T&T adjusts budget again, expting $1.7b deficit

The government of Trinidad and Tobago is making another budget adjustment that would show a deficit of $1.7billion for the fiscal year. Prime Minister Patrick Manning told Parliament the estimate is based on revised expenditure of $43.9 billion based on oil revenues at $US45 a barrel. But oil continues its downward spiral trading at US$37.97 a barrel on Thursday morning.

(Click here for a live minute-by-minute check of oil prices)

The original budget presented last year anticipated a price of US$70 based on the record high in the summer of more than US$140. But there was a sudden free-fall and after pressure from business leaders and politicians the government presented an update in December, still based on a very optimistic projection of US$55 a barrel.

Manning assured the nation that things are under control. "The rainy days are upon us. But we have been preparing for them," he said Wednesday as he gave his third update on the the effects of the global economic crisis.

He said Government is now projecting revenues of $42.2 billion, about $7.2 billion less than the original budget figure and expenditure estimated at $43.9 billion, leaving a deficit of $1.7 billion.

The prime minister warned that it was possible that oil prices could drop even further, adding that he might have to make further adjustments. However he promised once again that he won't touch the Heritage Stabilization Fund, which is estimated to be around $12.8 billion, to finance the deficit. Instead, Government would try to raise the money through the sale of domestic bonds.

Manning said the new adjusted oil price projection of US$45 a barrel price came after "much discussion and deliberation, including with the Central Bank". But the international market doesn't appear to be following Manning's script with oil down well below that and no sign of it shooting back close to what Manning expects.

Still he said he is confident the country would make it through the economic storm, noting that inflation is already coming from down. "Our economy will continue to grow in 2009, even though at a slower rate than that to which we have become accustomed over the last seven years. We also expect a reduction in inflation...to about 7-8 per cent by December 2009." Central Bank figures for December show that the annualized inflation rate was still 15.4 per cent.

His over-optimistic assessment also promised no further job losses although the opposition was quick to point out, "People going home every day." He also insisted that he won't cut wages and salaries, pensions, senior citizens' grants, disability grants, other social programmes and programmes to deal with crime.

And he said it's time for the opposition to stop talking "nonsense about devaluation" because the strength of the country's foreign reserves would ensure foreign exchange rate stability. The Central Bank, he said, currently has US$9.2 billion in official reserves, the equivalent of 11 months of import.

However he acknowledged that although Trinidad and Tobago does not face the same economic problems as the major developed nations there are some economics realities that he can't ignore. These include:

• the weakening stock market activity in the last quarter
• a softening in the real estate market
• a decline in Christmas retail sales
• the postponement of some private sector investments
• the continuing temporary closure of the energy plants
• the postponement of construction of new plants in the energy sector

Republic Bank's Senior economist Dr Ronald Ramkissoon gave Manning got a good review, noting that the measures to deal with the economic problems are appropriate for now. But he was still cautious about oil prices, which hold the key to revenues. Ramkissoon said "no one" can accurately predict how the prices will rise or fall.

While he feels the measure are appropriate "within these circumstances" Ramkissoon said the Government should be putting more savings aside.