debut: 2/16/17
40,774 runs
Fiscal Recklessness in T&T: Past Government Living on IOUs
For years, the PNM governments have promised prudent management of Trinidad and Tobago’s economy. Yet the Central Bank’s 2024 report leaves little doubt: the nation’s finances are being steered down a perilous path. Burdened by swelling debt, repeated withdrawals from sovereign savings, and a financial sector increasingly dependent on government paper, the façade of “resilience” is becoming more difficult to maintain.
The headline figures tell a troubling story. By the end of the fiscal year, general government debt had climbed by $4 billion, reaching $140.6 billion. This worsening trajectory is not simply the result of borrowing for development projects or long-term investment. Nearly one-fifth of the government’s 2024 borrowing was used for debt rollover ; refinancing old loans with new ones. It is a strategy that avoids the pain of reform but does nothing to strengthen the economy’s foundation. Imberts Borrowing to repay borrowing is not sustainable fiscal policy; it is a delay tactic.
Colin Imbert points to its successful US$750 million bond issue on international capital markets as proof of investor confidence. But closer examination reveals the fragility of this claim. The majority of financing still came from domestic institutions: commercial banks and insurance companies whose balance sheets are now deeply tied to government-issued securities. The Central Bank warns of “sovereign concentration,” the risk that the financial system itself is overexposed to government debt. Should the state’s fiscal position weaken, these institutions—and by extension, the savings and security of citizens—stand exposed.
This dependence is compounded by the government’s continued reliance on the Heritage and Stabilisation Fund (HSF). The 2024 withdrawal of nearly US$370 million, equivalent to TT$2.5 billion, may have eased immediate pressures, but it eroded a vital national buffer intended for genuine crises. The HSF was designed to shield the economy from external shocks, not to compensate for recurring fiscal imbalances. Using it to fill budget gaps offers only temporary relief at the expense of long-term security.Meanwhile, debt service costs continue to rise, consuming resources that could otherwise support development. By the close of the fiscal year, 8.7 percent of total debt was due within twelve months, the bulk of it domestic obligations. This compressed maturity profile leaves the country exposed to refinancing strains, with the steep slope of the 2024 yield curve signalling that markets already perceive higher risks. Simply put, borrowing is becoming more expensive as investors demand greater returns.
The dynamics within the financial sector compound these risks. While banks modestly reduced the share of assets tied to government securities, insurers increased their holdings, further binding citizens’ pensions and long-term policies to the health of public finances. This shifting exposure underscores the danger of continued fiscal indiscipline: the State is not merely jeopardizing its own sustainability but endangering the very institutions that safeguard citizens’ futures.
The consistent theme in the Central Bank’s assessment is clear. Rather than undertaking the difficult work of reform—rationalizing expenditure, broadening non-energy revenue, and pursuing true diversification; the government has relied on refinancing, reserves, and increased borrowing. These are short-term responses to structural weaknesses, not solutions. The costs of this approach extend beyond the balance sheets. Persistent fiscal imbalance undermines investor confidence and leaves Trinidad and Tobago less prepared to respond to external shocks. Over time, it diminishes growth potential while eroding institutional safeguards.
The Central Bank’s report should therefore not be viewed as a technical document alone. It is a warning. Trinidad and Tobago cannot continue to borrow its way out of deficit while raiding its savings to avoid reforms. Fiscal consolidation is no longer optional; it is essential.
Policymakers must move beyond political convenience and confront hard economic realities. Every year of delay adds to the debt burden, narrows room for manoeuvre, and increases the vulnerability of both the government and the wider financial system. Without decisive action, the country risks drifting into a cycle of rising costs, declining confidence, and greater instability.
Resilience, properly understood, is not the ability to borrow more, refinance faster, or deplete reserves. True resilience lies in discipline, sustainability, and the careful preservation of national buffers. In 2024, Trinidad and Tobago demonstrated none of these. Unless that changes, the reckoning hinted at in the Central Bank’s report may arrive sooner rather than later.
