Min­is­ter Tan­coo faces the same in­tractable is­sues faced by Colm Im­bert. Rev­enue is weak due to de­clin­ing gas pro­duc­tion and weak­en­ing en­er­gy prices. Of­fi­cial for­eign ex­change re­serves are falling as Gov­ern­ment con­tin­ues its pol­i­cy of sub­si­dis­ing the ex­change rate. Even af­ter the re­cent an­nounce­ment, pub­lic sec­tor unions’ agree­ments are still sev­er­al years be­hind sched­ule, and back pay oblig­a­tions must be fi­nanced and ac­count­ed for. There is pres­sure to in­crease ex­pen­di­ture from every quar­ter.

Mr Im­bert was able to bluff and blus­ter even as he kicked the can down the road. Un­for­tu­nate­ly, Min­is­ter Dav­en­dranath Tan­coo does not have the ben­e­fit of time to avoid tak­ing hard de­ci­sions to ad­dress these is­sues. The 11th Ac­tu­ar­i­al Re­port on the Na­tion­al In­sur­ance Sys­tem and Stan­dard & Poor’s 2025 Rat­ing Re­port both give es­ti­mates of the time fac­tor.

The Eleventh Ac­tu­ar­i­al Re­port cal­cu­lat­ed that the fund will be ex­tin­guished in eight years un­less sig­nif­i­cant in­ter­ven­tions are made now. Pay­ments al­ready ex­ceed con­tri­bu­tions and in­vest­ment in­come, mean­ing that the fund is now sell­ing as­sets to meet its oblig­a­tions. Since the re­port was is­sued a year ago, any de­ci­sion tak­en to­day is al­ready one year late and will take longer to re­verse the de­cline.

In its rat­ings opin­ion, S&P said that the rat­ing will be low­ered to a sub-in­vest­ment grade lev­el with­in six–24 months “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”. Six to 24 months is rel­a­tive­ly short. This means that ac­tion must be tak­en to­day if we are to see the ben­e­fits with­in twen­ty-four months.

The coun­try’s per­sis­tent fis­cal deficits over many years have led to a high and ris­ing gov­ern­ment debt. Cen­tral Bank da­ta puts to­tal gov­ern­ment debt at $145.6 bil­lion in April 2025, giv­ing a debt-to-GDP ra­tio of 75.5 per cent. This es­ti­mates the 2025 GDP (cur­rent prices) at $194 bil­lion. Cen­tral Bank da­ta sug­gest that the 2025 GDP will de­cline by 2 per cent. The Prime Min­is­ter has al­ready con­firmed that there will be a deficit in 2026. As­sum­ing that the deficit is sim­i­lar to or equal to the pro­ject­ed 2025 deficit, to­tal debt out­stand­ing would in­crease, caus­ing the debt-to-GDP ra­tio to cross 80 per cent.

The num­bers sug­gest that Gov­ern­ment was in a pri­ma­ry deficit in 2024 and 2025 and will be in that po­si­tion again in 2026 with­out cor­rec­tive ac­tion. A pri­ma­ry deficit means that a gov­ern­ment is not gen­er­at­ing enough rev­enue to meet its re­cur­rent ex­pen­di­tures be­fore its debt ser­vice re­quire­ments. This means that Gov­ern­ment debt will con­tin­ue to grow, as it must bor­row to re­pay its loans and meet its re­cur­rent ex­pen­di­ture. Mr Tan­coo pro­ject­ed a pri­ma­ry deficit of $3.14 bil­lion in the mid-year bud­get re­view.

Dur­ing the re­view, Min­is­ter Tan­coo iden­ti­fied five pri­or­i­ty ac­tions to im­prove the fis­cal po­si­tion. First, ad­min­is­tra­tive re­forms to make In­land Rev­enue more ef­fi­cient, to be fol­lowed by more com­pre­hen­sive and im­pact­ful re­forms in the 2025/2026 Na­tion­al Bud­get. Sec­ond, the in­tro­duc­tion of Trans­fer Pric­ing leg­is­la­tion to en­sure that prof­its earned in Trinidad and To­ba­go are taxed fair­ly. Third, re­form of the Busi­ness Levy. Fourth, a Qual­i­fied Do­mes­tic Min­i­mum Top-up Tax of 15 per cent aimed at large multi­na­tion­als. Fifth, a com­pre­hen­sive re­view to elim­i­nate un­nec­es­sary state pur­chas­es of goods and ser­vices.

Since the Prime Min­is­ter has con­firmed that the 2025/26 Bud­get will be a deficit bud­get, one can con­clude that the five pri­or­i­ty ac­tions were un­able to bridge the rev­enue–ex­pen­di­ture gap and cov­er any ad­di­tion­al spend­ing. Twen­ty-four months is a short pe­ri­od in an ad­min­is­tra­tion’s life, but it is the most crit­i­cal pe­ri­od if an ad­min­is­tra­tion wish­es to see the re­sults of its pol­i­cy de­ci­sions in time for the next gen­er­al elec­tion in 2030.

It is un­re­al­is­tic to ex­pect that this ad­min­is­tra­tion will be able to sub­stan­tial­ly out­per­form the lim­it­ed progress by pre­vi­ous ad­min­is­tra­tions in di­ver­si­fy­ing the econ­o­my. Nev­er­the­less, it is im­por­tant that this ex­er­cise be con­tin­ued if the coun­try is to in­su­late it­self from its vul­ner­a­bil­i­ty to en­er­gy price volatil­i­ty and the sec­u­lar de­cline of gas pro­duc­tion.

This im­plies that T&T must wean it­self off its de­pen­dence on en­er­gy sec­tor for­eign ex­change earn­ings. This will take time, but it re­quires an ur­gent re­think of the for­eign ex­change rate sys­tem in ad­di­tion to ad­just­ing the fis­cal po­si­tion. A bud­get deficit and a fixed ex­change rate will in­evitably lead to de­clin­ing ex­change re­serves.

Con­tin­u­ous­ly dip­ping in­to the HSF can­not solve the long-term prob­lem and pro­vides on­ly tem­po­rary re­lief. Blam­ing an un­cer­tain world or say­ing “the world has changed” due to US tar­iffs and high­er bor­row­ing costs might be com­fort­ing, but it will not help us ad­just to the sit­u­a­tion. Nor will blam­ing the pre­vi­ous ad­min­is­tra­tion. Our cur­rent con­di­tion is a re­sult of many fail­ures by more than one ad­min­is­tra­tion.

Talk­ing tough will not make T&T’s chal­lenges dis­ap­pear. On­ly con­cert­ed ac­tion by Gov­ern­ment and cit­i­zens will. Re­peal­ing the prop­er­ty tax and dis­card­ing the Rev­enue Au­thor­i­ty may sat­is­fy sec­tion­al in­ter­ests, but that does not ad­dress the un­der­ly­ing is­sues they were de­signed to fix. Good and ef­fi­cient gov­ern­ment is nei­ther cheap nor easy. If cit­i­zens want good gov­ern­ment, they must be pre­pared to pay for it and hold elect­ed of­fi­cials to ac­count for their ac­tions.

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