“A politician needs the ability to foretell what is going to happen tomorrow, next week, next month, and next year. And to have the ability afterwards to explain why it didn’t happen – Winston Churchill.”
The TTWhistleblower continues a series of economic analyses, ‘TT economic future hangs in the balance’ looking specifically at the current economic prospects for Trinidad and Tobago, and the fate of other nations around the world that have already experienced or now face the prospect of bankruptcy.
Since the first part of this series, a great deal of research has been ongoing on the impact of decline on the population and the future of the economy. In this Part 4 of the series, we continue sifting the truth from the misinformation as we look behind Finance Minister Imbert’s 2017 Budget Mid-Year Review.
Cheating with the numbers
In Part 3 of this series, we questioned whether the fluff and bluff used aplenty by the Finance Minister did anything to consolidate trust and confidence in the Government, and inspire activity and sustainable growth in the economy.
Readers’ feedback told a number of stories that ended the same way – the Government has no idea of where it is, where it wants to go, and what to do to solve the crisis that they have largely helped to create.
The Mid-Year review of any fiscal package is a time when a Government reviews its fiscal strategies to see what’s working and what’s not; a Government tends to either add impetus to strategies that are slow in bearing results and temper over-heating in other areas.
The 2017 Mid-Year review was no different from any other statement delivered by the Finance Minister, Colm Imbert. It starts with a sham of a thanksgiving that the PNM was elected, proceeds with odium under the guise of shifting blame, pauses for abundant self-praise, then ends with the same promise over and over again.
It is quite like Imbert’s view on the IPO and APO of the First Citizens Bank Limited. The IPO by the previous administration was over-subscribed, but demonized significantly by Imbert in the then Opposition.
Imbert’s Additional Public Offering of FCB shares, however, failed to attract anywhere near that level of confidence as he told Parliament: “The Additional Public Offer issued by First Citizens Bank which was an offer for sale by First Citizens Holding Limited of 48,495,665 ordinary shares at $32 per share closed on April 7, 2017. 4,440 applicants received 32,035,770 shares or 66.0 percent of the total shares on offer with proceeds amounting to $1.025 billion.”
It is left to be seen whether Imbert’s promise (or threat?) to proceed with the Additional Public Offering by the National Gas Company of Trinidad and Tobago Limited for 40,248,000 Class B shares held by NGC or 26.0 percent of the issued share capital of Trinidad and Tobago NGL Limited (TTNGL) will suffer a similar, mediocre fate.
In the last of this series, we looked at how the Finance Minister conveniently mixed and mismatched terminology in order to paint a grim picture of the debt to GDP ratio for 2010 to 2015, and a glowing picture of the debt to GDP ratio for 2015 to 2017.
Misinformation on oil production
Having revealed the rather sneaky attempt to gerrymander public finances, we now turn to Imbert’s recall of oil and gas production.
Early in his contribution, Imbert said: “The Trinidad and Tobago economy has faced three consecutive years of economic decline caused by a 23 percent fall in petroleum output between 2013 and 2016, with oil production dropping to its lowest level in 50 years in 2016, to 66,000 barrels per day.”
Then, having set the stage to thump his rather small chest, Imbert added: “Fortunately, as a result of sustained focus on increasing oil production over the last year, the country is now back up to almost 76,000 barrels per day, an increase of 10,000 barrels per day.”
The only way to describe Imbert’s assertions is that they are utterly and completely untrue, and deliberately intended to mislead a weary and anxious population.
The background to the oil sector’s decline goes back to 2005 when average annual oil production was 145,000 barrels of oil per day (bpd).
By 2010, oil production fell below 100,000 bpd on account of what was widely accepted as the then PNM Government’s uncompetitive fiscal regime which discouraged upstream producers from investing in exploration and production.
The incoming Government of 2010 undertook an immediate review of the fiscal regime for the energy sector and even as oil production continued moderate slippage, drilling, rig and exploration activity jumped and the decline in oil production which started over five years before was finally arrested.
The Central Bank’s figures are also in stark variance to Imbert’s misinformed assertions to the Parliament. The Central Bank’s ‘Summary Economic Indicators for September 2016’ was very clear on average annual oil production figures at the appendix on page 14:
- 2011 – 92,000 bpd
- 2012 – 81,700 bpd
- 2013 – 81,100 bpd
- 2014 – 81,300 bpd
- 2015 – 78,700 bpd
- 2016 – 71,300 bpd
Giving greater depth to the figures and the real activity in the energy sector, the Central Bank’s Economic Bulletin of March 2017 stated clearly at page 17: “The domestic petroleum industry registered a 7.7 per cent year-on-year decline in crude oil production in the second half of 2016. Over this six-month period, lower output was evident from several major producers including Petrotrin, bpTT, BHP Billiton and Repsol. Production levels were adversely affected by increased maintenance activity and declining yields during the period. Crude oil production averaged 69,952.3 barrels of oil per day (bpd) during July to December 2016, compared with 75,823.5 bpd over the corresponding period in 2015.”
