Many cit­i­zens of­ten cite the Unit­ed States po­lit­i­cal sys­tem and its in­sti­tu­tion­al frame­work as a mod­el to be em­u­lat­ed. Like T&T, the US Fed­er­al Bud­get ap­pro­pri­a­tion bill must be ap­proved by its Par­lia­ment. Yet, this week­end on the eve of T&T’s 2024 Bud­get pre­sen­ta­tion, the US Gov­ern­ment is on the cusp of a bud­get cri­sis and faces a shut­down be­cause the Fed­er­al Bud­get has not been ap­proved. With­out bud­getary ap­proval pub­lic ser­vices can­not be pro­vid­ed or pub­lic ser­vants paid.The US has been through this brinkman­ship many times. Un­ortho­dox emer­gency mea­sures have been de­ployed in the past to keep gov­ern­ment ser­vices run­ning un­til a po­lit­i­cal com­pro­mise was reached.

The T&T bud­get ap­proval process is much less com­pli­cat­ed and less par­ti­san by com­par­i­son, so T&T has nev­er faced a fis­cal cri­sis of that na­ture. In ad­di­tion, US econ­o­mists reg­u­lar­ly ad­vise de­vel­op­ing coun­tries like T&T to avoid deficit bud­get­ing, that is ex­pen­di­ture should not ex­ceed tax rev­enue for a pro­longed pe­ri­od. How­ev­er, the US Fed­er­al Gov­ern­ment has achieved a bud­get sur­plus on­ly four times (1998-2001) in the last 53 years. Run­ning per­sis­tent deficits is fis­cal­ly ir­re­spon­si­ble.

Most coun­tries, T&T in­clud­ed, would not fare well if they fol­lowed the US ex­am­ple. The US Gov­ern­ment could af­ford to rack up per­sis­tent fis­cal deficits be­cause the rest of the world is pre­pared to ac­cept the green­back (the US dol­lar) in pay­ment for pur­chas­es/im­ports by the USA. This ex­plains why ap­prox­i­mate­ly 80 per cent of the fi­nan­cial re­serves of the oth­er 193 coun­tries are held in US dol­lar-de­nom­i­nat­ed as­sets. For ex­am­ple, in March 2023 Japan was the largest US debt bond­hold­er with $1.1 tril­lion in US trea­suries fol­lowed by Chi­na with $870 bil­lion.

In com­par­i­son, the T&T bud­get has been in deficit for 20 of the last 23 years record­ing a sur­plus in 2006, 2008 and 2022, main­ly be­cause nat­ur­al gas prices were high­er than pro­ject­ed. Deficits must be fi­nanced, mean­ing that the Gov­ern­ment bor­rows to fund the deficit. Con­tin­u­ous deficits mean con­tin­u­ous bor­row­ing and are the pri­ma­ry rea­son why GORTT bor­row­ing now stands at 75 per cent of GDP. To re­main cred­it-wor­thy, the Gov­ern­ment must re­pay its debt oblig­a­tions. As na­tion­al debt ris­es, a greater per­cent­age of the tax­es col­lect­ed must be spent on re­pay­ing debt, mon­ey that would oth­er­wise have been used to fi­nance the de­vel­op­ment pro­gramme or pay for oth­er ser­vices. Per­sis­tent deficits al­so af­fect the “nat­ur­al” eco­nom­ic bal­ance. A short-term deficit may help boost a flag­ging econ­o­my and in­crease con­fi­dence lead­ing to a re­vival in eco­nom­ic for­tunes or avoid­ance of a re­ces­sion.

Many de­vel­oped coun­tries used this tech­nique to re­cov­er from the Great De­pres­sion of 2008. How­ev­er, while a gov­ern­ment may help stim­u­late an econ­o­my, eco­nom­ic suc­cess and in­come growth are de­pen­dent on in­vest­ment, in­no­va­tion, pro­duc­tiv­i­ty gains and pop­u­la­tion growth. Run­ning a per­sis­tent deficit can­not com­pen­sate for the weak­ness of these vari­ables. Per­sis­tent deficits sig­nal that a coun­try is liv­ing above its means lead­ing to high­er in­fla­tion, high­er im­ports and ul­ti­mate­ly high­er tax­es. The un­der­ly­ing cause of high for­eign ex­change de­mand is GORTT’s con­tin­u­ous deficit which in­creas­es do­mes­tic de­mand.

Boost­ing do­mes­tic in­vest­ment, in­no­va­tion and pro­duc­tiv­i­ty de­pends on the cre­ativ­i­ty of cit­i­zens and their will­ing­ness to in­vest. That in turn de­pends on busi­ness con­fi­dence and the ease of do­ing busi­ness. This means that gov­ern­ment busi­ness process­es must be ef­fi­cient and proac­tive­ly man­aged ... Un­less cit­i­zens see a fu­ture and de­vel­op suf­fi­cient con­fi­dence to in­vest there will be no growth. No deficit can fix this. There­fore, a bud­get speech must be more than just a rev­enue and ex­pen­di­ture state­ment. It should be a state­ment of in­tent that ex­plains the align­ment be­tween the Gov­ern­ment’s fi­nan­cial de­ci­sions with de­vel­op­ment ob­jec­tives. How do cur­rent ex­pen­di­tures ad­vance the de­vel­op­ment ob­jec­tives ar­tic­u­lat­ed in the Vi­sion 2023 doc­u­ment? No de­vel­op­ment ob­jec­tive could be achieved in the time frame of an an­nu­al bud­get. It re­quires a mul­ti-year, mul­ti­level ap­proach to achiev­ing said ob­jec­tives so that a com­mon thread or progress can be mea­sured to de­ter­mine what else needs to be done. The fi­nance min­is­ter has the un­en­vi­able task of ar­tic­u­lat­ing the Gov­ern­ment’s pri­or­i­ties, per­for­mance, and plans to ad­dress the key chal­lenges fac­ing the coun­try in the fore­see­able fu­ture.

Un­for­tu­nate­ly, de­spite the im­pres­sive la­bels giv­en to the bud­get speech­es, there is no com­mit­ment to demon­strat­ing that the goals en­vi­sioned for 2030 have been ad­vanced. One symp­tom of this fail­ure is the per­for­mance of the en­er­gy sec­tor. Apart from the Lo­ran Man­a­tee project and the re­cent agree­ment to al­low the ex­plo­ration of three deep­wa­ter blocks, nat­ur­al gas pro­duc­tion is in sec­u­lar de­cline.

Notwith­stand­ing this ob­vi­ous weak­ness of de­pend­ing on one sec­tor, lit­tle has been done to ad­dress the is­sue of di­ver­si­fi­ca­tion. On Mon­day, the fi­nance min­is­ter will de­liv­er an­oth­er deficit bud­get. There are many is­sues to be ad­dressed. Tran­si­tion­ing the econ­o­my to­wards less de­pen­dence on hy­dro­car­bons to fu­el pow­er gen­er­a­tion; wean­ing the coun­try away from sub­si­dies; en­cour­ag­ing do­mes­tic in­vest­ment to for­eign ex­change gen­er­at­ing ac­tiv­i­ties; bal­anc­ing the rev­enue de­cline with the de­mands for in­creased ex­pen­di­ture and ad­dress­ing the many pol­i­cy is­sues in the en­er­gy sec­tor.

All need a cal­i­brat­ed mul­ti-pe­ri­od ap­proach not blame and ex­cus­es. The coun­try des­per­ate­ly wants fo­cused, re­spon­si­ble, lead­er­ship. 

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al School of Busi­ness.