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TTO | Oct 7, 2024

Worries about T&T’s budget deficit crashing the economy

/ Our Today

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By Durrant Pate/Contributor

A senior lecturer in economics at The University of the West Indies (UWI), St Augustine, Dr Daren Conrad, is raising the red flag over Trinidad and Tobago’s (T&T) nine fiscal deficits in ten years, declaring this as a clear and present danger to the local economy crashing. 

Dr Conrad said during a post-budget webinar hosted by the South Chapter of the T&T Association of Insurance & Financial Advisors (TTAIFA) last Wednesday that running deficit budgets over the years should be a “concern” for the country. He added that this is not sustainable in the long term and can spell “doom and gloom” for T&T’s future.

His warning comes amidst Finance Minister Colm Imbert’s presentation of the national budget for fiscal year 2025 last Monday, which projected a deficit of TT$5.51 billion. The national budget shows a total expenditure of TT$59.74 billion and a total revenue of around TT$54.22 billion.

Trinbagonian Finance Minister Colm Imbert. (Photo: Energy Chamber of Trinidad & Tobago)

T&T’s recurring fiscal deficits

Since the 2008 budget, T&T has recorded fiscal deficits for every year, except 2022, when the country’s energy revenues were boosted by Russia’s invasion of Ukraine and the supply chain issues that resulted. 

Dr Conrad contended, “Our gross debt is accumulating. I think last year the deficit reached [TT]$7.1 billion. We have never been able to align the revenues with the expenditures, which tells us that given a budget of TT$59.74 billion with more than 50 per cent being transfers and subsidies, it tells us that we need to work on the number of transfers and subsidies as these do not equate to economic activity.”

The academic explained during the webinar that not being able to balance a national budget can lead to some economies crashing.

“We can only run a deficit budget for so long and we can continue to borrow to finance the deficit, but when you are borrowing to finance the recurrent expenditure and that is driving your deficit up, that well will run dry at some point in time,” he argued,

Dr Conrad made the point that running budget deficits and having to finance burdensome debt can lead to a deterioration of the quality of life for T&T’s citizens.

Senior lecturer in economics at The University of the West Indies, St Augustine Dr Daren Conrad (Photo: sta.uwi.edu)

“We have been doing it for years, successfully managing the borrowing to fit the expenditure in terms of recurrent expenditure. That is why T&T has a deterioration of the infrastructure.”

The country’s central government debt service in fiscal deficit was estimated at TT$15.67 billion, which is expected to be 25.4 per cent of central government revenue in fiscal 2024.

Fragile T&T economy

Former president of the Supermarket Association of T&T (SATT) Rajiv Diptee, who also commented during the webinar, warned that T&T’s economy continues to be “fragile” and very susceptible to shocks in the global markets, in particular.

DIPTEE…a lot of consumers are battling constant fatigue in food price inflation

According to Diptee, “[About] 85 to 90 per cent of the goods on T&T’s supermarket shelves are those that come from North America and Europe. We do not have that much finished goods originating from Asia. A lot of our inputs for production are still heavily imported. Agro-processing needs to be focused on.”

Diptee argued that because business owners have problems accessing foreign exchange, there is now less variety on supermarket shelves. He admitted, too, that consumers are now tired of the prices of supermarket items constantly going up, and said the increase in the minimum wage in the public sector was the Government of Trinidad and Tobago acknowledging this trend.

“A lot of consumers are battling constant fatigue in food price inflation, and there is something we call ‘sticker shock’ when you go inside the supermarket and consumers say the price was this yesterday and now it is that on your next trip. Salaries have not kept up with inflation and I think that is an acknowledgement when you consider the wage increase that was offered to public servants,” he added.

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