T&T facing structural cracks, says Dookeran

Raphael John-Lall

For­mer Cen­tral Bank Gov­er­nor and fi­nance min­is­ter, Win­ston Dook­er­an, be­lieves that while on the sur­face, T&T’s macro­eco­nom­ic in­di­ca­tors re­main “com­fort­able”, the Gov­ern­ment must pro­vide more de­tails on how it will solve deep­er is­sues like pro­duc­tiv­i­ty chal­lenges and the ris­ing cost of liv­ing.

He gave this view in a state­ment he is­sued to the Sun­day Busi­ness Guardian last week.

The Mid-Year Bud­get Re­view was pre­sent­ed by the Fi­nance Min­is­ter Dav­en­dranath Tan­coo on June 15 in Par­lia­ment.

The week be­fore the pre­sen­ta­tion, the sup­ple­men­tal al­lo­ca­tion was ap­proved, which in­creased the 2026 Bud­get from $59.232 bil­lion to ap­prox­i­mate­ly $62.162 bil­lion.

Prime Min­is­ter Kam­la Per­sad-Bisses­sar and Tan­coo had told the Par­lia­ment that the ad­di­tion­al fund­ing is large­ly in­tend­ed to fa­cil­i­tate salary in­creas­es and set­tle­ments in­volv­ing 62,050 unionised work­ers.

Some of the main high­lights in­clude the re­duc­tion of the fis­cal deficit from 5.8 per cent to 4.0 per cent of Gross Do­mes­tic Prod­uct (GDP), in­creased in­vestor con­fi­dence, ex­pan­sion of the Her­itage and Sta­bil­i­sa­tion Fund (HSF) and more ef­fi­cient tax col­lec­tion.

There were crit­i­cisms from for­mer gov­ern­ment of­fi­cials like for­mer fi­nance min­is­ter Colm Im­bert, who spoke about the rel­a­tive­ly small al­lo­ca­tion — just $92 mil­lion — to­ward de­vel­op­men­tal pro­grammes.

Dook­er­an said ac­cord­ing to var­i­ous re­cent re­ports, the key mes­sage is that while the fi­nan­cial sec­tor re­mains sta­ble and macro­eco­nom­ic in­di­ca­tors ap­pear com­fort­able, there are two un­der­ly­ing trends that must be ar­rest­ed.

He point­ed out that these are the “struc­tur­al cracks” iden­ti­fied in the 2026 Ar­ti­cle 1V Con­sul­ta­tion IMF re­port and the “di­min­ish­ing lev­el of cred­it ac­tiv­i­ty” ex­plained in de­tail in the May Mon­e­tary Pol­i­cy Re­port.

The re­port high­light­ed a sta­ble fi­nan­cial sec­tor and low in­fla­tion, but warned that deep “struc­tur­al cracks” threat­en long-term fis­cal re­silience. These vul­ner­a­bil­i­ties are pri­mar­i­ly tied to a heavy re­liance on the volatile en­er­gy sec­tor.

The IMF’s as­sess­ment iden­ti­fied sev­er­al spe­cif­ic struc­tur­al and macro­eco­nom­ic chal­lenges such as en­er­gy sec­tor vul­ner­a­bil­i­ty, for­eign ex­change short­ages and fis­cal deficits and pub­lic debt.

De­spite these struc­tur­al cracks, the IMF not­ed sev­er­al pos­i­tive buffers such as the bank­ing sec­tor be­ing well cap­i­talised, the cur­rent ac­count re­mains firm­ly in sur­plus, and in­ter­na­tion­al re­serves are ad­e­quate to cov­er rough­ly 5.5 months of im­ports and the HSF’s size.

Dook­er­an gave the view that the cru­cial pub­lic ques­tion should be what pol­i­cy ini­tia­tives can ef­fec­tive­ly ad­dress these trends.

He ar­gued that the emerg­ing struc­tur­al cracks are re­flect­ed in de­clin­ing pro­duc­tion and pro­duc­tiv­i­ty lev­els, the di­min­ish­ing lev­el of to­tal fi­nan­cial buffers, and the rise of a “sur­vival econ­o­my,” char­ac­terised by falling in­comes and re­duced pur­chas­ing pow­er.

“Some mea­sures in the Mid-Term Re­view are aimed at in­creas­ing pur­chas­ing pow­er, par­tic­u­lar­ly through tax con­ces­sions for hold­ers of an­nu­ities and pen­sions. Fines and penal­ties are ex­pect­ed to in­flu­ence be­hav­iour while gen­er­at­ing ad­di­tion­al rev­enue.”

He gave his po­si­tion on what a Mid-Term Bud­get Re­view should be.

