GEISHA KOWLESSAR ALONZO
T&T’s growing debt burden, persistent fiscal deficits and continued dependence on the energy sector are raising serious concerns about the country’s long-term economic sustainability, with economists Dr Vanus James and Dr Jamelia Harris warning that policymakers face increasingly limited options as they prepare the 2027 national budget.
The concerns emerge against a backdrop of worsening public debt indicators and more than a decade of recurring budget shortfalls.
Data compiled by the Central Bank shows that the public sector debt-to-GDP ratio increased from 62.9 per cent in 2019 to an estimated 84.2 per cent in 2025, while the economy contracted by an estimated 0.8 per cent last year.
Further data also indicates that from 2020 to 2025, T&T’s general government debt rose from $130.7 billion to $147.8 billion, an increase of approximately TT$17.1 billion.
Adjusted general government debt outstanding measure, increased from $118.6 billion in 2020 to $146.9 billion in 2025, an increase of roughly $28.3 billion
Adjusted general government debt outstanding is a modified measure of government debt used by the Central Bank to provide a clearer picture of the government’s actual debt burden.
James told the Business Guardian the figures point to a troubling trend in which debt continues to rise while economic growth remains insufficient to support it, noting, “Outside of the abnormal COVID-19 years of 2020 and 2021, the debt-to-GDP ratio has been rising steadily away from the 60 per cent prudent tipping ratio to reach about 84.2 per cent in 2025.”
According to James, one of the main drivers behind the increase is what economists refer to as the “economic spread”, the difference between economic growth and the cost of borrowing.
He argued that when growth remains below interest rates, debt accumulates faster than national income.
“Whenever this spread is negative, it causes the debt ratio to grow, purely on benefit-cost dynamics,” James said.
James also pointed out that the economic spread deteriorated from about negative one per cent in 2024 to negative five per cent in 2025 as growth weakened and borrowing costs increased, linking part of that deterioration to ongoing challenges in the energy sector, which remains the country’s primary source of export earnings and fiscal revenues.
Adding to the concern are the size and frequency of fiscal deficits.
James stated that T&T recorded deficits equivalent to 6.2 per cent of GDP in 2024 and 5.3 per cent of GDP in 2025, significantly above the internationally recognised benchmark of 3.0 per cent.
In real terms, those deficits amounted to $9.14 billion and $7.73 billion respectively.
“Substantial realised budget deficits, typically above the prudent 3.0 per cent threshold, adds to the national drift towards an insolvency tipping point,” he said
14 years of deficits
Harris’ assessment points to a broader structural problem.
She noted that with the exception of 2022, T&T has run an overall fiscal deficit every year since 2012.
“Since 2012, T&T has been running an overall fiscal deficit every year except for 2022. This means that for 14 out of the last 15 years, government expenditure has exceeded its revenues,” Harris said adding, “This is concerning as it means there have been consistent additions to the stock of government debt.”
She said the picture becomes even more concerning when the primary fiscal balance is examined.
The primary balance excludes interest payments and measures whether government revenues are sufficient to cover day-to-day expenditure.
According to Harris, only four years since 2012 recorded a primary surplus.
“Economists not only look at the overall fiscal balance, but also the primary balance. The primary balance is government revenue minus spending, before any interest on debt is paid. Looking at the historical data for this indicator, the trend is also worrying. Since 2012, the government has had only four primary surplus balance – in 2013, 2018, 2022 and 2023. In all the other years where there has been a primary deficit, which means that expenditure exceeded revenues even before interest had been paid,” she outlined.
The result has been a significant build-up in debt across the public sector as Harris estimated central government debt now stands at approximately 68 per cent of GDP, while overall public sector debt, including guaranteed debt of state enterprises and statutory bodies, is approximately 85 per cent of GDP.
She added that the debt ratio has risen not only because government continues to borrow, but also because economic output remains below pre-pandemic levels.
“The debt-to-GDP ratio has been increasing for two reasons. The debt stock is rising and the size of the economy is smaller,” Harris said.
The IMF projection is that the overall fiscal balance will remain in deficit up to 2031 (where the projections end).
Noting that the debt stock is projected to continue to increase, Harris said the IMF is, however, projecting a primary surplus from 2027, which is contingent on new energy projects coming on stream saying, “So again, as has been the case since the 1950s, our fortunes remain tied to the energy sector.”
Growing pressure on public finances
For Harris, one of the most immediate consequences of rising debt is the growing share of public resources that must be devoted to debt servicing.
“According to the Auditor General’s report for fiscal 2025, debt service was 21.6 per cent of actual spending. By comparison, the development programme accounted for a mere 2.5 per cent,” she cited as she warned that rising debt service costs mean fewer resources are available for priorities such as healthcare, education, workforce development and social programmes.
