STATE OWES $43B

In reply to queries by Chaguanas East MP Fazal Karim, permanent secretary in the ministry Suzette Lee Chee said the country’s debt-to-GDP ratio is now 60 percent and is expected to rise to 63 percent this year. She said the ministry’s target is to never exceed a ratio of 65 percent.

“We want a zero deficit by 2020,” Lee Chee added, explaining that while the State owes significant payments for this year, she hopes for an increase in GDP - a measure of economic activity of which an increase would lower the debt-to-GDP ratio to better levels. Lee Chee noted that the debt-to-GDP ratio excludes the non-guaranteed debt also owed by the State.

Karim asked what are the effects a worsening ratio in future.

Lee Chee replied that this could cause Government to be unable to finance its projects, plus a higher cost of borrowing. “You can get to a point where you don’t have a level of autonomy and independence.

More and more of your revenue will be constrained to pay for debt servicing. You have less and less to grow your economy.” Lee Chee repeatedly emphasised that a Government must look at the quality of its debt, that is, has the borrowing been to pay recurrent (consumptive) expenditure or to invest in capital projects that will generate a revenue.

JSC chairman David Small lamented that the State Enterprises which have created the highest debts among the $19 billion in guaranteed debt do not earn any revenue. He listed these as Udecott ($4 billion owed), Nipdec ($3.1 billion), Nidco ($1.5 billion) and Caribbean Airlines Limited ($825 million).

Earlier Government Senator Dr Lester Henry revealed that BWIA has a debt of $9 million, down from $18 million due to a $9 million payment on principal in November 2016.

Asked of plans to manage this debt, Lee Chee said State companies do not have revenue streams but their projects could stimulate the economy.

Saying the National Gas Company (NGC) is using debt to fund its operations, Small asked if this scenario is an economic red flag.

Lee Chee said this all depends of many factors such as if the borrowing is used to bring a return and or the tenor of the debt such as if it is short-term which tends to be riskier than longer term debts.

She said the ministry is holding preliminary discussions to consider re-financing Petrotrin’s 2019 bond.

“We’d look at a potential partial re-financing on the domestic market, but have taken no decisions as yet.” Asked if the debt-to-GDP ratio of 60 percent is okay compared to other nations, Lee Chee replied, “We are in a very good position.

We have sufficient buffers.

Amongst these buffers, she listed the US$5 billion Heritage and Stabilisation Fund, some ten months of import cover plus money in a sinking fund. The ministry’s director of economic research Hayden Manzano said some Caricom countries have debt-to-GDP ratios of 100 percent and 120 percent.

Lee Chee in reply to Karim said scheduled inflows of revenue from Clico to the State will likely soon help reduce the State’s need to borrow.

Asked by Newsday if the $34 billion debt was a cause for worry, economist Indera Sagewan-Alli replied, “Of course.” She said, “We should be concerned, just as is reflected in the recent downgrade of TT from Standard and Poor’s which measures TT’s credit worthiness and the level of risk in lending to the country.

“The downgrade reflects a very worrying situation regarding accelerated borrowing.” On top of the debt itself, Sagewan-Alli said are no signs of anything happening on any front to turn things around economically.

Citing the energy sector as the country’s economic mainstay, she said the ongoing serious shortage of natural gas has affected downstream industries to the extent that two methanol plants have recently had to shut down, even as other petrochemical facilities are operating way below capacity.

Alluding to Venezuela’s Dragon Field which is due to supply gas to Point Lisas, she said, “We are relying on an arrangement with a very volatile government for gas. It will not come in the short term. Anything could happen.

We could be digging a hole and throwing away our money.” She was also concerned for the oil-sub-sector. “Even if the world oil-price goes back up, we are not producing. We don’t have the volume to benefit from a rebound in price. The energy sector is not a very bright picture, and there is no other sector that is promising.”