Trinidad PM Warns Of Hard Economic Times Ahead
PORT-OF-SPAIN, Trinidad (AP) – Trinidad and Tobago’s leader warned that the Caribbean nation will have to adjust to making do with less amid tough economic conditions including major declines in energy revenue and falling production of natural gas and oil.
In a late Tuesday address, Prime Minister Keith Rowley said the twin-island nation that depends on its energy sector for roughly 44 percent of its gross domestic product must make serious adjustments if it is to avoid the kind of economic contractions it suffered during a 1980s oil bust. He says the country of 1.3 million people could face the prospect of entering into a future loan agreement with the International Monetary Fund if it doesn’t make the correct adjustments.
“If we fail to adjust now, we will find ourselves as we did in 1986 with an economy with insufficient foreign exchange reserves and having to restructure our debt under a series of IMF programs,” Rowley said in a televised speech.
He said Trinidad and Tobago has roughly $20 billion in foreign reserves currently.
Rowley’s national address comes days after rating agency Standard & Poor’s downgraded its outlook for Trinidad and Tobago from stable to negative. It said its change in outlook reflected a “one-in-three chance that prolonged low energy prices and potentially poor GDP growth prospects could result in a steadily rising debt burden, leading to a downgrade in the next two years.”
The prime minister said there’s been a 45 percent decline in revenue from natural gas exports and a 70 percent decline from oil, and experts say there is no sign of a rebound in prices in the short or medium term. Declining reserves are leading to a deficit in natural gas supply, with demand for 4.2 billion cubic feet but actual supply at 3.8 billion cubic feet.
To help ease economic constraints, Rowley said $1.5 billion will be taken from a stabilization fund over the next two years. Meanwhile, the government might also explore for natural gas with Venezuela in the Loran-Manatee offshore field that straddles the two nations’ territories, he said.
He also plans to reintroduce various land and building taxes while making tax collection more efficient. He emphasized that the government will be mindful of continuing social programs to protect vulnerable members of society from the downturn.
“This is not the first time Trinidad and Tobago has had to face these serious external shocks and to deal with them,” said Rowley.