Express ( Trinidad and Tobago )
11 July 2023 ( Page 10 )
Moody's improves T&T's credit outlook to positive
...eyes on Dragon Gas deal
¦ Joel Julien
joel.julien@trinidadexpress.com
MOODY'S Investors Service yesterday improved Trinidad and Tobago's credit rating outlook to positive from stable.
And it also affirmed the Government of Trinidad & Tobago's long-term local and foreign currency issuer and senior unsecured ratings at Ba2.
'The positive outlook reflects improved prospects that Trinidad & Tobago's (T& T's) fiscal consolidation momentum triggered by energy price windfall gains will be more sustained than projected in Moody's baseline scenario, despite lower gas prices, owing to the implementation of structural spending and revenue measures aimed at reducing fiscal accounts' sensitivity to energy prices,' Moody's stated.
'A sustained return to economic expansion after several years of contraction, supported by the projected increase in oil production starting this year would also enhance economic resiliency, as would continued diversification efforts in the non-energy sector. The government's adopted structural fiscal and economic reforms are reflected in an improving institutions and governance strength assessment as a driver of this action,' it stated.
In response Finance Minister Colm Imbert, in a release issued last night, stated that he considers this affirmative action on the part of Moody's 'to be a welcome development, because it acknowledges the positive outcome of the efforts of the country throughout the several different shocks that have taken place over the recent years, such as oil and gas prices shocks and the severe adverse effects of the Covid-19 pandemic'.
'Moody's positive outlook for Trinidad and Tobago is based on the fiscal performance of the country, which goes beyond the windfall of last year as a result of the surge in oil and gas prices and flows from positive developments favourably affecting gas production capacity and economic diversification,' the release stated.
Imbert stated that the improvement in the country's outlook is also an 'acknowledgement of policy effectiveness, illustrated by the capacity of the Government to implement difficult but necessary long-term reforms in restructuring transfers and subsidies and improving revenue collection.'
Moody's noted that 'The government's adopted structural fiscal and economic reforms are reflected in an improving in-stitutions and governance strength assessment as a driver of this action.'
'This improvement in our outlook is a first step in the convergence and harmonisation of our international credit ratings. It is also clear that our credit rating dynamics and momentum are now positive, which is of significant importance in a world of more elevated interest rates. Better credit ratings will positively influence the cost of funding for the Government and State Enterprises and the economy of Trinidad and Tobago as a whole,' Imbert stated.
Moody stated that T& T is a mature hydrocarbon producer with declining domestic supply trends and recoverable gas reserves of about ten years.
And as such these elements expose the country to very high energy transition and economic diversification risks.
'Low energy prices and supply disruptions have led to annual economic contractions since fiscal 2015. The economy expanded again by 2.1 per cent in 2022, driven by a strong rebound in the non-energy sector,' it stated.
'The government projects the energy sector expand again in 2023 with a renewed boost to oil production after several years of decline, while gas production is projected to pick up in subsequent years with the start of Shell's Manatee field among others,' Moody's stated.
Moody's said the capacity to slow the weakening energy production trend would support growth and economic resiliency.
'Part of the government's strategy to mitigate the declining domestic gas supply trend is to promote T& T's role as regional energy hub by collecting, processing, and re-exporting natural gas from other Caribbean countries. This strategy builds on T& T's comparative advantage as the only Caribbean nation with significant LNG and ammonia/methanol production capacity in place to supply world markets,' it stated.
'The two-year licence granted by the United States of America, Government of (Aaa stable) to T& T in January 2023 to develop the 4.2 trillion cubic foot (tcf) Dragon gas field offshore Venezuela, Government of (C stable) via an Office of Foreign Assets Control (OFAC) waiver from sanctions represents an important development that will test the viability of this strategy,' Moody's stated.