The Bankers Association of Trinidad & Tobago (BATT) is encouraged by the improved performance of the country’s external and fiscal accounts, as reported in the 2019 Mid-year Budget Review.
It is indeed a good sign that the country ran a balance of payments surplus in 2018 after registering deficits in the previous two years. This development was largely based on a stronger current account performance.
With regard to the fiscal performance, we welcome the news that revenue was $706 million higher and the fiscal deficit was $3.3 billion lower, than was budgeted for the first half of the fiscal year. The Heritage and Stabilisation Fund also increased to its highest ever value of US$6.1 billion in May 2019. These developments, together with the emergence of quarterly GDP data, which confirmed earlier reports by the government of economic growth, were the basis for the optimistic tone of the review.
BATT believes that while some of the adjustments will yield positive results, there are some residual concerns.
Government’s intention to improve the business environment by discharging arrears to commercial suppliers and contractors as well as liquidating overdue VAT refunds is to be applauded. These delayed payments can significantly affect a company’s liquidity, undermining investment and the firm’s ability to pay taxes in the process. While some of the spending from the $1.8 bn supplemental budget will provide some ease, it represents only a starting point. The full extent of the arrears and the timeframe over which it is intended to be settled would provide greater certainty to business.
Given the developments in the international energy market since the delivery of the 2018/2019 Budget in October 2018, the decision to lower the budgeted price of oil to US$60 per barrel and to increase the gas price to US$3.00 per MMbtu is prudent at this stage. The U.S. Energy Information Administration anticipates that West Texas Intermediate oil prices will average US$62.79 per barrel in 2019 and Henry Hub gas prices will average US$2.79 per MMbtu.
With revenue forecasted to be $221 million lower than initially budgeted, the decision to increase expenditure by $300 million is expected to result in a marginal increase in the budget deficit to $4.57 billion. Although there is some concern with regard to the larger deficit, BATT is encouraged that the move is not to increase recurrent expenditure but to accommodate tax refunds to businesses and investment in infrastructure. Nonetheless, Government is urged to remain focused on the careful management of the country’s fiscal accounts and to work towards a balanced budget as soon as practicable.
In the area of tax administration, BATT remains hopeful that the Revenue Authority will be brought on stream in the shortest possible time. This is a major priority at this time given the significant tax leakage and other inefficiencies associated with the current system. In this regard, it is good that the Government did not move to increase taxes at this time with a concurrent additional burden on the compliant.
BATT remains committed to working with Government and other stakeholders for the collective good of the country.