A key responsibility of any government is to provide resources to keep day-to-day operations running while investing in the future. Since resources are always limited, priorities must be carefully set to maintain a balance between current demands and long-term investment.
This balance is never easy to achieve, as immediate issues tend to generate political pressure that is difficult to resist. Trinidad and Tobago’s 2026 Budget provides a textbook example of this challenge. Beyond the question of where the development funds will come from, several human and organisational factors further complicate the task.
Managing the state bureaucracy is inherently complex, involving multiple levers of control and numerous elements across the public service. Adding to the difficulty is the fact that the State is the country’s largest employer, with the public sector payroll accounting for roughly 25–30 per cent of recurrent expenditure. There are at least 11 bargaining units, and negotiations are rarely completed on time—often years behind schedule.
Public servants’ wage agreements have been outstanding for an extended period. Current negotiations with the Public Services Association, the largest public-sector union, cover only the 2014–2019 period. The 10 per cent increase announced in the 2026 Budget applies solely to that bargaining period. The “backpay” due for those years—which should be settled during this financial year—has not been included in the 2026 estimates. This represents a substantial unfunded liability and understates the true size of the deficit.
Further complications arise from delayed increments, promotions, and reclassifications that will follow the long-awaited job evaluation expected to be completed this year. The financial impact for the 2020–2025 period has not yet been calculated.
Delays of this nature carry real consequences. Paying public servants is a statutory obligation, and deferring these payments disrupts fiscal planning and undermines organisational efficiency. Morale, productivity, and commitment inevitably suffer in any organisation that treats its staff this way. Improving public service performance and implementing ambitious development plans become exceedingly difficult when the machinery of implementation is demotivated and under-resourced.
Trinidad and Tobago has a long and creditable record of borrowing from multilateral institutions and private markets to finance development projects. The country has never defaulted. However, persistent deficits affect how credit rating agencies assess national creditworthiness.
The 2026 Budget fudged the issue by understating the deficit—phoping that it would buy time to roll out its development projects. Evidence of continuing cash flow problems can be found in the quiet withdrawal of $2.8 billion from the Heritage and Stabilisation Fund to close the 2025 financial year (Page 68, Revised Estimates, Head 11)—a move that went largely unnoticed and unannounced.
In reality, both the budget deficit and national debt are understated. Allowing VAT refunds to accumulate into the billions over several years amounts to unofficial borrowing. Instruments such as the National Investment Fund and the proposed Real Estate Investment Trust are also borrowing mechanisms, albeit presented as investment opportunities. The same applies to long-outstanding payments owed to suppliers and contractors.
Without factoring in these items, net government debt rose from $140.8 billion (81.8 per cent of GDP) to $147.5 billion (85.7 per cent of GDP) by the end of July 2025. This means that the the government’s borrowing capacity, its ability to raise more debt, is sharply declining.
Recurrent expenditure has exceeded revenue in 24 of the last 26 budgets. Development spending has therefore been funded almost entirely by borrowing. Weak energy sector revenues, ballooning payroll expenses due to delayed wage settlements, and the maintenance of an expansive social support system have all contributed to a situation in which most borrowing is now used to fund recurrent rather than development expenditure.
Trinidad and Tobago is not unique. Barbados and Jamaica have both faced similar fiscal challenges—with predictable outcomes. The classic cautionary tale, however, is Greece.
Like T&T, Greece’s underlying weaknesses were structural: an overreliance on public-sector employment and a narrow economic base—shipping and tourism—with little export diversification. Productivity was low, labour costs high, and regulations burdensome. Attempts to reform were politically unpopular and poorly implemented. For decades, Greek governments spent far more than they collected in taxes, sustaining high public-sector wages, pensions, and social benefits with insufficient revenues.
To finance the gap, the government borrowed heavily, and its debt-to-GDP ratio surpassed 128 per cent, eroding confidence. Authorities also underreported deficits and debt levels for years. In 2009, a new administration revealed that the deficit was 12.7 per cent of GDP—not the six per cent previously claimed—shattering investor confidence, driving up borrowing costs, and locking Greece out of bond markets. The 2008 global financial crisis ultimately triggered the collapse.
While there is no imminent financial crisis in Trinidad and Tobago, there are lessons to be learned from Greece’s experience:
Governments must not underreport the true size of deficits.
Public finances must be made sustainable.
The government cannot remain the primary source of employment indefinitely.
Construction and infrastructure projects must be tightly managed to control costs.
Mariano Browne is Chief Executive Officer of the UWI Arthur Lok Jack Global School of Business.
