(Trinidad Guardian) Government is making its second drawdown in less than a year from the Heritage and Stabilisation Fund (HSF), but a statement from the Ministry of Finance yesterday assured that the financial standing of the fund is sound, as in the ten months since money was first withdrawn, the fund had been able to recover to close to its original value.
The drawdown, which Cabinet approved on Thursday, was for the sum of $1.712 billion (US$251 million) and will be used for the financing of the 2017 budget and, in particular, the Public Sector Investment Programme.
The drawdown from the HSF came days after the publication of a Central Bank report that disclosed revenues for the first quarter of fiscal 2017 had declined by 29 per cent to $7.98 billion, in comparison to the same period in the 2016 fiscal year.
In May last year, the Government made its first drawdown from the fund in the sum of US$375.05 million. At that time the fund was valued at US$5.796 billion and after the withdrawal, the balance was US$5.420 billion.
The ministry said since then the fund has been able to recover through good management and good returns on investments and the balance in the HSF increased from US$5.420 billion in May 2016 to US$5.695 billion in March 2017, a recovery of US$274 Million, or five per cent.
And after this latest drawdown, the ministry said the balance in the fund will be of the order of US$5.44 billion, which is the same level it was after the first drawdown last year.
The statement sought to assure that as the country continues to experience severe revenue shortfalls as a result of depressed petroleum prices, the HSF will be carefully used by the Government to ensure the country’s financial stability.
The ministry recalled that in the 2016 mid-year review, it was stated that any budget deficit would be financed through a combination of borrowing and a drawdown from the HSF.
In the 2017 Budget statement it was stated: “In 2017, core revenue, defined essentially as revenue from taxation, royalties and customs duties is only projected to be of the order of $37 billion, $20 billion less than just two years ago . That left a fiscal gap in 2017 of over $16 billion, which must be financed by a combination of borrowings, and drawdowns from the Heritage and Stabilisation Fund, and one-off sources of income, such as the sale of assets, dividends from state enterprises, repayment of past lending (ie from the Clico bailout) and so on.”
The HSF was established by Act No 6 of 2007 and provides that the savings and investments from surplus energy revenues be used where necessary to:
• Cushion the impact on or sustain public expenditure capacity during periods of revenue downturn whether caused by a fall in prices of crude oil or natural gas;
• Generate an alternate stream of income so as to support public expenditure capacity as a result of revenue downturn caused by the depletion of non-renewable petroleum resources; and
• Provide a heritage for future generations, of citizens of Trinidad and Tobago, from savings and investment income derived from the excess petroleum revenues.
The Ministry of Finance yesterday said both drawdowns from the HSF were done in accordance with the HSF legislation, in particular, Section 15 of the HSF Act which states:
“(1) Subject to subsections (2) and (3), where the petroleum revenues collected in any financial year fall below the estimated petroleum revenues for that financial year by at least ten per cent, withdrawals may be made from the fund as follows, whichever is the lesser amount: either 60 per cent of the amount of the shortfall of energy revenues for that year; or 25 per cent of the balance standing to the credit of the fund at the beginning of that year.
However, no withdrawal may be made from the fund in any financial year where the balance standing to the credit of the fund would fall below US$1 billion, if such withdrawal were to be made.”