Prime Minister Keith Rowley’s address, at the end of last year, to the people of Trinidad & Tobago following his People’s National Movement’s victory at the polls, has laid out the problems, particularly in the economic sphere, confronting the country. And clearly, promises made to the electorate during the political campaign, have had to give way to consideration of the future state of the country’s economy as oil prices have continued to decline.
The period between the general elections and the end of the year has not given any respite to the Prime Minister, as his government has been immediately faced with what it has considered a challenge to its authority by the Governor of the country’s central bank, an appointee of the previous People’s Partnership government. The context of the government’s concern would appear to have been that the Governor seemed to have pre-empted the Prime Minister’s first major statement on the economy.
The Prime Minister has now spoken and described the immediate and central challenge to be the need for a response to the recent persistent decline in the prices of petroleum and natural gas, the essential basis of the country’s economy. And indeed, as is widely known, Trinidad has not escaped the experience of other oil and gas producers, the benchmark price for oil having slid from US$106 per barrel in June of 2014 to US$59 at the end of that year, and then to US$36 at the end of December. And Dr Rowley further indicated the country’s predicament when he asserted that the 2015 Budget of the People’s Partnership government had been premised on an oil price of US$80 per barrel.
PM Rowley further indicated that the consequent problem of maintaining adequate budgetary resources had been compounded by the fact that the price of Liquified Natural Gas (LNG) had had a similar experience to that of oil, having fallen by 45% between 2014 and the end of 2015. And this led to the his obvious conclusion to the Trinidad & Tobago public that the energy sector, as a substantial underpinning of the country’s economic strength, had now experienced a substantial decline, with obvious consequences for the new government’s permissible expenditure.
It is unlikely that the Trinidad & Tobago public, by now well experienced in the ups and downs of the economic resource on which the country substantially depends, would have been completely surprised by the government’s present predicament, with its inevitable consequence of restraints on public expenditure.
In that context, Prime Minister Rowley asserted that “while our accumulated savings are not insignificant…of the US$10 billion in official reserves…given the rate at which we have been consuming foreign exchange, all our reserves and most of our other savings would be exhausted before oil and gas prices recover or before production levels increase…” And this led him to the conclusion, and perhaps more than that a warning, that, no doubt contrary to the expectations of supporters during the recent election experience, “it would be imprudent to try to stimulate the economy just by increasing overall expenditure – government should be expected to lead the way by restraining expenditure.”
Clearly, taking the country’s history into account Prime Minister Rowley will have been quite cognizant of the experience of a previous Prime Minister, ANR Robinson who, on taking office having defeated the PNM government in 1986, found an economy in circumstances not dissimilar to that of the present. He has, in that context, indicated his government’s determination to continue investment in infrastructure and to seek external sources of financial support.
The political circumstances surrounding the Prime Minister’s statement would appear to be favourable, at least in the short run, given a certain amount of disarray on the opposition side. Though former Prime Minister Kamla Persad-Bissessar has obtained a renewed mandate as leader of her party and of the opposition, the manoeuvres around her re-election have suggested some degree of dissatisfaction with her leadership, the recent challenge to her being led by parliamentary colleagues who were seen as her major supporters during her regime, and during the election campaign.
That these opponents have been unable to prevail suggests that at least for the foreseeable future, she will retain her position, a situation which the government might well see as favourable to itself. The fact of the matter would seem, however, to be the government’s recognition that, more than anything else, its own fate depends on what happens to energy prices in the next few years.
From a regional perspective, there must be some inclination on the part of Trinidad’s Caricom partners that, in spite of its preoccupation with the possibility of a downward trend in energy prices, the present government will play a more active part than its predecessor did, in the last few years. But in his recent address to the country, he has indicated that what he referred to as “extensive discussions” have been held “with Venezuela in respect of producing gas present across the two countries’ border”, and that he has already received an invitation, which he has accepted, from President Nicolás Maduro to visit Caracas.
While there can be little doubt that cross-border energy resources will be at the basis of their discussions, it probably can be assumed that the Prime Minister will take the opportunity to subsequently apprise his Caricom colleagues of their outcome with reference, particularly, as to what he has gleaned in respect of Venezuela’s perspectives on Caricom at this time, when the Venezuelan president would appear to be under some degree of domestic pressure.
