T&T will end up in an In­ter­na­tion­al Mon­e­tary Fund-sup­port­ed pro­gramme by next year, econ­o­mist Mar­la Dukha­ran has pre­dict­ed as she said the $15.5 bil­lion deficit be­ing pro­ject­ed by Fi­nance Min­is­ter Colm Im­bert may just be the tip of the fi­nan­cial ice­berg fac­ing the coun­try.

“We will have to go to the IMF by next year just like Bar­ba­dos had to,” the econ­o­mist said.

Dukha­ran made the state­ment as she an­tic­i­pat­ed that the size of this coun­try’s fis­cal deficit may re­al­is­ti­cal­ly be even $5 bil­lion more than the lat­est pro­jec­tion by Im­bert.

Speak­ing in the Par­lia­ment on Mon­day, Im­bert said that this coun­try’s fis­cal deficit for 2020 is now ex­pect­ed to ex­pand to $15.5 bil­lion.

“Ac­cord­ing­ly, our fis­cal deficit for fis­cal 2020, which was orig­i­nal­ly es­ti­mat­ed at $5.3 bil­lion, is now ex­pect­ed to ex­pand to $15.5 bil­lion, $10.2 bil­lion high­er than was en­vis­aged in our FY 2020 Bud­get,” Im­bert stat­ed.

In terms of in­ter­na­tion­al fi­nan­cial as­sis­tance to ad­dress the un­prece­dent­ed fi­nan­cial de­mands of COVID-19, the coun­try is sourc­ing US$300M (TT$2B) from var­i­ous mul­ti­lat­er­al agen­cies – US$20m from the World Bank, US$130m from the IADB and US$150m from the De­vel­op­ment Bank of Latin Amer­i­ca (CAF), Im­bert said.

He said the coun­try is al­so pur­su­ing a fur­ther US$500m ($3.4b) for bud­getary sup­port from oth­er ex­ter­nal sources.

In ad­di­tion to this the coun­try has al­so tak­en steps to al­low for emer­gency draw­downs from the Her­itage and Sta­bil­i­sa­tion Fund (HSF), not ex­ceed­ing US$1.5 bil­lion ($10 bil­lion) in any giv­en year, for bud­getary sup­port in ex­cep­tion­al cir­cum­stances, such as the cur­rent pan­dem­ic, Im­bert said.

The cur­rent val­ue of the HSF is US$6.1 bil­lion.

Im­bert said so far the gov­ern­ment has not with­drawn a dol­lar from the HSF.

“I wish to as­sure all con­cerned, there­fore, that draw­downs will be made from the fund in a struc­tured man­ner, on­ly as and when re­quired, and not ar­bi­trar­i­ly or by vapse,” he said.

But Dukha­ran in­sist­ed the way Im­bert cal­cu­lates the deficit does not paint the re­al pic­ture, as his fig­ure usu­al­ly in­cludes fi­nanc­ing items such as the sale of as­sets and the rais­ing of bonds and not just rev­enue items.

With­out the fi­nanc­ing items, Dukha­ran said the true size of the orig­i­nal fis­cal deficit fac­ing T&T for 2020 would have been around $8 bil­lion.

With those things be­ing con­sid­ered Dukha­ran said the deficit the coun­try will be fac­ing this fis­cal could be clos­er to $20 bil­lion.

“And that’s a huge fig­ure,” Dukha­ran said.

Dukha­ran ar­gued now is not the time for the gov­ern­ment to wor­ry about debt to GDP ra­tios or pos­si­ble down­grades.

She said the fo­cus should be sta­bil­is­ing the econ­o­my and en­sur­ing that we can re­cov­er prop­er­ly when the time comes.

“Now is the time to wor­ry about feed­ing peo­ple, and mak­ing sure that when we come out of this we have an econ­o­my that can re­cov­er,” she said.

Dukha­ran added that while the coun­try needs to put mea­sures in place to en­sure the spread of the COVID-19 is stopped, if the sit­u­a­tion is not han­dled prop­er­ly it can ac­tu­al­ly de­stroy the pri­vate sec­tor.

“Right now it is about keep­ing the pa­tient alive but we have to en­sure that when the blood starts flow­ing in the sys­tem again the pa­tient is in as good as pos­si­ble a po­si­tion to re­cov­er,” she said.

