- Caribbean natural gas producer buffeted by low energy prices
- Finance minister says government withdrew $375 million
Trinidad & Tobago, the Caribbean’s largest oil and natural gas producer, joined Qatar, Russia and other energy-rich nations by tapping its sovereign wealth fund after low oil prices left the government with a budget shortfall, Finance Minister Colm Imbert said Friday.
The twin-island country, located off the coast of Venezuela, dipped into its $5.5 billion Heritage and Stabilization Fund for the first time since it was created in 2007, withdrawing $375 million.
“The purpose of this fund is to offset serious shortfalls in revenue in periods of depressed petroleum prices,” Imbert said during a session of Parliament in Port of Spain. “It is not, as some believe, a trophy to be kept on a shelf and never to be touched.”
Suffering a recession that the central bank expects to last at least through next year, the country of 1.2 million, where oil and gas output makes up about 45 percent of gross domestic product, has said it will rely on a combination of borrowing and withdrawals from the fund to make up budget deficit. It is facing a revenue shortfall of more than $1 billion since its budget took effect in October, due mainly to a fall in energy prices and slumping production.
In tapping its fund, Trinidad will join countries from Saudi Arabia to Norway, which built up reserves during the boom in crude prices and are now trying to shore up their finances. The value of equities held by the world’s largest sovereign funds will drop to about $2.64 trillion this year from $3.04 trillion at the end of 2015, the Sovereign Wealth Fund Institute reported in February.
Trinidad, a top 10 global exporter of liquefied natural gas, saw exports decrease in 2015 to 17 billion cubic meters from 18.4 billion a year earlier, according to the BP Statistical Review of Energy released this month. A slowdown in the energy sector is expected to drive the $29 billion economy to contract 2 percent this year and remain flat in 2017, according to the central bank.
Just a decade ago, Trinidad was the region’s economic star, posting 13 percent growth in 2006, according to World Bank figures. Due to its reliance on the energy sector, however, its economy has gone through peaks and troughs, emerging from its last recession in 2010.
The government is trying to diversify away from energy by promoting tourism, agriculture and manufacturing. It has proposed a 7 percent tax on online purchases to bring in extra revenue.