“Hav­ing pow­er is not near­ly im­por­tant as what you do with it.”–Roald Dahl

Man­age­ment’s task is al­ways to do the best, what­ev­er the eco­nom­ic con­di­tions. If mar­ket con­di­tions are favourable, then man­age­ment is ex­pect­ed to achieve the best pos­si­ble out­come. If ex­ter­nal mar­ket con­di­tions are un­favourable, then the task is to make the small­est loss. But man­age­ment is al­so re­spon­si­ble for seek­ing new op­por­tu­ni­ties to cre­ate sus­tain­able growth.

The Prime Min­is­ter and Cab­i­net are the coun­try’s man­age­ment team re­spon­si­ble for se­lect­ing and co­or­di­nat­ing the eco­nom­ic poli­cies to achieve the best re­sult. To be clear, no gov­ern­ment can make a coun­try pros­per­ous, but it must choose the poli­cies and de­ploy its re­sources to cre­ate an en­abling en­vi­ron­ment that will fa­cil­i­tate growth and en­gen­der con­fi­dence. The rest is up to the dy­namism and in­ge­nu­ity of the pri­vate sec­tor.

The fall in en­er­gy prices in 2014 and de­clin­ing nat­ur­al gas pro­duc­tion cre­at­ed a dif­fi­cult eco­nom­ic en­vi­ron­ment. An­gelin and Ju­niper tem­porar­i­ly re­versed the trend in falling gas pro­duc­tion. The Spot­light on En­er­gy in 2018 promised a new dawn, a new boom which did not ma­te­ri­alise. In­stead, the en­er­gy ma­jors ne­go­ti­at­ed high­er con­tract prices to NGC which were passed on to the petro­chem­i­cal sec­tor whilst in­ter­na­tion­al am­mo­nia and methanol prices were de­pressed. This led to plant clo­sures. Then came the pan­dem­ic in 2020 and so­cial dis­tanc­ing mea­sures which added to the eco­nom­ic de­pres­sion.

Re­liance on the ex­port of hy­dro­car­bons and their byprod­ucts ex­pos­es the coun­try to a roller coast­er ride. Since in­de­pen­dence, fis­cal pol­i­cy has been pro­cycli­cal, mean­ing that gov­ern­ment spends more when en­er­gy prices are high and when en­er­gy prices fall the coun­try goes in­to a de­pres­sion, a pro­longed mul­ti-year re­ces­sion. This has hap­pened three times; in the 1960s, in the 1980s and in 2014. Three booms dur­ing which the Gov­ern­ment tried to do too much fol­lowed by pe­ri­ods when it couldn’t do much.  

The Prime Min­is­ter elo­quent­ly sum­marised the po­si­tion in re­spond­ing to crit­i­cisms over his re­cent for­eign trip to vis­it some of T&T’s en­er­gy part­ners,  “With­out the earn­ings from [oil, gas and petro­chem­i­cals], our bud­getary arrange­ments would be ex­treme­ly chal­leng­ing and dire…it is in the in­ter­est of Trinidad and To­ba­go to en­sure that the best arrange­ments are in place in these three ar­eas–we have to un­der­stand that we are still heav­i­ly de­pen­dent…” ( Ex­press News­pa­per Sep­tem­ber 14)

There are three rea­sons why a pro­cycli­cal fi­nance strat­e­gy is not sus­tain­able.

First, de­pend­ing on one ma­jor sta­ple is in­her­ent­ly desta­bil­is­ing. Can mar­ket slumps or spikes be re­li­ably pre­dict­ed? How long will they last? What hap­pens in the in­ter­ven­ing pe­ri­od? Can the pub­lic with­stand pro­longed aus­ter­i­ty mea­sures with­out so­cial in­sta­bil­i­ty? Pub­lic sec­tor wage ne­go­ti­a­tions have been de­layed for nine years, since 2013. This has hap­pened twice be­fore. It un­der­mines the bar­gain­ing process there­by cre­at­ing con­di­tions which are more sus­cep­ti­ble to po­lit­i­cal in­flu­ence rather than eco­nom­ics in the process cre­at­ing eco­nom­ic dis­par­i­ty and so­cial in­equal­i­ty.

Sec­ond, are the eco­nom­ic buffers, the for­eign re­serves and the Her­itage and Sta­bil­i­sa­tion Fund (HSF) suf­fi­cient to car­ry the coun­try for pro­longed pe­ri­ods? The HSF is al­so sub­ject to eco­nom­ic volatil­i­ty. In his re­cent up­date, the fi­nance min­is­ter re­ferred to the HSF’s 2021 val­ue when mar­kets were buoy­ant. Since then, cen­tral banks in the largest mar­kets have re­spond­ed to the cur­rent in­fla­tion­ary con­di­tions by rais­ing in­ter­est rates mak­ing fi­nan­cial mar­kets more volatile and de­press­ing the val­ue of the stocks and bonds in which the HSF is in­vest­ed, di­min­ish­ing its val­ue.

Third, the hy­dro­car­bon in­dus­try faces an un­cer­tain fu­ture due to cli­mate change. The en­vi­ron­men­tal im­pact of cli­mate change is in­creas­ing­ly ev­i­dent sug­gest­ing that the in­dus­try has an un­cer­tain fu­ture. The move to re­new­ables and the in­creas­ing pop­u­lar­i­ty of elec­tron­ic ve­hi­cles in­di­cates a change of di­rec­tion for the en­er­gy sec­tor in­ter­na­tion­al­ly and is re­flect­ed in the chang­ing in­vest­ment pat­terns by the en­er­gy ma­jors.

T&T’s cur­rent favourable po­si­tion is due sole­ly to the for­tu­itous in­crease in en­er­gy prices aris­ing from the post-pan­dem­ic hard start and the war in Ukraine which has added volatil­i­ty to en­er­gy mar­kets. The re­al­i­ty is that do­mes­tic nat­ur­al gas pro­duc­tion is 37 per cent be­low peak pro­duc­tion and 25 per cent be­low 2018, while oil pro­duc­tion is 72 per cent low­er than its peak pro­duc­tion.

T&T’s eco­nom­ic ex­pe­ri­ences sug­gest that the eco­nom­ic pol­i­cy di­rec­tion needs to be re­bal­anced. The pub­lic ex­pec­ta­tion is that in­creased en­er­gy prices will lead to good times and more ex­pan­sive gov­ern­ment ex­pen­di­ture when the op­po­site is re­quired. Mixed mes­sages by the fi­nance min­is­ter en­cour­age this sen­ti­ment. Hav­ing a seat at the ta­ble is im­por­tant, but it is more im­por­tant what you do with it.