The Financial Crisis We Met In 2015 On Assuming Office and Our Management of the Economic and Social Challenges That Faced Us

When the PNM Administration, under the leadership of our Prime Minister, Dr. the Honourable Keith Rowley, assumed Office in September 2015 – just under 5 years ago – we promised the citizens of Trinidad and Tobago a transparent, honest, and accountable Government. This was necessary for establishing credibility and trust in the new Government after 5 years of mismanagement and overindulgence by the previous Administration.

We faced very difficult and challenging circumstances, briefly summarized as follows.

  • Our public finances had been eroded by the collapse of oil and gas prices in 2014, coupled with declining oil and gas production.
  • $6 Billion left in credit to the Government’s bank account at the Central Bank just prior to the May 2010 election, had been consumed by reckless spending.
  • The Government’s overdraft was maxed out by the previous Government at negative $9 Billion, resulting in depletion of the country’s available cash advances by $15 billion.
  • A further $14 billion had been siphoned out of the National Gas Company’s bank account and used to award questionable construction and equipment supply contracts at inflated prices.

Yet in the face of a clearly imminent financial crisis, where:

  • Revenues from petroleum plunged by $10 billion between 2014 and 2015 and continued to spiral downwards as the 2015 Election approached
  • Oil prices collapsed from US$103 per barrel in June 2014 to as low as US$43 per barrel in March 2015 – the General Election year
  • An almost impossible $6 Billion backpay liability to public servants and workers in state agencies loomed on the horizon

The previous Administration inflated annual budgetary expenditure to an unsustainable all-time high of $63 Billion, an increase of 43% over the original PNM 2010 budget of $44 Billion. In addition, by 2015, because of the disjointed approach to economic stability at that time, real economic activity had become volatile and weak and taxpayers’ money was not being spent for the purposes intended, but rather was being siphoned off into the pockets of a fortunate few. Indeed, in September 2015, just after we took office, we were advised by the then Governor of the Central Bank that was only enough money in the Government’s bank account to keep the country running for a few days!

Yet we persevered, and in so doing, as a deliberate strategy, we preserved as many jobs as possible, and despite our huge financial challenges, the number of employed persons has only decreased marginally over the last 5 years.

The new PNM Government had to move immediately to stabilize the economy, stop the downward spiral and create sustainable growth and true national development.

In pursuing these objectives, we sought to ensure that the collective public good and the national interest was paramount in our policy implementation process. The journey since then has been as difficult as it has been rewarding. Despite the drastic decline in Government revenue, we have managed to keep the country afloat, by taking decisive and sensible action without crashing the economy and without engaging in a massive devaluation of the Trinidad and Tobago dollar.

We believe that the people of Trinidad and Tobago understand and appreciate our approach to pulling the country out of the deep dark hole in which our predecessors left us. We were in a virtual financial abyss.

Going forward, we recognize that while our current resources are inadequate to meet all of the urgent needs and demands of our citizens, we are confident that collectively and with appropriate sacrifice we are achieving the desired results and are putting our country on a path of economic growth and human development. This country has demonstrated time and time again that when it is under pressure, it rallies and overcomes its problems, however insurmountable they may appear.

The effects of the reckless and profligate expenditure of the former administration over the period 2010 to 2015 are still with us, but the assignment given to the new Rowley Government in 2015 was clear. We were required to stabilize a dangerously slipping country and provide the country with an honest, clean and transparent Administration; revitalize an economy after several years of economic stagnation; and repair the fiscal accounts, which were seriously damaged by wasteful expenditure even as revenues deteriorated as a result of adverse commodity price shocks. We were also mandated by the people of Trinidad and Tobago to re-establish confidence and trust in the management of the country’s business.

We have shown by our plans, our deeds, and action-oriented programmes that our mandate has been appropriately discharged. In fact, corruption is no longer a feature of public transactions as it was prior to September 2015.

