Based on da­ta avail­able from the CSO in Sep­tem­ber 2015, it was as­sumed that there would be vir­tu­al­ly no eco­nom­ic growth in 2015, ie a flat econ­o­my, and there would be a de­cline of ap­prox­i­mate­ly 1.4% of GDP in 2016. While there are still no of­fi­cial es­ti­mates of GDP from the CSO for 2015, be­cause of the dys­func­tion­al con­di­tion that or­gan­i­sa­tion was left in by our pre­de­ces­sors, it is clear that the ac­tu­al eco­nom­ic per­for­mance in fis­cal 2015 was much worse than orig­i­nal­ly an­tic­i­pat­ed.

Rather than ze­ro growth, re­al GDP in 2015 is now es­ti­mat­ed by the Cen­tral Bank to have de­clined by 2%. In fact, the lat­est da­ta from the Cen­tral bank has in­di­cat­ed that there was a de­cline in eco­nom­ic growth in all four quar­ters of 2015, start­ing from Jan­u­ary 2015. And for 2016, be­cause of the in­or­di­nate­ly long slump in oil prices, it is now es­ti­mat­ed that there will be a fur­ther de­cline of 2% of GDP.

Fis­cal Op­er­a­tions April-Sept 2016

(look­ing for­ward)–Rev­enue

To be safe, fis­cal op­er­a­tions dur­ing the sec­ond half of the fis­cal year will now be based on an oil price of US$35 per bar­rel and a gas price of $2.00 per mmb­tu. This would im­ply an­oth­er siz­able short­fall in en­er­gy tax re­ceipts, com­pared with the bud­get pro­jec­tions.

Col­lec­tions of do­mes­tic tax­es (in­clud­ing VAT) are still lag­ging be­hind bud­get pro­jec­tions due in large part to the eco­nom­ic slow­down, the de­pressed en­er­gy sec­tor, and com­pli­ance is­sues. The Gov­ern­ment there­fore in­tends in the sec­ond half of this year to launch an ag­gres­sive ef­fort to col­lect all tax ar­rears and to en­force com­pli­ance, and in par­tic­u­lar, in re­spect of VAT and gam­ing tax­es.

Re­gard­ing Cli­co, I have re­stored or­der and busi­ness com­mon sense to this process, and we are now back on track in terms of re­cov­er­ing the $20 bil­lion plus of pub­lic funds that has been pumped in­to Cli­co. Ac­cord­ing­ly, I have re­quest­ed the Cen­tral Bank, with whom I now meet reg­u­lar­ly, to dis­pose, strict­ly in ac­cor­dance with the share­hold­ers' agree­ment, of the re­main­ing MIHL shares owned by Cli­co, at the val­u­a­tion price, which is in the vicin­i­ty of $2 bil­lion, as well as Cli­co's tra­di­tion­al port­fo­lio of in­sur­ance poli­cies and oth­er as­so­ci­at­ed as­sets, val­ued at ap­prox­i­mate­ly $1 bil­lion. We ex­pect these as­set sales to be com­plet­ed dur­ing this fis­cal year, since, as Max Sen­house used to say, "we need the mon­ey."

We must now find ways and means of cre­at­ing new rev­enue streams. To bol­ster the rev­enue pic­ture and sup­port on­go­ing ef­forts to con­serve for­eign ex­change, the Gov­ern­ment in­tends to in­tro­duce the fol­low­ing mea­sures, among oth­ers viz:

A levy of 7% on on­line pur­chas­es of goods and ser­vices through the In­ter­net from re­tail com­pa­nies res­i­dent over­seas, that are not sub­ject to tax­a­tion in Trinidad and To­ba­go, such as for ex­am­ple, Dell, Wal­mart, Sta­ples and Ama­zon. This is not a new con­cept and there is well es­tab­lished prece­dent for a tax of this na­ture in coun­tries such as the USA, UK and New Zealand. On­line pur­chas­es are now a sig­nif­i­cant area of for­eign ex­change de­mand, which is putting a strain on our re­serves, since cred­it card trans­ac­tions are set­tled al­most im­me­di­ate­ly. This tax is in­tend­ed to help man­age the in­crease in for­eign ex­change out­flows from on­line pur­chas­es, re­duce rev­enue leak­age and as­sist lo­cal man­u­fac­tur­ers and ser­vice com­pa­nies to com­pete with over­seas re­tail­ers. This mea­sure is sched­uled to take ef­fect by Sep­tem­ber 2016 and it will re­quire dis­cus­sions with the banks and cred­it card com­pa­nies to make it work.

