debut: 2/16/17 4:58 AM
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“Trinidad & Tobago’s Economy is Running Out of Easy Fixes”
For years, Trinidad and Tobago has muddled through with incremental adjustments, patchwork measures, and fiscal Band-Aids. Each budget has promised course corrections, yet the structural weaknesses remain the same: low national savings, fragile foreign exchange reserves, stagnant productivity, and institutions that are struggling to support competitiveness under the previous Finance Minister, led by a clueless PM.
The 2025/26 budget cannot be another exercise in tinkering. The economy has arrived at a point where stopgaps no longer restore balance. Without a decisive policy reset, the pattern of weak growth, fiscal stress, and external vulnerability will accelerate, eroding the country’s resilience and narrowing its choices.
The Cracks Beneath the Surface
While global uncertainties weigh on all economies ; energy market volatility, stronger US interest rates, geopolitical risks, Trinidad and Tobago’s pressures are largely domestic. Fiscal deficits have become chronic and are increasingly costly to finance. The foreign exchange market is unstable, marked by persistent shortages and widening spreads. Buffers are eroding, with foreign reserves thinning at the very moment when confidence is in need of reinforcement. On the real economy side, non-energy investment is sluggish, wages are distorted, and productivity growth is weak.Instead of policy levers working in concert ; interest rates, exchange rates, tariffs, and wages ; measures often clash. One decision cancels another, leaving markets distorted rather than corrected. The bigger danger is that each year these pressures pile atop each other, creating a cycle where corrective tools lose credibility.
Lessons Abroad, Warnings at Home
There is nothing inevitable about small states being trapped at low growth. Consider the Gulf economies: They used energy windfalls to build buffers, establish sovereign wealth funds, and reduce dependency on short-term rents. Or consider the Asian tigers, which began constrained in resources but accelerated growth by mobilizing savings, investing in technology, and driving efficiency in capital use.The common thread was not size or resources, but vision and execution. They understood that durable growth comes from reducing waste, building institutions, and making each unit of investment produce more output.
Equitable development was not treated as charity but as the very engine of transformation. Over the last decade, Trinidad and Tobago was going in the opposite direction. Savings remain low, both at the household and corporate level. Public projects often fail to deliver efficiency, while private capital hesitates in the face of policy uncertainty. Productivity has not kept pace with global competitors, and institutions have not adapted quickly enough to enforce coherence in policy design. This is not simply about growth rates. It is about credibility: the confidence of households who save, businesses who invest, and international partners who lend and trade. Without credibility, even the best growth numbers can prove fragile. Using Heritage Saving funds and borrowing locally are not fiscal prudence; it's a disaster approaching.
What Old Tools Won’t Fix
For the past decade, the instinct in difficult times has been to rely on conventional adjustments: deficit financing, devaluation, or vague promises of diversification. Each has its place, but none addresses the structural foundations of resilience.
Deficit spending widens financing gaps without building competitiveness. Devaluation risks inflation and does little to ease foreign exchange constraints when import dependence is high. Diversification often ends up as rhetoric unless backed by the hard work of shifting incentives and investing in productive capacity.
The reality is clear: Trinidad and Tobago can no longer rely on the old playbook. The challenges have outgrown quick fixes.
cont'd,,2025/26 budget
Sarge.
For years, Trinidad and Tobago has muddled through with incremental adjustments, patchwork measures, and fiscal Band-Aids. Each budget has promised course corrections, yet the structural weaknesses remain the same: low national savings, fragile foreign exchange reserves, stagnant productivity, and institutions that are struggling to support competitiveness under the previous Finance Minister, led by a clueless PM.
The 2025/26 budget cannot be another exercise in tinkering. The economy has arrived at a point where stopgaps no longer restore balance. Without a decisive policy reset, the pattern of weak growth, fiscal stress, and external vulnerability will accelerate, eroding the country’s resilience and narrowing its choices.
The Cracks Beneath the Surface
While global uncertainties weigh on all economies ; energy market volatility, stronger US interest rates, geopolitical risks, Trinidad and Tobago’s pressures are largely domestic. Fiscal deficits have become chronic and are increasingly costly to finance. The foreign exchange market is unstable, marked by persistent shortages and widening spreads. Buffers are eroding, with foreign reserves thinning at the very moment when confidence is in need of reinforcement. On the real economy side, non-energy investment is sluggish, wages are distorted, and productivity growth is weak.Instead of policy levers working in concert ; interest rates, exchange rates, tariffs, and wages ; measures often clash. One decision cancels another, leaving markets distorted rather than corrected. The bigger danger is that each year these pressures pile atop each other, creating a cycle where corrective tools lose credibility.
Lessons Abroad, Warnings at Home
There is nothing inevitable about small states being trapped at low growth. Consider the Gulf economies: They used energy windfalls to build buffers, establish sovereign wealth funds, and reduce dependency on short-term rents. Or consider the Asian tigers, which began constrained in resources but accelerated growth by mobilizing savings, investing in technology, and driving efficiency in capital use.The common thread was not size or resources, but vision and execution. They understood that durable growth comes from reducing waste, building institutions, and making each unit of investment produce more output.
Equitable development was not treated as charity but as the very engine of transformation. Over the last decade, Trinidad and Tobago was going in the opposite direction. Savings remain low, both at the household and corporate level. Public projects often fail to deliver efficiency, while private capital hesitates in the face of policy uncertainty. Productivity has not kept pace with global competitors, and institutions have not adapted quickly enough to enforce coherence in policy design. This is not simply about growth rates. It is about credibility: the confidence of households who save, businesses who invest, and international partners who lend and trade. Without credibility, even the best growth numbers can prove fragile. Using Heritage Saving funds and borrowing locally are not fiscal prudence; it's a disaster approaching.
What Old Tools Won’t Fix
For the past decade, the instinct in difficult times has been to rely on conventional adjustments: deficit financing, devaluation, or vague promises of diversification. Each has its place, but none addresses the structural foundations of resilience.
Deficit spending widens financing gaps without building competitiveness. Devaluation risks inflation and does little to ease foreign exchange constraints when import dependence is high. Diversification often ends up as rhetoric unless backed by the hard work of shifting incentives and investing in productive capacity.
The reality is clear: Trinidad and Tobago can no longer rely on the old playbook. The challenges have outgrown quick fixes.
cont'd,,2025/26 budget
Sarge.
- edited -