“The pri­ma­ry pur­pose of the Mid-Term Bud­get Re­view is to se­cure leg­isla­tive au­thor­i­ty to par­tial­ly meet the agreed wage set­tle­ment. It is al­so an­tic­i­pat­ed that in­creased ac­tiv­i­ty in the en­er­gy sec­tor will stim­u­late cred­it use in the com­mer­cial sec­tor and, over the medi­um term, help re­build fi­nan­cial buffers. How­ev­er, no spe­cif­ic mea­sures have been iden­ti­fied to di­rect­ly ad­dress the chal­lenges of pro­duc­tion and pro­duc­tiv­i­ty.”

He al­so ex­plained that a Mid-Term Bud­get Re­view is not a bud­get state­ment, nor is it in­tend­ed to be.

“Nev­er­the­less, its pol­i­cy ini­tia­tives must align with a broad­er eco­nom­ic di­ag­nos­tic. The IMF re­port and the con­clu­sions of rat­ing agen­cies large­ly re­flect ac­count­ing tar­gets that as­sess macro-fis­cal bal­ances in re­la­tion to a coun­try’s ex­ter­nal oblig­a­tions. While this is a nec­es­sary com­po­nent of eco­nom­ic as­sess­ment, it is not suf­fi­cient.”

In the sum­ma­tion of these re­ports, he said there is no cause for dis­may, rather, there is a sense of re­lief that the macro-fi­nan­cial bal­ance sheet re­mains in­tact.

“What is clear­ly miss­ing, how­ev­er, is a deep­er eco­nom­ic di­ag­nos­tic and a con­fi­dent path­way to en­sure that this sta­bil­i­ty is sus­tained. Ul­ti­mate­ly, while the is­sues re­late to the log­ic of eco­nom­ics, they are equal­ly root­ed in the re­al­i­ties of pol­i­tics.”

Plan­ning ahead

Look­ing be­yond the Mid-Year Bud­get Re­view in­to the fu­ture, Econ­o­mist Dr Ronald Ramkissoon is warn­ing that the coun­try should not be over­ly op­ti­mistic about the en­er­gy rev­enue “wind­fall” some like the En­er­gy Min­is­ter Dr Roodal Mooni­lal are ex­pect­ing over the next few years via re­struc­tured At­lantic LNG pric­ing and BP and Shell gas projects.

Be­cause of the ex­treme volatil­i­ty in geopol­i­tics and the re­sult­ing un­cer­tain­ty of en­er­gy prices as well as this coun­try’s con­straints in the pro­duc­tion of greater vol­umes of crude oil and nat­ur­al gas, Ramkissoon said there is no guar­an­tee that T&T would en­joy any sig­nif­i­cant in­crease in en­er­gy rev­enues over the com­ing two years.

“How­ev­er, if we are for­tu­nate enough to ob­tain some in­crease in en­er­gy sec­tor rev­enues, there is no guar­an­tee that we would spend the added rev­enues in any dif­fer­ent man­ner than we have done in the past. In­deed, any an­tic­i­pat­ed en­er­gy rev­enues are al­ready com­mit­ted to pay­ing promised in­creas­es in wages and salaries as well as in re­cur­rent sub­si­dies.”

He spoke about er­rors past gov­ern­ments have made in how they spend mon­ey and what it is spent on, which he says leaves lit­tle room for de­vel­op­ing new projects and new prod­ucts that would di­ver­si­fy the econ­o­my.

“The point is that as a coun­try we have grown ac­cus­tomed to spend­ing ap­prox­i­mate­ly 90 per cent of to­tal rev­enues or more on re­cur­rent ex­pen­di­tures with lit­tle left for such cap­i­tal projects as in­fra­struc­ture de­vel­op­ment, main­te­nance and in­no­va­tion. Fur­ther we have done very lit­tle to at­tract do­mes­tic and for­eign in­vest­ment in non-en­er­gy projects in tourism, ex­port agri­cul­ture, the cre­ative arts or any­thing else.”

He ad­vised that if T&T should be for­tu­nate enough to de­rive any en­er­gy wind­fall then the fol­low­ing should be con­sid­ered:

* Add to the coun­try’s nest egg, i.e. the Her­itage and Sta­bil­i­sa­tion Fund as the law re­quires;

* De­vel­op a com­pre­hen­sive strate­gic plan which fea­tures an in­dus­tri­al pol­i­cy which is con­sis­tent with oth­er poli­cies and which ben­e­fits from the wealth of hu­man, fi­nan­cial and oth­er re­sources with which this coun­try is still blessed.;

If the in­ten­tion is to tru­ly trans­form T&T then all sec­tions of the so­ci­ety must be in­volved. To do oth­er­wise is to be short­sight­ed and trans­for­ma­tion is un­like­ly to suc­ceed.