“Increasing debt service payments mean less budgetary resources will be available to finance the things citizens care about, health, education and training programmes,” Harris said as she also expressed concern about the increasing reliance on foreign borrowing.
She noted that government issued approximately US$1.8 billion in bonds this year, increasing the stock of external debt stating,“This means a larger share of foreign exchange will be used to pay debt service on these instruments denominated in foreign currency.”
Reliance on borrowing and the HSF
James’ analysis also examined how government has financed recent deficits.
The data shows that approximately one-third of the estimated 2025 fiscal deficit was financed through withdrawals from the Heritage and Stabilisation Fund (HSF), while the majority was covered through domestic and foreign borrowing.
In 2025, the overall fiscal deficit is estimated at TT$8.4 billion. Of that amount, TT$2.775 billion, or 33 per cent, is expected to be financed through HSF drawdowns, while TT$6.089 billion, representing 72.5 per cent, is projected to come from borrowing.
Other financing sources contributed a net reduction of TT$464 million.
The pattern is similar to previous years. In 2020, at the height of the COVID-19 crisis, the Government recorded a TT$16.8 billion deficit. Nearly 40 per cent of that shortfall was covered through HSF withdrawals, while 53 per cent was financed through borrowing. In 2021, domestic borrowing accounted for almost the entire deficit financing requirement, covering 98.5 per cent of the $13.7 billion shortfall.
The only exception came in 2022, when higher energy revenues helped produce a fiscal surplus of $1.08 billion.
During that year, the Government made a net deposit into the HSF and reduced domestic borrowing. However, deficits returned in 2023 and widened considerably in 2024 and 2025.
James argued that while these financing measures could address immediate funding needs, they do not resolve the underlying causes of fiscal deterioration.
Data from the Central Bank showed that T&T’s growing reliance on a combination of government borrowing and withdrawals from the HSF to finance budget deficits is raising concerns about the country’s long-term fiscal sustainability
Call for long-term planning
Looking ahead to budget 2027, Harris said Government should adopt a more comprehensive development strategy anchored in long-term planning and evidence-based policymaking.
“There should be more long-term development planning that spans all sectors, anchored in some national vision,” Harris said noting, “The last time there was such comprehensive development planning was Vision 2020.”
Without such planning, she warned, the country would continue confronting the same challenges, including weak diversification, foreign exchange shortages, rising debt and low labour force participation.
She also called for greater use of research in policymaking.
“There is an abundance of research on many of the challenges we are trying to tackle in T&T, diversification, crime and student attainment, but policies seem detached from evidence,” Harris said.
James similarly argued that fiscal spending must be tightly linked to credible diversification efforts capable of generating export earnings and sustainable growth.
“The closer the country approaches its fiscal limits, the more the threat of unsustainability evident in the data should routinely remind governments of the importance of linking the fiscal financing premium package to credible diversification initiatives,” he said.
With debt levels approaching 85 per cent of GDP, deficits expected to persist and economic growth remaining heavily tied to the fortunes of the energy sector, both economists suggest the upcoming budget would need to confront difficult fiscal realities if T&T is to place its public finances on a more sustainable path.
Fiscal Year*Total overall deficit*HSF drawdowns transfers*Net domestic borrowing (bonds)*Other financing (overdraft/external)
2020*-$16,791M*$6,635M (39.5%)*$8,899M (53.0%)*$1,257M
2021*-$13,674M*$6,040M (44.2%) *$13,471M (98.5%)*-$5,837M (Debt Repayments)
2022*+$1,080M (Surplus)*$0 (Net Deposit: +$2,350M)*-$1,867M (Net Reduction)*$787M
2023*-$3,420M*$0*$3,311M (96.8%)*$109M
2024*-$9,100M*$2,495M (27.4%)*$1,975M (21.7%)*$4,630M (Overdraft & External)
2025 (E)*-$8,400M*$2,775M (33.0%)*$6,089M (72.5%)*-$464M
Deficit Financing Breakdown (In Nominal TTD Millions)
Public debt profile and foreign component (2019 vs. 2020 vs. 2025)*
Debt Indicator*Fiscal Year 2019*Fiscal Year 2020*Fiscal Year 2025*Total 6-Year Net Change 2019-2025*Total 5-Year Net Change 2020-2025
Total general government debt*$118,037.7 Mn*$130,663.2 Mn*$147,784.0 Mn* +$29,746.3 Mn*+$17,120.9 Mn
Central government foreign debt*$27,110.0 Mn*$31,600.0 Mn*$42,000.0 Mn* +$14,890.0 Mn*+$10,400 Mn
Foreign debt % of total debt*~23.0%*~24.2%*~28.4%*+5.4% structural shift*+4.2% structural shift
Central Gov’t External Debt Service Ratio (to exports)*2.90%*9.70%*8.20%*+5.3%*-1.50%
Source: CBTT Archives