An in­crease of 50% in cus­toms du­ty and mo­tor ve­hi­cle tax on lux­u­ry ve­hi­cles, start­ing with pri­vate mo­tor ve­hi­cles with an en­gine size ex­ceed­ing 1999cc. This mea­sure will take ef­fect im­me­di­ate­ly.

Bet­ter col­lec­tions of tax­es due from the gam­ing and gam­bling In­dus­try un­der ex­ist­ing leg­is­la­tion.

In­creased tax­es on al­co­hol and to­bac­co prod­ucts. This mea­sure will take ef­fect in May 2016 af­ter the pas­sage of the Fi­nance Bill No 2.

How­ev­er, with all these mea­sures, in­clud­ing the new tax­es and im­prove­ments in tax ad­min­is­tra­tion, to­tal rev­enue re­ceipts will not by them­selves achieve the orig­i­nal Bud­get es­ti­mate, nor al­low all of the planned ex­pen­di­ture, such as the full amounts of ex­pen­di­ture con­tem­plat­ed by these vari­a­tions of ap­pro­pri­a­tion.

The re­vised es­ti­mate for cur­rent rev­enue in fis­cal 2016 is now $52.68 bil­lion as com­pared to $60.28 bil­lion in the orig­i­nal Bud­get es­ti­mates, a short­fall of $7.6 bil­lion. The ma­jor short­falls in rev­enue in­clude tax­es from oil com­pa­nies, at an es­ti­mat­ed $2.4 bil­lion, oth­er com­pa­nies at $1 bil­lion and VAT at $3 bil­lion, due in no small mea­sure to the down­turn in the en­er­gy sec­tor.

Ex­pen­di­ture

It is not wide­ly known that the fu­el sub­sidy has cost Trinidad and To­ba­go $31 bil­lion over the last 10 years and as oil prices trend­ed up­wards in the 2009 to 2014 pe­ri­od, the sub­sidy av­er­aged over $3.5 bil­lion per year and ex­ceed­ed 2% of GDP. It is al­so not wide­ly un­der­stood that for years, we have im­port­ed ex­pen­sive oil, processed it in our re­fin­ery and then sold pe­tro­le­um prod­ucts to the pub­lic at a loss. At one stage when the price of oil ex­ceed­ed $100 per bar­rel, the fu­el sub­sidy cost in ex­cess of $6 bil­lion per year.

Ac­cord­ing­ly, to kick­start the process of na­tion­al di­a­logue on this mat­ter, the fol­low­ing prices will take im­me­di­ate ef­fect:

The price of su­per gaso­line will be in­creased by 15% to $3.58 per litre, and the price of diesel will be sim­i­lar­ly in­creased by 15% to $2.00 per litre.

This will mean that su­per gaso­line will no longer be sub­sidised at cur­rent oil prices, where­as diesel will con­tin­ue to be sub­si­dized at this time by ap­prox­i­mate­ly $1 per litre.

Fur­ther, it is the Gov­ern­ment's in­ten­tion to in­tro­duce a new fu­el pric­ing regime in this year 2016, that will re­sult in price ad­just­ments for fu­el, up or down, based on changes in the price of oil and pe­tro­le­um prod­ucts, as ob­tains in most coun­tries. We await the com­ments of the na­tion­al com­mu­ni­ty on this pro­pos­al.

On the flip side, Madam Speak­er, as part of our en­er­gy pol­i­cy and to help pro­tect the en­vi­ron­ment, the Gov­ern­ment will re­move all tax­es on CNG, elec­tric and hy­brid cars with en­gine sizes up to a max­i­mum of 1999cc. The Gov­ern­ment will al­so be­gin the process of con­vert­ing all gov­ern­ment ve­hi­cles as well as the fast fer­ries and wa­ter taxis to CNG and/or al­ter­na­tive pow­er sources.

I had men­tioned, Madam Speak­er, the Gov­ern­ment's in­ten­tion to in­crease cap­i­tal ex­pen­di­ture dur­ing the sec­ond half of this fis­cal year. We have been work­ing over the last 6 months and we now ready to go with a num­ber of ma­jor de­vel­op­ment projects, in­clud­ing ma­jor pub­lic hous­ing ini­tia­tives and road im­prove­ment projects, among oth­er projects, such as schools, com­mu­ni­ty and sport­ing fa­cil­i­ties, which my col­leagues will ad­dress in more de­tail dur­ing this de­bate.

