The Heritage and Stabilization Fund
The Heritage and Stabilization Fund (HSF) was established with the passing of the HSF Act. No. 6 in March 2007. This Fund was previously known as the Interim Revenue Stabilization Fund (IRSF) which has been in existence since 2000. All proceeds from the IRSF have been transferred into the HSF, and the Fund will be denominated in the currency of the United States of America. The HSF Act incorporates several of the “best practices” as identified in literature pertaining to such commodity funds and also outlines details on the establishment and management of the Fund including operational guidelines, resources of the Fund, and governance arrangements.
Objectives of the Fund
The purpose of the Fund is to save and invest surplus petroleum revenues derived from production business in order to:
- Cushion the impact on or sustain public expenditure capacity during periods of revenue downturn whether caused by a fall in prices of crude oil or natural gas.
- Generate an alternative stream of income so as to support public expenditure capacity as a result of revenue downturn caused by the depletion of non-renewable petroleum resources; and
- Provide a heritage for future generations, of Trinidad and Tobago, from savings and investment income derived from excess revenues.
Deposits to the Fund
Where petroleum revenues collected in each quarter of any financial year:-
- Exceed the estimated petroleum revenues for that quarter of a financial year by more than ten percent (10%), the currency of the United States of America equivalent of the excess revenue shall be withdrawn from the Consolidated Fund and deposited to the HSF; or
- Exceed the estimated petroleum revenues for that quarter of a financial year but do not exceed such estimated revenues by at least ten percent (10%), the Minister may direct that the currency of the United States of America equivalent of all or part of the excess revenue shall be withdrawn from the Consolidated Fund and deposited to the HSF.
Withdrawals from the Fund
Where the petroleum revenues collected in any financial year fall below the estimated petroleum revenues for that financial year by at least ten percent (10%), withdrawals may be made from the Fund as follows, whichever is the lesser amount:-
- Either sixty percent (60%) of the amount of the shortfall of petroleum revenues for that year; or
- Twenty-Five percent (25%) of the balance standing to the credit of the Fund at the beginning of the year.
Corporate Governance
The President shall appoint for a term of three (3) years, a five member Board with proven competence in the fields of finance, investment, economics, business management or law, including an officer of the Central Bank and the Ministry of Finance. The Board shall determine the governance structure and the operational and investment guidelines of the Fund. The Central Bank will have the responsibility for the management of the Fund. Transparency and accountability is also provided for in the legislation through the submission of quarterly reports to the Board on the holdings, performance and risk of the Fund, as well as the submission of an Annual Report of the Fund together with the audited, financial statements and investments report on the performance of the Fund.
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