In a warning to the Government to get its financial house in order, the global rating agency Standard & Poor’s (S&P) yesterday revised the country’s outlook from stable to negative, while affirming its ratings on T&T at ‘BBB-/A-3’ long- and short-term foreign and local currency sovereign credit ratings.
“The negative outlook reflects our view that there is at least a one-in-three chance we could lower the ratings over the next six to 24 months,” S&P said, adding in its downside scenario that that could take place “if the Government fails to take timely corrective steps to strengthen the sustainability of public finances, ensure long-term balanced economic growth, and maintain the country’s strong external profile.”
The rating added added, “Failure to address a prolonged weakening of public finances and diminution of foreign exchange reserves could reflect institutional shortcomings that limit the government’s capacity to build buffers that enhance the country’s ability to respond to negative shocks.
“We could also lower the rating if Trinidad and Tobago’s external position materially worsens beyond our base-case scenario, or GDP per capita fails to rise in line with our forecast, reflecting lesser economic resilience.”
Outlining its upside scenario, S&P said, “We could revise the outlook to stable over the next 24 months if we believe Government policies will improve fiscal sustainability, and lead to more favorable long-term GDP growth prospects and sustain the country’s external profile.”
Speaking to reporters outside Parliament on September 12, Prime Minister Kamla Persad-Bissessar said, “I don’t think we can havea balanced budget, so we may have expenditure outpacing revenues. So we will have to find creative ways to supplement those revenues. In other words, there will be a deficit.”
In delivering the mid-year budget review on June 18, Minister of Finance Davendranath Tancoo, anticipated that the overall budget deficit for the 2025 fiscal year, which ends on Tuesday, would be $9.67 billion.
He said the Government expected to fund the increased deficit principally via borrowings on the local capital market as well as by drawing down on existing multi-lateral facilities.
S&P said in its rating review of T&T, which involved meetings in T&T during the week from July 20, “The country’s fiscal and external buffers have been gradually weakening over time and its long-term economic growth has been low. Despite many efforts, there has been only limited progress by previous administrations in diversifying the economy, leaving it vulnerable to volatile energy prices while output from the oil and gas sector has recently declined.”
BBB- is S&P’s lowest investment grade rating. If T&T were downgraded, it would be considered non-investment grade/speculative, which is considered to be ‘junk’ bond status. The main implications of a ratings downgrade are an increased cost of borrowing over time due to the perception of higher risk and, possibly, reduced access to capital.
The rating agency said the Government will have elevated financing needs in 2026 as it faces an amortising US$1 billion external bond due in the summer.
“We expect the Government will finance the deficit with domestic, external, and multilateral lending, as well as possible withdrawals from the sovereign wealth fund, the Heritage and Stabilisation Fund,” said
In a statement yesterday, issued shortly after the S&P news release, Tancoo said he welcomed the S&P rating review.
“The S&P report emphasizes Trinidad and Tobago’s resilience and underscores its position as a trusted place for international investors, particularly during periods of global uncertainty.
“At the same time, the revised outlook highlights the need for transformative reforms to advance economic diversification, strengthen fiscal discipline, and ensure long-term growth.”
Tancoo elaborated on the Government’s strategy, “Accelerating economic diversification is no longer optional. It requires a comprehensive strategy and coordinated efforts, which are central to our manifesto. In the upcoming Budget, I will announce key measures to support this agenda and tackle bottlenecks to long-term growth.”
Commenting on the S&P report, UWI economist Vaalmikki Arjoon said, “The shift in outlook, however, is a warning that fiscal and external buffers have been eroded over the past decade, growth remains sluggish, and the economy is still overly reliant on a declining energy sector.
“Against this backdrop, the upcoming national budget takes on even greater significance. With energy production depressed and a fiscal deficit in FY2026 unavoidable, the structure of that deficit must be viewed as a strategy to expand productive capacity and generate the revenues needed to close the fiscal gap in the coming years.
“By front-loading productive capital spending—such as infrastructure, technology, and logistics improvements—while tightening oversight to cut waste and leakages, the Government can use the deficit as a bridge to higher long-term growth.
“Equally important will be improving tax compliance and enforcement at the BIR, by enhancing tax administration, closing loopholes, improving compliance, and broadening of bases will be necessary. This is important to at least reverse the outlook from negative back to stable.”
Former Minister of Finance and permanent secretary in the Ministry of Finance, VIshnu Dhanpaul, said, “The real ratings and outlook will take place after the 2026 budget.”