How­ev­er, I wish at this stage to ad­vise this House and the na­tion­al pop­u­la­tion of the Gov­ern­ment's de­ci­sion with re­gard to the pro­posed mass tran­sit project. As we in­di­cat­ed dur­ing the 2015 elec­tion cam­paign, it was our in­ten­tion up­on as­sum­ing of­fice to im­me­di­ate­ly re­quest tech­ni­cal as­sis­tance from the In­ter-Amer­i­can De­vel­op­ment Bank to re­view the cost and fea­si­bil­i­ty of this project.

We have done so, and it has been de­ter­mined by the ex­perts at the IDB that the pro­posed mass tran­sit project is ex­pen­sive and not fea­si­ble at this time in the present en­vi­ron­ment of se­vere­ly de­pressed oil and gas prices. If oil were still $100 per bar­rel, it would be a dif­fer­ent sto­ry, but with oil at $37 per bar­rel, we sim­ply can­not as a coun­try af­ford to pro­ceed with this project at this time.

Ac­cord­ing­ly, we are shift­ing fo­cus to­wards im­prov­ing our road in­fra­struc­ture in or­der to ease traf­fic con­ges­tion and to as­sist the trav­el­ling pub­lic, we will al­so put more pub­lic trans­porta­tion ve­hi­cles on the road, thus fa­cil­i­tat­ing pub­lic trans­port at sub­si­dized prices. Some of the road im­prove­ment projects that we have iden­ti­fied for im­me­di­ate im­ple­men­ta­tion in­clude the fol­low­ing:

The Waller­field to Man­zanil­la High­way, which in­cludes a ring road round San­gre Grande

The Curepe In­ter­change

The Va­len­cia to To­co Free­way

Up­grade of the Moru­ga Road

Com­ple­tion of the Pt Fortin High­way

The San Fer­nan­do to Princes Town High­way

A Medi­um Term Fis­cal Strat­e­gy

The dra­mat­ic weak­en­ing of oil and gas prices dur­ing the first half of the year has prompt­ed a re­con­sid­er­a­tion of the gov­ern­ment's orig­i­nal tar­get of achiev­ing fis­cal bal­ance by 2018. In­stead spread­ing the fis­cal ad­just­ment to 2019-2020 would seem to be a more re­al­is­tic tar­get.

This fis­cal ob­jec­tive is pred­i­cat­ed on the as­sump­tion that i) GDP growth will be­gin to re­cov­er in 2017, based on an ex­pect­ed rise in gas pro­duc­tion, ii) a pick-up in pub­lic in­vest­ment; and iii) an in­crease in pri­vate sec­tor ac­tiv­i­ty as con­sumer and busi­ness con­fi­dence strength­ens and the pri­vate sec­tor takes ad­van­tage of the fis­cal in­cen­tives that we in­tend to de­vel­op and in­tro­duce to stim­u­late in­vest­ment in man­u­fac­tur­ing, con­struc­tion and ser­vices. The medi­um term fis­cal sce­nario al­so as­sumes a mod­est re­cov­ery in oil and gas prices which are pro­ject­ed to reach US$55 by 2018.

The For­eign Ex­change Regime

Over the last 6 months, our ex­change rate has moved 3.7%, from 6.37 TT dol­lars to 1 US dol­lar to 6.61 TT dol­lars to 1 US dol­lar. As Min­is­ter of Fi­nance, I am of the view, af­ter con­sid­er­a­tion of all rel­e­vant fac­tors and af­ter seek­ing the ad­vice of ex­perts, both here in Trinidad and over­seas, that our ex­change rate should not fluc­tu­ate at this time by more than 7% from the rate of ex­change that pre­vailed in Sep­tem­ber 2015. Ap­pro­pri­ate mea­sures will there­fore be tak­en to en­sure that our ex­change rate does not move by more than a fur­ther 3.3% from to­day's rate.

While we are in dif­fi­cult times, and our econ­o­my has been dealt a heavy blow, this Gov­ern­ment has a plan for eco­nom­ic re­cov­ery, a work­able plan. It in­volves spread­ing the bur­den of ad­just­ment across the so­ci­ety and get­ting use to the fact that as the Econ­o­mists like to say, that we are in an era of a "new nor­mal", where we can no longer de­pend on oil to save us and we must now turn to the non-oil sec­tor, to man­u­fac­tur­ing, to com­merce and to trade in ser­vices to main­tain our stan­dard of liv­ing, pro­tect jobs and achieve our na­tion­al de­vel­op­ment ob­jec­tives. Most im­por­tant­ly, we must now cut our cloth to suit our mea­sure.