The Honorable Minister of Finance gave an interview today to address the precipitous decline in oil prices over the last few weeks. In that interview Mr. Imbert provided some important information amid a lot of fluff.

So here’s the situation. The government predicated its revenue estimates based on a US$60/barrel oil price. As of this morning, the price of West Texas Intermediate (WTI) crude was US$33. Mr Imbert went into a long round the world explanation of the Genesis, Exodus and Leviticus of oil prices from way back in 2015 all the way to the present day.

I was particularly impressed when he explained that a while ago the country changed from a profit based taxation regime to one based on volumes, meaning royalties. Therefore, even if the oil companies are losing money we still make some money based on production levels.

All of this to say that he is now projecting an additional $3.5 billion deficit on top of the already projected $4.5 billion for a total deficit of $8 billion.

The Minister noted that there are a number of options to finance the deficit including borrowing, withdrawal from the Heritage and Stabilization Fund (HSF) and generating extraordinary revenue aka asset sales. The HSF withdrawal option is problematic as you are only allowed to withdraw after the end of the fiscal year. That would be in October 2020 unless the Fund is restructured, which is an option. He also indicated that the one option currently NOT on the table is approaching the IMF.

As far as borrowing goes the intention would be to borrow first and foremost from the local market through the banks. He also stated that international borrowing could be an option.

Here is where Imbert hit me a crossover, a spanner, a drag and had me skating off the field into the stands. Apparently there is a US$250 million bond maturing soon and the Government had already contemplated, before oil wars and coronavirus, refinancing that debt and upsizing it by a further US$250 million. The boss man said this would not increase the debt level of the country. I’m not a mathematician but I’m pretty sure 500 is more than 250.

Naturally the Minister is always watching the debt to GDP ratio (remember that?). Interestingly he assured that his advisors and international institutions have told him that the maximum debt ratio we can sustain is 70%. Which is above the IMF 60% threshold and the 64% from the World Bank’s study that we discussed just yesterday.

Coincidentally according to the Minister, this means we can assume another $8 billion in debt. I mean, what are the odds! Anyway who is me to dispute the Minister’s numbers.

The most impressive part of the whole interview was Mr Imbert’s patience and calm while being harassed and pushed by an equally impressive journalist, Mr Curtis Williams of the Guardian I believe.

At one point Imbert asked Williams to keep his questions short while Williams fired back later with “are you going to answer my questions or continue with your soliloquy?”. Williams again hit Imbert with a jab in the form of the question “are you planning to maintain expenditures levels because this is an election year and you need votes?”.

However, the Mortal Kombat, Chinese hat wearing, Raiden “bhaji boobolee” screaming move from Mr Williams when he asked “you are increasing the deficit projection for this year and it’s not the first time over the years you have been wrong about your projections. Is it that you are the victim of all these unfortunate events or are you just terrible at budgeting?”

At this point I expected the boss man to erupt. Everyone knows Mr. Colm is one of the most brutal when it comes to dealing with the media. However he was incredibly Zen in his mood and response. I was thoroughly impressed.

You all know I would never defend any politician but today I felt like if I was Imbert I woulda let out two fowl foot and a mudda Constantinople behind that journalist.

Well played Sirs. Well played.


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