be­yond Sep­tem­ber 30, 2027?

What is T&T’s un­di­ver­si­fied econ­o­my go­ing to look like be­tween now and Sep­tem­ber 30, 2027, if the Drag­on and Cocuina gas rev­enues are not flow­ing to the Rev­enue Au­thor­i­ty by the end of fis­cal 2027?

Here is Mr Im­bert’s take on those three ques­tions: “Ac­cord­ing­ly, the next three years will be very chal­leng­ing for the coun­try from a rev­enue per­spec­tive. In fact, un­less ad­di­tion­al tax rev­enue can be col­lect­ed through the im­prove­ments in tax ad­min­is­tra­tion that will come with a ful­ly op­er­a­tional Rev­enue Au­thor­i­ty, the Gov­ern­ment will soon be faced with very dif­fi­cult choic­es in terms of main­tain­ing the cur­rent lev­els of sub­si­dies, grants, free ser­vices and so­cial pro­grammes. No­tably, as the Gov­ern­ment grap­ples with sig­nif­i­cant­ly re­duced rev­enues, there are de­mands for more and more Gov­ern­ment ex­pen­di­ture on in­fra­struc­ture and so­cial pro­grammes.”

This is an ad­min­is­tra­tion that has:

—Re­duced the per­cent­age of the an­nu­al rentable val­ue of the Prop­er­ty Tax from three per cent to two per cent;

—Not tak­en a de­ci­sion, in close to a year, on the rec­om­men­da­tion by the Reg­u­lat­ed In­dus­tries Com­mis­sion to in­crease elec­tric­i­ty rates;

—Not fol­lowed through on its plan from the 2021 bud­get to lib­er­alise gaso­line and diesel prices; and

—Not even con­sid­ered the flota­tion of the ex­change rate or the pri­vati­sa­tion of the vast State sec­tor as means of rais­ing rev­enue.

This is an ad­min­is­tra­tion whose clear pref­er­ence is to kick the ad­just­ment can as far down the road as pos­si­ble while con­tin­u­ing to record fis­cal deficits.

Those deficits will in­evitably dri­ve the gen­er­al gov­ern­ment debt-to-GDP ra­tio from 72.2 per cent in March 2024 back to, or be­yond, the 89.8 per cent lev­el from Sep­tem­ber 2020.