All economic decisions ultimately have political consequences, especially when they affect daily life. James Carville, Bill Clinton’s 1992 campaign manager, emphasised the key lesson: economic issues drive voter behaviour. His famous phrase, “It’s the economy, stupid,” underscores that the economy is often the decisive factor in elections. Sometimes this lesson is lost when incumbents assume office.
Carville coined this phrase during the Clinton campaign to emphasise that voters care most about issues impacting their daily lives—jobs, income, inflation, and financial stability. As such, economic conditions usually dominate voter evaluations of a government’s performance, making it essential for campaign messaging to prioritise the economy. Crime and national security are close seconds.
The intersection of politics and economics is fertile ground. Here is where the laws we pass, the taxes we levy, and the fines we impose land most directly on households and businesses—and feedback, in turn, at the ballot box. Consider the Property Tax: its rollout brought political backlash in both the 2010 and 2025 campaigns. Lately, hikes in motor vehicle fines and new taxes on alcohol and gambling have drawn similarly negative headlines.
The sudden increase in bar and pub closures is probably due to a general “shakeout” from a fall in consumer demand. But the increase in alcohol taxes and gaming licences certainly helped to tip the scales. The electorate is fickle, and expectations are high. Few people remember that T&T was in depression from 2014 to 2021. The surge in economic activity between 2022 and 2024 was fuelled by the international rebound from the COVID-19 pandemic and by higher energy prices driven by fallout from the war in Ukraine.
Since then, energy prices have declined to more normal levels, and T&T’s economic performance has reverted to the 2014 trend line, though at a slower rate of decline. The critical tasks remain. First, to generate a sustainable long-term rate of growth. This means improving the energy sector’s fortunes in the medium term while accelerating diversification. Second, the country must manage its fiscal position more evenly and limit the increase in government borrowing. Whilst one understands the need to increase taxation, it may be easier to manage government expenditure than it is to raise revenue. The third priority is to address the foreign exchange situation. None of these tasks is easy, and all could have damaging political consequences even if carefully managed.
Last week, the Ministry of Finance shared confidence-building news. The GORTT and international advisors issued a USD 1 billion, ten-year bond. This was the largest since 2016. The proceeds will retire the 2016 bond due August 2026. T&T avoided a maturity cliff and improved its external debt maturity from 4.1 to 6.3 years.
The bond was oversubscribed 2.5 times, implying strong investor confidence in the country’s ability to repay despite the backdrop of external rating outlook challenges (e.g., S&P maintaining a BBB- rating with a negative outlook as of late 2025) and macroeconomic concerns, such as negative trends in foreign exchange reserves. The 6.5% coupon rate was 45% more expensive than the 4.5% coupon on the bond it was refinancing, but cheaper than the rates Barbados and the Bahamas obtained. The bond was issued at a discount (98.53), giving it an attractive running yield of 6.6%.
But the bond’s very success is indicative of the tightrope that complicates the country’s financial position. Whilst the country does not have to reduce its reserves by USD 1 billion to repay the debt, the higher interest rate (6.5% compared to the old rate of 4.5%) increases the country’s debt service requirement by USD 20 million annually for the next 10 years. T&T must now pay TTD 135.6 million more (USD 20 million times $6.78) annually on its external debt service requirement, leaving $135.6 million less to spend on other priorities.
The country’s fiscal space is narrowing. The decision to increase wage settlements for other public sector unions to 10% for the bargaining period that ended in 2019 complicates the country’s finances. What of the bargaining period, which ended in 2025? Why weren’t all the backpay obligations settled with a one-time offer? Given these known unknowns, what other expenditures will be reduced to fund public sector worker pay?
The reality is that the 2026 budget deficit has not yet been determined. The more difficult question is where the expenditure reductions will be made, given the delicate revenue situation. Keeping campaign promises is the easy part. Finding the money to pay for the promises is the tricky part. And turning around the economy is the hardest task of all.
Energy is a critical input for every sector, but especially for manufacturers who export, and it affects competitiveness directly. NGC’s recent decision to increase the price of gas to local manufacturers by 70% illustrates how policy conflicts occur. Whilst the Finance Minister is adamant that NGC should not subsidise commercial customers at NGC’s expense, he argues that the businesses facing this new price increase should not pass the cost increases on to their customers. How does this affect the ambitious export growth targets set by the Minister of Trade? Why should commercial customers not pass on the increase in energy costs just as NGC proposes?
The economic challenges, like the geopolitical situation, will get more complicated with time.
Mariano Browne is the Chief Executive Officer of the UWI Arthur Lok Jack Global School of Business.