Dukha­ran opined that the gov­ern­ment needs to al­so look at that fig­ure than the pri­vate sec­tor re­quires in or­der to keep the lights on.

So the fig­ure that is fac­ing us as a coun­try is the fis­cal deficit plus the fig­ure need­ed to help the pri­vate sec­tor re­cov­er, she said.

One way the gov­ern­ment can ad­dress this fi­nan­cial ice­berg is by rais­ing a high val­ued bond do­mes­ti­cal­ly in TT dol­lars with a 15-year du­ra­tion since we are not go­ing to come out of this predica­ment any time soon, she said.

Dukha­ran sug­gest­ed that this bond should be in de­nom­i­na­tions as small as $1,000 each to en­sure that there are many bond­hold­ers.

She ar­gued this would not be re­struc­tured if and when we en­ter the IMF-pro­gramme.

“We will have to go to the IMF and say please help us and if we do this (raise this bond) it will bide us some time,” she said.

“We need to do this now, we need to bor­row big, bor­row hard, or go home. We have to try every­thing be­hind this,” she said.

Dukha­ran said the bond will take ex­cess liq­uid­i­ty out of the bank­ing sys­tem and al­so sap up some of the liq­uid­i­ty on the ex­change rate since we will be fac­ing a bal­ance of pay­ment cri­sis.

The econ­o­mist an­tic­i­pat­ed the coun­try we will run out of for­eign ex­change in the next eight to ten months.

Apart from the COVID-19 pan­dem­ic the dras­tic fall in oil prices has hit T&T hard.

“This re­sults in a pro­ject­ed loss of rev­enue in fis­cal 2020 of $9.2 bil­lion, to which must be added an­oth­er net $1 bil­lion in ex­tra­or­di­nary ex­pen­di­ture. With­in that $9.2 bil­lion rev­enue loss, we es­ti­mate a loss of $3.8 bil­lion in tax­es on In­comes and Prof­its, and loss­es of $750 mil­lion in Busi­ness Levy and Green Fund Levy, $600 mil­lion in tax­es on Goods and Ser­vices and In­ter­na­tion­al Trade, $2.5 bil­lion in Roy­al­ties and Pro­duc­tion Shar­ing and $1.2 bil­lion in Prof­its from State En­ter­pris­es, among oth­er ar­eas,” Im­bert said.

“There is no ques­tion that fis­cal 2020 will be ex­cep­tion­al­ly dif­fi­cult even if the pan­dem­ic fades in the sec­ond half of the year thus al­low­ing for a grad­ual lift­ing of the con­tain­ment mea­sures and a re-open­ing of the econ­o­my. In­deed, the April 2020 World Eco­nom­ic Out­look en­vis­ages a par­tial re­cov­ery in 2021. How­ev­er, there is tremen­dous un­cer­tain­ty around the out­look, giv­en that it can get worse,” he said

Econ­o­mist Dr Vaalmik­ki Ar­joon said that the “whop­ping” $15 bil­lion deficit cur­rent­ly be­ing fore­cast by Im­bert maybe even worse than that.

Im­bert said that the coun­try will be bas­ing its bud­get on a “con­ser­v­a­tive” oil price of $25 per bar­rel for oil for the rest of the year and $1.80 per MMB­TU for nat­ur­al gas.

Ar­joon said this oil price is “still too high”.

“From my per­spec­tive US$25 is still yet a bit too high but it is more in line with where prices are av­er­ag­ing right now,” Ar­joon said.

“If it were me I would have dropped that price that he is pre­dict­ing it on. I would have used a more con­ser­v­a­tive val­ue of US$20,” he said.

Ar­joon said in the last four fis­cal years T&T would have spent $202 bil­lion but on­ly re­ceived $171 bil­lion in rev­enue leav­ing us with a to­tal deficit of $31 bil­lion.

“And now with this ad­di­tion­al $15 bil­lion deficit that’s go­ing to take us to a grand to­tal of $46 bil­lion in deficit in five years,” Ar­joon said.

Ar­joon said, un­for­tu­nate­ly, the coun­try did not in­sti­tute mea­sures to en­sure that the non-en­er­gy sec­tors were suf­fi­cient­ly de­vel­oped to pro­vide us with more rev­enue.

He ar­gued the gov­ern­ment needs to not on­ly look at sav­ing lives but al­so sav­ing liveli­hoods.