Introduction

On the 12^th June 2020, the Minister of Finance presented the current administration’s final mid-year review before the election. In this blog entry we continue to explore the main contents of that presentation and the implications for that review for the citizens of Trinidad and Tobago.

The Informal Economy

The Minister of Finance noted his concern that only 420,000 workers representing 68% of the total labour force are registered for national insurance. This means that 32% are outside the formal economic system. The Minister stated that “this must be corrected”.  In other words, every individual should contribute and pay their fair share in tax and national insurance contributions.

In order to improve the cash flow position of businesses and individuals registered for value added tax (VAT) and due refunds, the Government of the Republic of Trinidad and Tobago (GORTT) took the following steps in March 2020.

• Issued 3,800 VAT Refund payments in cash to businesses with arrears of TT$250,000 per VAT period (or less) at a cost of TT$260 million.
• Paid TT$200 million in VAT refunds to businesses owed between TT$250,000 and TT$500,000 per VAT period.
• Paid TT$240 million in income tax refunds to 25,095 individuals clearing off all outstanding individual income tax refunds.

Remaining VAT arrears are to be settled through the issuance of interest-bearing bonds. These fully tradeable bonds bear interest at 3.3% over three years and are already being purchased by financial institutions at par. At the time of the mid-year review TT$900 million in VAT Refund Bonds had been successfully issued by the GORTT.

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The Minister defined further elements of the Support Programme designed to help individuals and businesses navigate through COVID-19.

These elements include:

• Providing the Credit Union Sector with TT$100 million for the provision of soft loans to members. Credit Unions will be able to provide affordable loans of TT$5,000 per month for three months to members to carry them through the lockdown period. Loans are priced at half of the usual interest rate. The GORTT plans to provide an additional TT$100m to be used specifically for loans to Small and Medium Sized Enterprises (SME’s).
• Providing TT$300m to First Citizens Bank to provide soft loans to SME’s. This programme will target SME’s with annual gross revenue between TT$1m and TT$20m. Funds advanced are intended for salary payments, working capital and the purchase of raw materials. Loans will be interest free and have a moratorium on repayment of two years.
• Providing TT$30m to the National Development Company Limited (NEDCO) for the issue of grants to businesses with annual revenues of less than TT$1m.
• Providing US$25m per month for a total period of three months to the EXIMBANK to fund the importation of food, pharmaceuticals, sanitary products, PPE and other essential supplies to fight COVID-19.
• Providing support to UWI students in Jamaica and Barbados (with students at various institutions in other countries shortly to receive assistance as well).
• Reducing the reserve requirements for commercial banks from 17% to 14%, and the REPO rate from 5% to 3.5%. This has resulted in the commercial banks reducing their prime lending rates from an average of 9.5% to 7.5% and has provided a liquidity boost to the financial system of TT$2.6 billion. Total liquidity in the banking system now stands at TT$10 billion.
• Banks are providing a moratorium on mortgages and instalment loans. Penalties are being waived on overdraft facilities on a month-by-month basis.
• Credit cards have reduced rates and increased limits.
• Banks are being encouraged to reduce mortgage interest rates.
• Credit Unions are being encouraged to exercise forbearance.
• The Trinidad and Tobago Mortgage Finance Company Limited and Home Mortgage Bank are deferring mortgage payments for three months.
• The Housing Development Corporation is deferring mortgage payments for two months.
• Import duty and VAT is being waived on certain medical and emergency supplies.

On the 16^th April 2020 the Prime Minister established a 23-person committee comprising of Ministers, members of the business community, senior public servants, academia and non-governmental organisations in order to develop a road map for the country post COVID-19.

The GORTT has received a first draft of that plan which is designed to assist them in navigating the challenging period ahead.

The preliminary road map focuses on eight (8) sectors which would form the foundation for a revitalised economy. Those sectors are:

• Agriculture
• Construction
• Energy
• Manufacturing
• Services
• Wholesale, Retail and Distribution
• Banking and Insurance
• Small Business and Credit Unions

Tobago is accorded a special status. Tobago has undergone a severe shock on account of the closure of borders, the closure of restaurants and bars and the sharp decline in inter-island traffic. The Minister committed to providing Tobago with all the support it needs in terms of key construction projects, the expansion of enterprise development and the support of the hotel and tourism sector.

A significant agricultural stimulus of TT$500 million is planned with a view of making Trinidad and Tobago a more “food secure nation”.

The Road Map calls for a revitalisation of the construction sector to create jobs and economic activity in the quickest possible time frame. This involves the commencement of a number of new central government projects in parallel with new private sector projects. These projects involve the urban revitalisation of main city centres.

Revitalising the energy sector involves an assessment of the gas value chain to ensure a competitive, viable and sustainable investment environment moving forward.

With support already being provided by the GORTT to the manufacturing sector, the Road Map Committee expects the manufacturing sector to rebound quickly from the impact of COVID-19.

In respect of tourism the Road Map Committee recommended that a tourism recovery plan be developed to address the areas and resources needed. Tourism-related initiatives are to be expanded and emergency support grants are to be provided to micro-businesses.

Small and Medium-sized tourism businesses are to be provided with support under a liquidity support programme.

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