According to the 2017 Review of the Economy, in the first fiscal year of Colm Imbert’s stewardship as T&T’s Minister of Finance, which was the 2016 fiscal year, total expenditure was $52.94 billion. That was 11.71 per cent less than the $59.97 billion spent in the last year of the People’s Partnership administration.
In the 2016 fiscal year, the expenditure on transfers and subsidies was $27.85 billion, which accounted for 52.63 per cent of total expenditure, but was 9.24 per cent less than the $30.70 billion spent in the 2015 fiscal year. In that fiscal period, the People’s Partnership’s expenditure on transfers and subsidies was 51.19 per cent of the total spending.
But in fiscal 2016, with total expenditure at $52.94 billion, T&T only collected $44.97 billion in total revenue, resulting in a fiscal deficit of $7.97 billion. That deficit was funded mainly by net external financing, which totalled $8.95 billion that year. Net domestic financing was -$981 million.
So, in his first year as Minister of Finance, Mr Imbert spent $27.85 billion on transfers and subsidies and had a fiscal deficit of $7.97 billion.
In the 2017 fiscal period, Mr Imbert’s second year as Minister of Finance, T&T’s total expenditure was $49.71 billion, which was 6.1 per cent less than the previous fiscal year.
Transfers and subsidies, at $26.03 billion, accounted for 52.36 per cent of total expenditure and was 6.55 per cent less than the $27.85 billion allocated to transfers and subsidies in 2016.
But in the 2017 fiscal year, total revenue was only $36.18 billion, which meant that T&T had a fiscal deficit of $13.53 billion. That deficit was funded by net domestic financing of $10.26 billion and net external financing of $3.26 billion.
It needs to be pointed out that T&T spent $27.85 billion in transfers and subsidies in 2017 and had to borrow $13.53 billion to fund its fiscal deficit.
In the nine years Mr Imbert has served as minister of finance, the fiscal accounts have been reported as follows, with the parenthesis meaning a deficit:
• 2016—($7.97B)
• 2017—($13.53B)
• 2018—($5.69B)
• 2019—($4.02B)
• 2020—($16.68B)
• 2021—($12.35B)
• 2022—$1.33B
• 2023—($3.41B)
• 2024—($5.19B)
(NB: The 2023 fiscal deficit is a preliminary number from the 2023 Review of the Economy. The 2024 fiscal deficit is the estimate provided by the minister in his 2024 budget presentation.)
I think there are four things of interest in the table above:
1) Of the nine budgets that Mr Imbert has presented, only one has been in surplus and that was in 2022 when the prices of T&T’s energy exports skyrocketed as a result of Russia’s invasion of Ukraine. A cogent argument can be made that a country that has spent more than it earned in eight out of nine years is living beyond its means.
2) It is clear that the reason T&T has spent more than it has earned in eight out of nine years is because of the increase in the amount of money that has been allocated to transfers and subsidies.
As previously noted, in 2016, T&T spent $27.85 billion on transfers and subsidies, according to the information in the 2020 Review of the Economy.
According to the preliminary number in the 2023 Review of the Economy, transfers and subsidies increased to $32.63 billion in 2023. That means transfers and subsidies may have increased by 17.16 per cent in eight years. The word “possible” is used because the 2023 number is preliminary.
In its July 2024 Economic Bulletin, the Central Bank said, “Declines in both international commodity prices and domestic energy production led to an overall deficit of $4.3 billion on the Central Government fiscal accounts for the first nine months of fiscal year 2024. Central Government revenue declined by $5.5 billion (year-on-year) to $35.0 billion, due to a fall-off in energy revenues, while expenditure fell by $1.1 billion to $39.3 billion....In addition, transfers to households fell by $1.2 billion (year-on-year) to $7.0 billion in the nine months to June 2024, as there were no fuel subsidies payments compared with $1.0 billion in the previous fiscal year period.”
3) If one tabulates the eight years of deficits (out of nine years of budgets), the total cumulative deficits are $68.84 billion. Does that mean that T&T’s total debt has increased by $68.84 billion in the nine-year period?
According to the 2017 Review of the Economy, net public sector debt stock was $87.50 billion at the end of the 2016 fiscal year, on September 30, 2016. T&T’s debt, as at the end of September 2016, was 58.8 per cent of GDP.
(Net public sector debt is defined as the sum of all domestic and external obligations of public debtors which include the Central Government and autonomous public bodies such as state enterprises and statutory authorities. It excludes instruments of open market operations (OMOs) such as treasury bills, treasury notes, treasury bonds and sterilised bonds, proceeds of which are held or sterilised at the Central Bank and not utilised by the GORTT for its operations.)
The July 2024 Economic Bulletin informs us that T&T’s adjusted general government debt, which also excludes debt issued for sterlisation purposes, totalled a preliminary figure of $141.10 billion as the end of June 2024. That was equal to 73.7 per cent of GDP.
That means in nominal terms the country’s total stock of debt has increased by $53.6 billion or by 61.25 per cent (from the end of September 2016 to June 2024) and, for the same period, T&T’s debt to GDP increased from 58.8 per cent to 73.7 per cent.
Why would the cumulative $68.84 billion in deficits for fiscal 2016 to 2024 not be closer to the $53.6 billion by which the country’s debt increased? I believe there are two main reasons: withdrawals from the Heritage and Stabilisation Fund are considered to be part of the financing of the Government; and a country’s debt is always a moving number as maturing debt can be rolled over or paid off even as new debt in taken on.
It is also useful to note that T&T’s adjusted general government debt outstanding stood at $118.4 billion (79.6 per cent of GDP) at the end of September 2020, and at $126.6 billion (79.1 per cent of GDP), at the end of September 2021, according to the Central Bank’s 2021 Annual Economic Survey. That means T&T’s adjusted general government debt has declined to 73.7 per cent of GDP, as at June 2024, from 79.1 per cent of GDP as at September 2021.
The fact that T&T’s debt to GDP is declining, and not increasing, is something to celebrate.
4) The 2024 Draft Estimates of Expenditure document projects the Government’s spending on transfers and subsidies for the fiscal year ending September 30, 2024, at $33.47 billion. In my view, fiscal prudence requires that the Government come up with a plan to reduce the transfers and subsidies allocation by a specific amount, maybe between $1 billion and $2 billion, every year for the next five years.
Of course, any dollar subtracted from transfers and subsidies will hurt a group of people, which is difficult for any minister of finance to do in what is likely to be the last budget presentation before the next general election, which is constitutionally due by November 9, 2025.
But, if T&T continues spending more than half of its total expenditure on transfers and subsidies, the country’s nominal debt is going to rise to a point of no return, which could mean a return to the International Monetary Fund.
