Mar­i­ano Browne

Ex­pen­di­ture has ex­ceed­ed rev­enue in 23 of the last 26 gov­ern­ment bud­gets. The fore­cast for 2026 is an­oth­er deficit, and 2027 is un­like­ly to be any dif­fer­ent. These short­fall/deficits have been fi­nanced by gov­ern­ment bor­row­ing.

Ac­cord­ing to the Cen­tral Bank (CBTT) da­ta as of June 30th, the na­tion­al debt was $148.4 bil­lion and now ac­counts for 84.9% of GDP, well above the rec­om­mend­ed max­i­mum pru­den­tial thresh­old of 60-70%. This does not in­clude the new US$800 mil­lion loan drawn in late Ju­ly. While most of this loan was used to re­pay an ex­ist­ing debt, the na­tion­al debt in­creased, as ap­prox­i­mate­ly US$300 mil­lion (TT$2 bil­lion) was new bor­row­ing used for bud­getary sup­port. I cal­cu­late that this added an­oth­er 1% to the debt-to-GDP ra­tio.

Why does a coun­try’s debt mat­ter? High debt can slow down the econ­o­my, cost a lot in in­ter­est, and lim­it what a gov­ern­ment can do for its peo­ple. Gov­ern­ments al­ways need to bor­row to smooth fluc­tu­a­tions in their tax re­ceipts, just like any in­di­vid­ual or cor­po­ra­tion. The high­er the debt, the more a coun­try has to re­pay. This is the debt ser­vice oblig­a­tion, and debt ser­vice pay­ments as a per­cent­age of rev­enue are called the debt ser­vice ra­tio.

The more it has to re­pay, the less it has to spend on its cit­i­zens and their needs. In­ter­na­tion­al rat­ing agen­cies (Fitch, Moody’s, Stan­dard and Poor’s) as­sess a coun­try’s abil­i­ty to re­pay. The high­er the rat­ing, the low­er the risk and there­fore the low­er the in­ter­est rate charged. If the debt ra­tio is not man­aged, this could lead to a low­er cred­it rat­ing and the pos­si­bil­i­ty that ac­cess to loan fi­nance could dry up. This is what hap­pened to Bar­ba­dos and Ja­maica, which were forced to re­ly on IMF loans.

A coun­try’s bor­row­ing ca­pac­i­ty and its ac­cess to cap­i­tal mar­kets are not to be tak­en light­ly. Too much gov­ern­ment bor­row­ing could cause a fi­nan­cial cri­sis. Even the Unit­ed States gov­ern­ment, with the world’s largest econ­o­my, must con­sid­er the ef­fects of its bor­row­ing on fi­nan­cial mar­kets. The US na­tion­al debt crossed $40.05 tril­lion on Au­gust 18, 2026, or 125.8% of its es­ti­mat­ed GDP. Fi­nan­cial mar­kets re­act­ed im­me­di­ate­ly. In­ter­est costs on 30-year Trea­suries soared past 5%, the high­est in 19 years, as mar­kets de­mand­ed a pre­mi­um to com­pen­sate for high­er risk.

Fi­nan­cial mar­kets are not yet in cri­sis, and the US Trea­sury Sec­re­tary has had to take emer­gency mea­sures to re­as­sure in­vestors. There is more to come in the com­ing months. How­ev­er, the in­crease in yields re­in­forces the pass­ing of the post-glob­al fi­nan­cial era, one in which OECD gov­ern­ments could bor­row with lit­tle fear of penal­ties and rates were low. It is un­clear how fi­nan­cial mar­kets will set­tle, as sev­er­al com­pli­cat­ing fac­tors, such as oil prices, the war with Iran, and the im­pact of US tar­iffs, are at play.

The point is that the T&T Gov­ern­ment can­not con­tin­u­al­ly in­crease its debt, par­tic­u­lar­ly its for­eign debt, with­out some con­se­quence. This is a dif­fi­cult po­si­tion for any gov­ern­ment. Re­duc­ing gov­ern­ment debt means ei­ther in­creas­ing tax­es, re­duc­ing ex­pen­di­ture, or some com­bi­na­tion of the two. This way, more mon­ey can be di­rect­ed to re­pay­ing the debt. The fourth al­ter­na­tive is to grow the econ­o­my quick­ly. None of these mea­sures is easy.

The Fi­nance Min­is­ter and his pre­de­ces­sor Colm Im­bert, both in­di­cat­ed that they would re­duce the deficit in the “medi­um” term to 3% of GDP. The deficit at the 2026 mid-year re­view came in at 3% or there­abouts. This was achieved by us­ing a draw­down from the Her­itage and Sta­bil­i­sa­tion Fund and post­pon­ing pub­lic sec­tor wage set­tle­ments to 2027. S&P Glob­al Rat­ings reaf­firmed Trinidad and To­ba­go’s in­vest­ment-grade sov­er­eign cred­it rat­ing at ‘BBB-’ on Ju­ly 22, 2026, thus pre­serv­ing the coun­try’s in­vest­ment-grade sta­tus and as­sist­ing the suc­cess of the US$800 mil­lion bond, which was fi­nalised short­ly af­ter­wards.

What will the 2027 Bud­get Speech bring: a grow­ing econ­o­my, ex­pen­di­ture re­duc­tion or in­creased tax­a­tion?

The IMF es­ti­mat­ed that the T&T econ­o­my grew by 0.8% in 2025 and ex­pects 2026 to show a sim­i­lar rate of growth. The pro­jec­tions for 2027 and be­yond are more op­ti­mistic, with the econ­o­my ex­pect­ed to grow by 2% or more. This pos­i­tive es­ti­mate has been main­ly pred­i­cat­ed on the Man­a­tee (Shell), Gin­ger (BP) and Aphrodite (Shell) fields com­ing on stream in 2027 to boost ex­port and do­mes­tic pro­cess­ing ca­pac­i­ty. Man­a­tee is es­ti­mat­ed at 600 mil­lion cu­bic feet per day (MM­cf/d), Gin­ger at 372 MM­cf/d and Aphrodite at 100 MM­cf/d.

Man­a­tee is ex­pect­ed to come on stream in the third quar­ter and is there­fore un­like­ly to pos­i­tive­ly im­pact the 2027 bud­get num­bers. The Aphrodite field is al­so like­ly to be de­layed, as Shell tem­porar­i­ly shelved the off­shore de­vel­op­ment and re­leased the jack-up drilling rig orig­i­nal­ly se­cured for the project wells be­cause it could not agree on com­mer­cial terms with the Na­tion­al Gas Com­pa­ny.

In­deed, ac­cel­er­at­ed al­lowances will re­duce the pos­i­tive fi­nan­cial con­tri­bu­tion of any field on the 2027 bud­get num­bers. How will the Fi­nance Min­is­ter meet the un­paid pub­lic sec­tor wage oblig­a­tions and stay with­in a 3% deficit tar­get with­out cut­ting ex­pen­di­ture or rais­ing tax­es? We can ex­pect 2027 to be an­oth­er dif­fi­cult year.