Gail Alexan­der

COVID-19 plus crash­ing oil prices have caused the 2020 Bud­get deficit to bal­loon from $5.3 bil­lion to $15.5 bil­lion - and the 2020 Bud­get is now be­ing re­cal­i­brat­ed.

And while Gov­ern­ment’s been suc­cess­ful in slow­ing COVID spread, Fi­nance Min­is­ter Colm Im­bert says there’s no ques­tion that fis­cal 2020 will be ex­cep­tion­al­ly dif­fi­cult even if the pan­dem­ic fades in the sec­ond half of the year.

Im­bert spoke about the sit­u­a­tion in a state­ment to Par­lia­ment yes­ter­day on the eco­nom­ic ef­fect and Gov­ern­ment’s fi­nan­cial re­sponse to the COVID-19 cri­sis.

He shared prin­ci­pal el­e­ments in Gov­ern­ment’s pack­age of poli­cies to ad­dress pub­lic health and eco­nom­ic chal­lenges posed by the pan­dem­ic. Im­bert said a tar­get­ed fi­nan­cial sup­port pro­gramme for an ini­tial three months, cost­ing ap­prox­i­mate­ly $4.5 bil­lion, is pro­vid­ing a safe­ty net for the most vul­ner­a­ble house­holds and busi­ness­es. (See page 15)

He said while the breadth, depth and du­ra­tion of the ef­fects of the virus are still un­cer­tain, “our strate­gic ini­tia­tives have been swift as we seek to slow spread of the dis­ease and min­imise its eco­nom­ic con­se­quences. We have been suc­cess­ful. We act­ed de­ci­sive­ly, even be­fore the World Health Or­gan­i­sa­tion de­clared the virus a pan­dem­ic on March 11.”

As a re­sult, he said the num­ber of known/con­firmed T&T cas­es as of yes­ter­day was lim­it­ed at 116 with eight deaths, plus 59 peo­ple have been dis­charged

“We recog­nised very ear­ly the char­ac­ter­is­tics of this cri­sis. It was fast mov­ing and re­quired quick, ef­fec­tive ac­tion which we ini­ti­at­ed al­most im­me­di­ate­ly. Our proac­tive ap­proach saved us much of the pain and dis­tress that oth­er coun­tries now face.”

But he said the com­pre­hen­sive so­cial, fi­nan­cial and eco­nom­ic sup­port pack­age of mea­sures re­quired to be tak­en has ex­pand­ed Gov­ern­ment’s ex­pen­di­ture “in the con­text of a se­ri­ous ero­sion of our tax base caused by the oil prices’ col­lapse.”

Im­bert added, “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 2020 Bud­get.”

In cal­cu­lat­ing the re­vised deficit, he said Gov­ern­ment not­ed that the col­lapse of the re­cent price of WTI oil to 1 US cent per bar­rel is hav­ing an ad­verse ef­fect on oth­er oil prices. He said Brent oil has dropped to $20.

“Such low prices were pre­vi­ous­ly un­dreamt of,” he said.

“Notwith­stand­ing the fore­casts of the US En­er­gy In­for­ma­tion Ad­min­is­tra­tion and WEO of oil in the $30 range and gas in the $2.10 range for the rest of 2020, there­fore, our lat­est rev­enue pro­jec­tions are based on con­ser­v­a­tive prices of $25 per bar­rel for oil for the rest of the year and $1.80 per MMB­TU for nat­ur­al gas.

“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.”

Im­bert added, “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.”

“There’s no ques­tion that fis­cal 2020 will be ex­cep­tion­al­ly dif­fi­cult even if the pan­dem­ic fades in the sec­ond half of the year, al­low­ing for a grad­ual lift­ing of con­tain­ment mea­sures and a re-open­ing of the econ­o­my.”

He said the April 2020 World Eco­nom­ic Out­look en­vis­ages a par­tial re­cov­ery in 2021 but “there’s tremen­dous un­cer­tain­ty around the out­look, giv­en that it can get worse”.

There­fore, he said Gov­ern­ment’s ob­jec­tive is to keep the econ­o­my mov­ing, stim­u­late eco­nom­ic ac­tiv­i­ty, pro­vide fi­nan­cial as­sis­tance to in­di­vid­u­als and busi­ness­es and keep as many peo­ple em­ployed as is pos­si­ble, in­clud­ing all work­ers in the pub­lic sec­tor.

“We can­not al­low this pan­dem­ic to de­stroy our econ­o­my and, there­fore, while a re­al­lo­ca­tion of pri­or­i­ty ar­eas for spend­ing is in­evitable, it’s our in­ten­tion to main­tain our orig­i­nal ex­pen­di­ture tar­get of $53 bil­lion for fis­cal 2020,” Im­bert said.

For that rea­son, he said Gov­ern­ment’s been in dis­cus­sions with cer­tain mul­ti­lat­er­al in­sti­tu­tions and de­vel­op­ment banks to en­sure that in ad­di­tion to do­mes­tic fi­nan­cial re­sources, ap­pro­pri­ate ex­ter­nal fi­nanc­ing is avail­able to meet the re­quire­ments of the ex­pand­ed fis­cal deficit in 2020 and 2021.

Steps were al­so tak­en to al­low for emer­gency draw­downs from the Her­itage and Sta­bil­i­sa­tion Fund (HSF) not ex­ceed­ing US$1.5 bil­lion.