Sarge
For years, the PNM governments have promised prudent management of Trinidad and Tobago’s economy. Yet the Central Bank’s 2024 report leaves little doubt: the nation’s finances are being steered down a perilous path. Burdened by swelling debt, repeated withdrawals from sovereign savings, and a financial sector increasingly dependent on government paper, the façade of “resilience” is becoming more difficult to maintain.
The headline figures tell a troubling story. By the end of the fiscal year, general government debt had climbed by $4 billion, reaching $140.6 billion. This worsening trajectory is not simply the result of borrowing for development projects or long-term investment. Nearly one-fifth of the government’s 2024 borrowing was used for debt rollover ; refinancing old loans with new ones. It is a strategy that avoids the pain of reform but does nothing to strengthen the economy’s foundation. Imberts Borrowing to repay borrowing is not sustainable fiscal policy; it is a delay tactic.
Colin Imbert points to its successful US$750 million bond issue on international capital markets as proof of investor confidence. But closer examination reveals the fragility of this claim. The majority of financing still came from domestic institutions: commercial banks and insurance companies whose balance sheets are now deeply tied to government-issued securities. The Central Bank warns of “sovereign concentration,” the risk that the financial system itself is overexposed to government debt. Should the state’s fiscal position weaken, these institutions—and by extension, the savings and security of citizens—stand exposed.
This dependence is compounded by the government’s continued reliance on the Heritage and Stabilisation Fund (HSF). The 2024 withdrawal of nearly US$370 million, equivalent to TT$2.5 billion, may have eased immediate pressures, but it eroded a vital national buffer intended for genuine crises. The HSF was designed to shield the economy from external shocks, not to compensate for recurring fiscal imbalances. Using it to fill budget gaps offers only temporary relief at the expense of long-term security.Meanwhile, debt service costs continue to rise, consuming resources that could otherwise support development. By the close of the fiscal year, 8.7 percent of total debt was due within twelve months, the bulk of it domestic obligations. This compressed maturity profile leaves the country exposed to refinancing strains, with the steep slope of the 2024 yield curve signalling that markets already perceive higher risks. Simply put, borrowing is becoming more expensive as investors demand greater returns.
The dynamics within the financial sector compound these risks. While banks modestly reduced the share of assets tied to government securities, insurers increased their holdings, further binding citizens’ pensions and long-term policies to the health of public finances. This shifting exposure underscores the danger of continued fiscal indiscipline: the State is not merely jeopardizing its own sustainability but endangering the very institutions that safeguard citizens’ futures.
The consistent theme in the Central Bank’s assessment is clear. Rather than undertaking the difficult work of reform—rationalizing expenditure, broadening non-energy revenue, and pursuing true diversification; the government has relied on refinancing, reserves, and increased borrowing. These are short-term responses to structural weaknesses, not solutions. The costs of this approach extend beyond the balance sheets. Persistent fiscal imbalance undermines investor confidence and leaves Trinidad and Tobago less prepared to respond to external shocks. Over time, it diminishes growth potential while eroding institutional safeguards.
The Central Bank’s report should therefore not be viewed as a technical document alone. It is a warning. Trinidad and Tobago cannot continue to borrow its way out of deficit while raiding its savings to avoid reforms. Fiscal consolidation is no longer optional; it is essential.
Policymakers must move beyond political convenience and confront hard economic realities. Every year of delay adds to the debt burden, narrows room for manoeuvre, and increases the vulnerability of both the government and the wider financial system. Without decisive action, the country risks drifting into a cycle of rising costs, declining confidence, and greater instability.
Resilience, properly understood, is not the ability to borrow more, refinance faster, or deplete reserves. True resilience lies in discipline, sustainability, and the careful preservation of national buffers. In 2024, Trinidad and Tobago demonstrated none of these. Unless that changes, the reckoning hinted at in the Central Bank’s report may arrive sooner rather than later.
Sarge
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