Ralph Maraj

Ralph Maraj

THE Finance Minister is always spinning a rosy picture of his very questionable management of the economy.

Recently, he uttered the absurdity that Trinidad and Tobago has enough foreign savings to defend the country’s currency for 23 years! He bases his assessment on the nation having “defended its exchange rate for 26 years, from April 1993 when it was first floated”.

But during that period, foreign currency inflows exceeded outflows. We had a gas boom, the price moving from US$2 to US$7 per thousand cubic feet, with oil crossing US$100 per barrel several times. We were the leading supplier of LNG in the western hemisphere, accounting for nearly 80 per cent of US imports. So great were foreign earnings, we not only built reserves but established a Heritage and Stabilisation Fund (HSF) and engaged in massive spending. Budgets increased from $12 billion in 2000 to $63 billion in 2014. Foreign capital also flowed from Foreign Direct Investment (FDI) needing our natural gas.

All that has changed. Energy revenue is permanently down from the global energy revolution. Yet, this administration of ostriches persists with “Our oil, Our gas, Our future” while both prices and production are reduced and we are no longer attracting FDIs to Point Lisas, now plagued by gas shortages. Petrochemical companies are migrating to the US with its cheap, abundant gas from the shale bonanza. World leaders like Sabic, Methanex, Sasol, Formosa Plastics and Braskem are making the superpower a premium exporter of ammonia, methanol and other products. Between 2013 and 2017, 317 petrochemical projects valued at US$185 billion were announced in America! Instead of arrivals, we have had departures, two plants leaving for the US and ArcelorMittal for Iran with its 34 tcm of gas reserves. The future of Point Lisas is under question.

But continuing his disingenuous defence, Imbert said we still have foreign reserves amounting to eight months’ import cover, touting that as his achievement. But reserves have dropped 34 per cent since Imbert took over. Soon US$4 billion would have evaporated under his watch. Outflows have far exceeded inflows, and this scandalously irresponsible administration has done nothing in four years to gestate new foreign earnings to replenish reserves, which dropped recently to $US6.9 billion.

But it is much worse than that! The massive foreign borrowings are added to the reserves giving it an artificial boost. The question we must ask is this: how much of the borrowed billions have been utilised in consumption, and how much are we still counting falsely as reserves? Are we deceiving ourselves? What is the true state of our foreign reserves? We are in deep trouble. We have been spending foreign exchange far in excess of both earnings and borrowings combined. How can this be cause for celebration? Or Imbert’s self-vindication? There can be no worse indictment than our vanishing reserves. They constitute the nation’s strength, now fading through squandering of our economic security.

And the minister knows the truth but engages in obfuscation for political purposes. This is unacceptable toying with the country’s very viability. Without foreign exchange we have neither economy nor society. Imbert is now peddling the promise of a reduction in the depletion rate of reserves based on inflows from three areas: increased gas production, “financing on the overseas capital markets” which simply means more borrowing, and “increased financing from the Heritage and Stabilisation Fund (HSF)” from which he says the Government can “comfortably withdraw US$300 million and still maintain US$6 billion”, speaking so glibly of draining the nation’s strength.

But the latest downgrade of T&T’s credit rating by Standard and Poor’s “reflects lower than expected energy production and economic growth”. Indeed for the first five months of 2019, natural gas production increased by just 0.8 per cent and oil production declined by 12.8 per cent. The remainder of 2019 and most of 2020 could see the mothballing of Train 1 and the scheduled shutdown of BPTT’s largest hub, Cassia B. Imbert’s increased foreign revenue will therefore not materialise. The funds will come from borrowing, which will now cost more as result of the S&P downgrade and from recklessly raiding the HSF.

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They plan to use borrowed money and our precious savings to fund a spending spree to get themselves re-elected. That’s the selfishness, uncaring and immorality at work here. Imbert claims the debt-to-GDP ratio is 62 per cent and he wants to keep borrowing at below 70 per cent. He says “we have available to us eight per cent of GDP”, which is about $12.72 billion that he will borrow for electioneering.

Note, he says nothing about capacity to repay. He can’t, because we don’t have enough revenue for it. We are now borrowing more to repay existing debt, already in the debt-trap. And servicing debt also depletes reserves. More debt will further reduce reserves. Where is the relief in reserves-depletion that Imbert is promising?

The IMF has warned reserves could deteriorate to under three months’ import cover by 2021. With the Government accelerating the decline, it could be much earlier. And note, we have heard nothing about the IMF doing its 2019 Article 1V consultation. Have they been invited? Is somebody afraid of their findings?

Reserves of strength are critical for survival, whether it is an individual or a nation. In that famous poem about his burial, the Sea-King says: “My strength is fading fast. I shall never sail the seas like a conqueror again.” Foreign reserves constitute the lifeblood of our economy and society. When they dwindle, we weaken until we die.

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