Say­ing that the fi­nance min­is­ter has been crit­i­cal of the IMF would be an un­der­state­ment as he has of­ten dis­dain­ful­ly dis­missed IMF rec­om­men­da­tions in the past. The 2023 Ar­ti­cle IV re­port re­leased on May 5 is vir­tu­al­ly iden­ti­cal to the IMF’s pre­lim­i­nary re­port is­sued in Jan­u­ary when it had com­plet­ed its T&T field­work and re­peats sev­er­al rec­om­men­da­tions from pre­vi­ous re­ports, al­beit phrased dif­fer­ent­ly. The re­port al­so com­pli­ment­ed the ad­min­is­tra­tion on its han­dling of the pan­dem­ic and pro­ject­ed ro­bust growth of 3.2 per cent for 2023. Mr Im­bert was hap­py to use this pos­i­tive fore­cast as an en­dorse­ment of his suc­cess in man­ag­ing the econ­o­my.

ALL pre­dic­tions of eco­nom­ic growth must be tak­en with a pinch of salt. They are based on eco­nom­ic mod­els which cap­ture the ef­fect of vari­a­tions in ma­jor vari­ables that im­pact a coun­try’s eco­nom­ic per­for­mance but not all the vari­ables. There­fore, there will al­ways be some mea­sure of vari­a­tion. The IMF is­sues two edi­tions of its World Eco­nom­ic Out­look (WEO) at its twice-year­ly meet­ings, one in April and the oth­er in Oc­to­ber. Its pro­jec­tions for the WEO are up­dat­ed in each pub­li­ca­tion based on the most re­cent da­ta. The world is a dy­nam­ic place and things change. Even the T&T Cen­tral Sta­tis­ti­cal Of­fice up­dates and re­vis­es its num­bers as more in­for­ma­tion be­comes avail­able.

Over the last three years, the IMF pro­jec­tions have shown ma­jor vari­a­tions be­cause of the im­pact of COVID and a less than ro­bust re­cov­ery than pro­ject­ed. The IMF is not in­fal­li­ble; none of us are. In recog­ni­tion of this and the cur­rent world volatil­i­ty, in its April 2023 WEO it cau­tioned that “…the fog around the world eco­nom­ic out­look has thick­ened …Un­cer­tain­ty is high, and the bal­ance of risks has shift­ed to the down­side” mean­ing that its fore­casts are in­dica­tive, and many things can go wrong which could neg­a­tive­ly im­pact the pro­jec­tions.

One must re­mem­ber that the min­is­ter is an elect­ed par­lia­men­tar­i­an and there­fore wish­es to present the best view on the per­for­mance of the T&T econ­o­my. An en­dorse­ment from the IMF is a gift to be used to re­in­force his po­si­tion. As in all pre­vi­ous pre­sen­ta­tions, the min­is­ter took the op­por­tu­ni­ty to ex­co­ri­ate the sup­posed ig­no­rance of com­men­ta­tors, es­pe­cial­ly the Op­po­si­tion par­ty, lump­ing any or all crit­ics in this po­lit­i­cal group­ing.

There were many gaps in the min­is­ter’s pre­sen­ta­tion. The oil and gas prices re­port­ed by the min­is­ter con­firm a dis­turb­ing trend that was point­ed out in last week’s col­umn. The min­is­ter con­firmed that the av­er­age re­alised oil price had de­clined from USD 93 per bar­rel in Oc­to­ber 2022 to $73 at the end of March 2023, a 20 per cent de­cline.

Sim­i­lar­ly, the av­er­age re­alised well­head price for nat­ur­al gas had de­clined from USD 11.61 in Oc­to­ber 2022 to $4.12 at the end of March 2023, a 40 per cent de­cline. The trend is neg­a­tive as prices are falling and have con­tin­ued to fall in April and May. He omit­ted to ad­dress petro­chem­i­cal prices where the de­clines have been deep­er.

Whilst the min­is­ter es­ti­mat­ed that rev­enue will on­ly be $1 bil­lion less than bud­get­ed for 2023, 2024 and be­yond threat­en to be dif­fi­cult years based on the trends re­vealed by the min­is­ter. What is wor­ry­ing is that ex­pens­es are in­creas­ing as ev­i­denced by the ad­di­tion­al $3.9 bil­lion in ex­pen­di­ture which will in­crease the deficit. This means ad­di­tion­al bor­row­ing whether it is from the Cen­tral Bank by way of over­draft, or from the com­mer­cial banks. The 2025 elec­toral count­down has start­ed. Ex­pen­di­ture will on­ly go up and in­di­cate a re­turn to deficit fi­nanc­ing.  

While the min­is­ter pro­vid­ed some re­lief to those who have been wait­ing on VAT re­funds for years, pay­ing those owed un­der $250,000 in cash and giv­ing bonds to those who are owed more. Busi­ness­es are hap­py to re­cov­er these amounts. But they would have missed the op­por­tu­ni­ty to im­prove their busi­ness­es or would have had to re­ly on bank fi­nanc­ing to cov­er the re­fund/ short­fall. Ei­ther way, a re­fund to­day is worth much less than if it had been re­ceived when it was due five years ago. What was miss­ing was a com­mit­ment to pay VAT re­funds when due.

Un­ad­dressed was the im­pact of de­clin­ing en­er­gy prices (nat­ur­al gas, oil, petro­chem­i­cals) on the forex po­si­tion. Nat­ur­al gas, petro­chem­i­cals, and oil gen­er­ate 80 per cent of the coun­try’s for­eign ex­change earn­ings. Price de­clines for these com­modi­ties mean a re­turn to for­eign ex­change short­ages with corol­lary ef­fects in every sec­tor. Whilst there are pos­i­tive signs from the do­mes­tic man­u­fac­tur­ing sec­tor, it is not large enough to gen­er­ate the ex­port vol­ume re­quired to fill the forex short­fall cre­at­ed by falling en­er­gy prices.

The con­tin­u­ing fail­ure of BP’s in­fill drilling pro­gramme means that BP’s nat­ur­al gas pro­duc­tion is de­clin­ing there­by re­duc­ing to­tal pro­duc­tion. Low­er mar­ket prices and falling nat­ur­al gas pro­duc­tion will lead to an­oth­er round of plant clo­sures as in 2018-2020, per­haps per­ma­nent­ly this time as ex­plained by Prof An­drew Jupiter in his “Red White and Black Gold” page 93.

“By its very na­ture nat­ur­al gas is non-re­new­able and there­fore un­sus­tain­able.” As an in­dus­try in­sid­er, he ought to know. The re­al­i­ty is that the coun­try’s eco­nom­ic per­for­mance im­proved be­cause of the “wind­fall” gain com­ing from in­creased en­er­gy prices in 2021 and 2022, not to any pol­i­cy change. Rougher wa­ters lie ahead.

Mar­i­ano Browne is the CEO of the UWI Arthur Lok Jack Glob­al School of Busi­ness.