Al­isa De­o­nanan

Pol­i­cy An­a­lyst

TTEITI Sec­re­tari­at

Trinidad and To­ba­go’s fu­ture de­vel­op­ment is un­de­ni­ably in­ter­twined with the coun­try’s oil and gas sec­tor. Rev­enue from the sec­tor serves as a key dri­ver for growth and will fi­nance any fu­ture di­ver­si­fi­ca­tion ef­forts by the Gov­ern­ment.

Giv­en glob­al de­mand and sup­ply im­bal­ances, un­pre­dictable weath­er pat­terns and geo-po­lit­i­cal ten­sions, since 2011 there has been a con­cern­ing trend in de­clin­ing Gov­ern­ment ex­trac­tive sec­tor rev­enue punc­tu­at­ed by mar­gin­al peaks. Con­cur­rent­ly, Gov­ern­ment’s so­cial sec­tor spend­ing has ex­hib­it­ed con­sis­ten­cy, prompt­ing a cru­cial ques­tion: what will be the im­pact on so­cial ex­pen­di­ture if there is a marked de­cline in oil and gas rev­enue?

The volatil­i­ty in­her­ent in ex­trac­tive sec­tor rev­enue prompts re­flec­tion on how these fluc­tu­a­tions may af­fect vul­ner­a­ble groups, in­clud­ing the el­der­ly, low-in­come house­holds, dis­abled, sick, un­em­ployed, and uni­ver­si­ty stu­dents.

Giv­en the im­por­tance of so­cial ex­pen­di­ture, which ac­counts for 41 per cent of oil and gas rev­enue, ex­plor­ing how a 20 per cent de­cline in en­er­gy rev­enues im­pacts so­ci­ety or those in need is worth ex­plor­ing.

The Trinidad and To­ba­go Ex­trac­tive In­dus­tries Trans­paren­cy Ini­tia­tive (TTEITI) took on the ques­tion.

The EITI stan­dard prompts coun­tries to fos­ter greater di­a­logue on rev­enue man­age­ment and ex­pen­di­ture. More specif­i­cal­ly, the ob­jec­tive of re­quire­ment 5.3 of the 2023 EITI Stan­dard is to “strength­en pub­lic over­sight of the man­age­ment of ex­trac­tive rev­enues; the use of ex­trac­tive rev­enues to fund spe­cif­ic pub­lic ex­pen­di­tures and the as­sump­tions un­der­ly­ing the bud­get process, in­clud­ing con­sid­er­a­tions re­lat­ed to rev­enue sus­tain­abil­i­ty.”

In keep­ing with this ob­jec­tive, the TTEITI in col­lab­o­ra­tion with the EITI In­ter­na­tion­al Sec­re­tari­at, de­vel­oped a mod­el to project ex­trac­tive sec­tor rev­enue and its im­pact on so­cial ex­pen­di­ture. The mod­el lever­ages pub­licly avail­able da­ta pri­mar­i­ly sourced from TTEITI Sum­ma­ry Da­ta tem­plates, the Min­istry of Fi­nance bud­get doc­u­ments and the Min­istry of En­er­gy and En­er­gy In­dus­tries (MEEI) bul­letins.

The mod­el projects ex­trac­tive rev­enue and its im­pact on so­cial ex­pen­di­ture up to 2033 if oil and gas rev­enue de­clined by 20 per cent. The mod­el us­es his­tor­i­cal so­cial ex­pen­di­ture, pro­ject­ed oil and gas pro­duc­tion and con­ser­v­a­tive oil and gas prices of US$80 per bar­rel and US$3 per mil­lion British ther­mal unit (see Chart 1, 2, 3).

So­cial ex­pen­di­ture in Trinidad and To­ba­go, av­er­aged TT$6.5 bil­lion from 2011-2023, has demon­strat­ed sta­bil­i­ty, with the mod­el re­view­ing pro­grammes such as Se­nior Cit­i­zens Pen­sion (SCP) and CEPEP. The mod­el demon­strates that so­cial ex­pen­di­ture is sticky and re­mains con­stant even amidst oil and gas rev­enue de­clines.

The SCP con­tin­ues to record the high­est ex­pen­di­ture dur­ing the pe­ri­od un­der re­view. To­tal ex­pen­di­ture has in­creased from TT$3.5 bil­lion in 2017 to TT$4.3 bil­lion in 2022. Thus far, 2022 record­ed the high­est ex­pen­di­ture on SCP. Over the last decade, 2022 record­ed the sec­ond largest to­tal so­cial ex­pen­di­ture of TT$6.9 bil­lion, while the largest fig­ure was record­ed in 2020 at TT$7 bil­lion.

How­ev­er, over the pro­ject­ed pe­ri­od from 2023-2033, to­tal so­cial ex­pen­di­ture shows a de­clin­ing trend.

An in-depth ex­am­i­na­tion of spe­cif­ic so­cial sec­tor ini­tia­tives, like the Gov­ern­ment As­sis­tance for Ter­tiary Ed­u­ca­tion (GATE), in­di­cates that GATE’s doc­u­ment­ed ex­pen­di­ture was TT$400 mil­lion in 2022. How­ev­er, ac­cord­ing to the mod­el, this amount is ex­pect­ed to rise to TT$422 mil­lion by 2033.

Sim­i­lar­ly, the Pub­lic As­sis­tance Grant ex­hibits an up­ward trend, es­ca­lat­ing from the record­ed TT$356 mil­lion in 2022 to a pro­ject­ed TT$392 mil­lion by 2033.

Con­trast­ing­ly, se­lect­ed pro­grammes like SCP dis­play a de­clin­ing pat­tern, with ac­tu­al ex­pen­di­ture de­creas­ing from TT$4.3 bil­lion in 2022 to TT$3.9 bil­lion in 2033.

The Dis­abil­i­ty As­sis­tance Grant fol­lows suit, ex­pe­ri­enc­ing a de­crease from the ac­tu­al fig­ure of TT$620 mil­lion in 2022 to the pro­ject­ed ex­pen­di­ture of TT$577 mil­lion in 2033.

These find­ings should prompt pol­i­cy di­a­logue on ra­tio­nal­i­sa­tion of spend­ing, es­pe­cial­ly as de­mo­graph­ic trends point to the ag­ing pop­u­la­tion in­creas­ing over the next 20 years. Dis­cus­sion on in­dus­tries for the fu­ture and Gov­ern­ment spend­ing to equip to­day’s stu­dents with skills to work in these in­dus­tries is al­so vi­tal.

• Con­tin­ues on BG9