PM announces new oil Fund

Prime Minister Patrick Manning yesterday announced that Cabinet had agreed to establish a Heritage and Stabilisation fund, scrapping in the process, the Interim Revenue Stabilisation fund (IRSF), which had been created under the United National Congress. The resources of the IRSF will be transferred to the new fund — which is expected to stand at $4.2 billion by September 2005. As was the case with the old one, the new fund would continue to consist mainly of surplus oil and gas revenues to be used to cushion the economy during times of low oil and gas prices, Manning explained. In a statement to the House of Representatives, the Prime Minister announced the fund and detailed the new management structure under which it would fall as well as an elaborate mechanism for its operation.

He said the resources of the fund would include all energy revenues from oil and natural gas exploitation and refining, with the exception of unemployment levy. He added that the resources of the fund will include, Supplemental Petroleum Tax (SPT), Petroleum Profits Tax (PPT,) oil impost, royalties and signature bonuses. Manning said deposits to the fund in any financial year would be made when oil and gas taxation revenues exceed the budgeted medium-term oil and gas taxation by at least 10 percent. Conversely, withdrawals from the fund in any financial year would be made when oil and gas taxation revenues received for the year are at least 10 percent less than the revenues anticipated in the annual budget for that year. Manning said the fund would be managed by a Board of Trustees subject to the general direction and control of the Minister of Finance.

It would comprise five members to be appointed by Cabinet with three officials being chosen from the Central Bank and the Ministry of Finance, with  the chairman coming from the Finance Ministry. In order to ensure that the money is well invested, Manning stated that two portfolios would be established — the financial investment portfolio and the strategic investment portfolio. Three accounts would also be established — the fiscal sustainability account, the heritage account and the strategic account, he said. All three accounts would be managed by the Central Bank of Trinidad and Tobago on behalf of the Minister of Finance, he said.

Manning said the Board of Trustees would submit an annual report on the operations of the fund to the Minister of Finance within three months of the end of the financial year. The accounts of the fund would be audited annually by the Auditor General or an auditor authorised by the Auditor General and would be laid in Parliament, the PM said. Manning said the fund would have three objectives: 1) economic stabilisation by sustaining public expenditure capacity through periods of revenue downturns stemming from declines in oil and gas prices; 2) ensuring that there is a balance of interest between current and future generations and 3) contributing to the transformation of Trinidad and Tobago into developed country status before 2020.