Even Imbert’s Ministry’s own publication, Review of the Economy 2016 told a harsh story of oil production levels and its genesis in the 2001 – 2010 PNM Government.
At page 23 of the Review of the Economy 2016, it states clearly: “Trinidad and Tobago’s annual average crude oil and condensate production has been on a downward trajectory, declining every year since fiscal 2006/2007. This has been primarily due to the natural wane in the rate of extraction from the country’s maturing hydrocarbon fields, amidst the absence of significant new crude oil discoveries. After attaining a decade high rate of 148,170 barrels per day in fiscal 2005/2006, production declined steadily, falling below 100,000 barrels per day in fiscal 2010/2011, to an average of 91,976 barrels per day.”
Nothing about sectoral strategies for growth
The Review of the Economy 2016 was also quite blunt in the manner in which Trinidad and Tobago’s economy was declining on almost every front.
It states: “Services, the largest Non-Petroleum sub-sector, is projected to contract by 1.2 percent in 2016, after registering positive growth of equal magnitude (1.2 percent) in 2015.
The ROE 2016 also stated: “Real economic activity in the Manufacturing sub-sector, the second largest Non-Petroleum subsector, is forecast to decline by 5.7 percent in 2016, a turnaround from the 1.6 percent expansion achieved in 2015. The sub-sector’s contribution to real GDP is therefore projected to fall to 7.8 percent in 2016, from 8.1 percent one year earlier.”
“Likewise, a contraction of 6.0 percent is anticipated in the remaining Non-Petroleum sub-sector, Agriculture, weaker than the sub-sector’s 1.2 percent growth registered during 2015. Agriculture’s share of real GDP is however expected to remain unchanged at 0.4 percent in 2016.”
On Agriculture, it was the Minister, Clarence Rambharat who told the Senate on 08 May 2017 that the nation’s food import bill fell by some $1 billion in the past 18 months, owning in some measure to a lack of availability of foreign exchange.
Despite the assertion of the 2016 Review of the Economy, however, Rambharat seemed to be pulling at just about any number floating past him. The Review stated that a contraction was anticipated in the Agriculture sector, which is always a feature of PNM Government.
Yet, despite a public document on the nation’s finances talking about decline, the Agriculture Minister was telling the Senate: “A key area of the reduction in the food import bill was vegetable production. The work of the farmers had led to the increased availability of vegetables, especially in the dry season.”
What about Trade?
One of the hotly contested suggestions by Imbert – to give FOREX priority to Manufacturers and Trade oriented businesses – seemed to stop short of saying exactly how the economy will benefit.
Imbert made no mention of maximizing the:
- Trinidad and Tobago-Panama Partial Scope Trade Agreement;
- Trinidad and Tobago – Guatemala Partial Scope Trade Agreement;
- World Trade Organisation (WTO) – Agreement on Trade Facilitation;
- Caricom-Costa Rica Free Trade Agreement;
- Caricom-Cuba Trade and Economic Cooperation Agreement
Imbert has a deep affinity for talking about the things that the previous Government ‘gifted’ the PNM with on leaving office, yet has not mentioned any of these agreements, all of which were initiated and mostly executed by the previous Administration.
One wonders whether Imbert is at all worried about decline nominal GDP which at page 7 of the 2016 Review of the Economy was described as: “The CSO’s 2014 and 2015 Nominal GDP has been revised from $174,756.9 million to $167,764.3 million in 2014 and from $165,286.1 million to $150,246.6 million in 2015. The 2016 Nominal GDP is now estimated by the CSO to be $145,910.7 million.”
Nominal GDP refers to gross domestic product (GDP) valued at current market prices. GDP is the dollar value of all the finished goods and services produced in a specific period.
One is also led to wonder whether Imbert views his job as Finance Minister as the Government’s Journalist – just reporting the situation but doing nothing about it.
With these and other trade agreements abundant with opportunity but languishing, a serious strategy on maximizing Trinidad and Tobago’s trade position could help turn around the Foreign Exchange Reserves position Imbert moaned about last Wednesday.
While we recall both Imbert and Keith Rowley telling the Parliament not long ago that ‘Foreign Exchange Reserves did not move an inch’, Imbert told the Parliament last Wednesday: “It must be emphasized that there has been a significant loss of US$2.5 billion per year in foreign exchange inflows from oil and gas receipts since 2014. As a result, our Net International Reserves, or Foreign Reserves, have fallen by 12 percent from US$10.4 billion in May 2014 to US$9.1 billion in April 2017.”
What this means is that import cover has fallen somewhat drastically from 12 months, to 10 months. This means that should a serious crisis hit and the economy…hits a coma stage, Trinidad and Tobago could previously have safely covered 12 months of its import needs, but now, can only cover 10 months.
In Part 5, the TTWhistleblower continues to explore the inaccuracies and misinformation on the 2017 Budget Mid-Year Review.