MP Lee – Is the Minister of Finance misleading the country on the Standard and Poors Downgrade?

It is quite disingenuous and misleading that the Minister of Finance has sought to blame the recent downgrade of this nation’s economic outlook from stable to negative by Standard and Poors on what he calls “the submission of inaccurate oil and gas forecasts by the Ministry of Energy and Energy Affairs”. In the past days since the credit agency issued it’s economic outlook for Trinidad and Tobago the Minister has been seeking to create a narrative that the downgrade was solely due to Standard and Poors being unable to take into account the possible increases in oil and gas production Trinidad and Tobago would be experiencing for the next year .

However when one reviews the media release issued by Standard and Poors on their website on April 27th 2018 it is quite clear that the renowned credit rating agency did highlight and take into consideration the fact this country would be experiencing increases in oil and gas production but still saw it fit to downgrade our outlook as they were not convinced that these increases in production could compensate for the other conditions and issues posing a threat to our nation’s economic health. This was demonstrated in their media release which stated ; ” The negative outlook reflects our view that there is at least a one-in-three chance that we could lower the ratings over the next 12-to-24 months.We expect moderately higher energy prices and higher production levels to lead to a mild economic recovery and smaller current account deficit over this period. Nevertheless, we believe there is uncertainty about whether this improvement will be sufficient to mitigate the impact that imbalances–such as exchange rate pressure, restrictions on accessing foreign currency, negative yield differentials on short-term treasury securities relative to those of the U.S., and historical gas supply shortages–could have, leading to a faster depletion of the country’s external assets, or a weakening of the effectiveness of monetary policy. Under this scenario, we could lower the rating. ”

Therefore it is quite erroneous for the Minister of Finance to adopt the position that inaccurate forecasts have led to this downgrade when evidence shows it is some of the economic conditions which his administration has failed to adequately address in the past two years such as a sustained shortage of foreign exchange in our national economy that have led to this negative outlook. Another key issue which has critically impacted this nation’s outlook has been the question of Trinidad and Tobago’s ability to effectively repay its medium term and long term debts causing Standard and Poors to issue a warning of the possibility of lowering the rating in the next twoyears should the government’s fiscal consolidation measures fail to shrink the deficit to the degree that they forecast or any larger increases in government debt.

These actions by the Minister of Finance demonstrate that this administration will undertake any measures possible to mask the truth of their incompetence and poor economic track record. Given the discontent and extent which the Minister of Finance took to challenge this outlook, the question that must now be asked is ; ” Would Government be seeking the services of another Credit rating Agency to review our national economic outlook as was the case last year when the Government wanted to hire a third agency in the form of Fitch due to poor ratings received by Moody’s as well as Standard and Poors ?”