The people of Trinidad and Tobago spoke in 2015 and rejected the politics of deception, betrayal, greed, arrogance, waste, and mismanagement. They rejected officially sanctioned corruption. They rejected squandermania. They rejected discrimination. They rejected immorality. They rejected inequality. They rejected nepotism and cronyism. At the same time, the electorate embraced the values of honesty, integrity in public life, and value for money in public expenditure. They asked for impartiality, transparency, and sincerity in government. They asked for equity and prosperity for all. They asked for growth, progress, harmony, and social peace.

The fact that we have survived the oil crash of 2016 and Covid-19 in 2020, without any major financial trauma, while meeting our commitments, in the face of the price of oil dropping to the hitherto unthinkable level of $26 per barrel in February 2016 and to ZERO and then negative in February 2020, is testimony to the capacity, capability and resilience of the Rowley Government.

To put things in their proper perspective, we need to understand that in 2014, total Government revenue was $56 Billion. However, in 2016/2017, as a result of the double whammy of depressed oil and gas prices and ill-advised changes in the fiscal regime for the energy sector introduced by the former regime, Government revenue crashed to $36 Billion, an annual loss of $20 Billion, a decrease of 36%. This was the reality that we had get used to, i.e. we could no longer spend money that we did not have, without regard for the consequences. However, notwithstanding the crisis we faced in our first year in office, we were able to stabilise the economy and bring our expenditure profile into better alignment with revenue.

Amazingly, we were able to reduce public expenditure by $13 Billion, from the 2014 high of $63 Billion to $50 Billion in 2017, or by 20%, without shutting down any part of the public service, or jeopardizing any project, programme or social service delivery, which goes to show the level of waste that existed in the pre-2015 years.

By 2019, the economic slide had been stopped and with innovative and modern reform of our petroleum tax regime, moving from a profit- based system to a volume-based system for oil and gas taxes, we were on a firm pathway to growth. Indeed, notwithstanding a reduction in the rate of Value Added Tax from 15% to 12.5%, and an increase in the Personal Allowance for Individuals from $60,000 per annum to $72,000 per annum, which reduced the tax take from those taxes, by 2019, current revenue, i.e. revenue from taxes and royalties had improved by $11 Billion per annum from $35 Billion in 2016/2017 to $46 Billion in 2018/2019.

The improvement in revenue collection was also due in no small measure to a number of proactive strategies employed by the new PNM Government, including high level meetings led by the Prime Minister with the major gas producers at their head offices in Europe and the USA.

Arising from these meetings, the major companies, such as BP, Shell and BHP, made the decision to invest US$10 Billion (TT$68 Billion) in exploration and production in Trinidad and Tobago during the 2016 to 2020 period as well as approving a number of new projects. This has the effect of increasing gas production by as much as 15% to as high as 3.8 billion cubic feet per day in 2018, with gas production stabilising at 3.6 billion thereafter.

It is noteworthy that over the 5 years from 2015 to 2020, despite the tremendous financial challenges and against all the difficulties that we faced as a country, we were able to pay the salaries of all public officers and workers in state enterprises on time, initiate new development projects, clear off the backlog of bills that we found in 2015, pay backpay and keep the country running efficiently. We did this without any traumatic measures such as devaluation of our currency.

And when the Covid-19 catastrophe arrived on our shores, we rose to the occasion and swiftly and immediately put in place a comprehensive broad based multisectoral plan that addressed every critical aspect of the virus and its effects on our country, our people and our economy. Our swift and focused response to all aspects of the threat posed by the Covid-19 pandemic (health, social and economic threats) has received worldwide recognition and accolades from Oxford University, the Economist, the World Bank, the IADB and many other international bodies and commentators.

We firmly believe that our political opponents would not have been able to handle this virus successfully.

In our view, the other main political party would have allowed the virus to consume and collapse our health system, and destroy our economy and way of life. Under them, Trinidad and Tobago’s social fabric and economic structure would have collapsed in the face of Covid-19, as has occurred in other countries.