Sunday 18 August, 2019

Imbert on Moody’s deficit estimate: That’s their opinion

Finance Minister Colm Imbert said that Moody’s Investor Service (Moody’s) is free to have its own opinion on the country’s estimated fiscal deficit.

Imbert was speaking at Thursday’s post-cabinet meeting regarding the company’s estimate of Trinidad and Tobago’s fiscal deficit which they estimate to narrow to 3.5 percent of GDP by September 2018, instead of government's projections of $4.3 billion or 2.5 percent of GDP.

Moody’s said several challenges such as the implementation of property tax and the Revenue Authority as well as increases in capital spending ahead of the 2020 general election could also prevent narrowing of further deficits.

(Source: Moody's Investor Service)

However, Imbert said that this is simply their opinion, which they are entitled to have.

“That’s just an opinion that Moody’s is saying, the government is saying that the deficit this year will be two and a half percent of GDP, but Moody’s believes that it will be three and a half percent because (they) don’t think (government) will generate the entire four billion in revenue from the sale of the shares and units in the National Investment Fund, that’s just their opinion,” he said.

“At the end of the fiscal year we will see whether we have in fact realised the projected $4 billion from the NIF. Similarly, they are saying they believe in the election year (2020), they think that capital expenditure will increase because 2020 is an election year, that’s just their opinion.”

“We have a programme, we have a manifesto, we have projects and programmes and we’re on target to complete what we promised in our manifesto,” he said.

He added that the Revenue Authority Bill will be brought this week before a committee for review. 

"You never know. The Opposition, in the same way they supported the Insurance Bill and they're also expressing support for the Gambling Bill, which is still in a committee, and they agreed to the FATCA legislation, after we agreed to amendments with them, you never know."

"They may come with amendments, propose amendments to the Revenue Authority and the Bill may pass. What you're reading there is simply somebody's opinion, it's not fact, whereas it is a fact that Government revenue collection has increased," he said. 

Government expects the fiscal deficit to narrow to TT$4.2 billion, or 2.5% of GDP for the fiscal year ending 30 September 2018 (fiscal 2018), down from 3.1% of GDP in the original budget.

However Moody’s said in a report issued May 22, 2018, that while they expect an energy sector-led rebound, they see downside risks to government’s revised revenue targets and expect a slightly wider fiscal deficit of 3.5 percent of GDP in 2018.

Additionally, they see capital spending as well as challenges with parliamentary approvals as obstacles in creating non-energy revenue. 

"Beyond 2018, we expect only a gradual pace of fiscal consolidation as revenue-enhancing measures such as the introduction of a property tax and the establishment of a unified revenue authority face delays, preventing a more significant increase in non-energy revenue (see Exhibit 3). The introduction of a property tax continues to face delays because of legal and administrative issues related to the valuation of properties. The establishment of the Trinidad and Tobago Revenue Authority has also faced legislative hurdles."

"A unified revenue authority would improve tax compliance and collection, potentially leading to significant revenue gains – the government believes it could generate up to 3.0% of GDP in additional revenue. Legislation for both the property tax and the revenue authority require special three-fifths majorities in parliament. With elections scheduled for 2020, we believe parliamentary approval will be difficult. At the same time, we expect increases in spending – both capital spending and spending on goods and services and wages – as the government begins to focus on increasing support ahead of the elections," Moody's said. 


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