Last Friday, the Central Bank of T&T released its 2025 Financial Stability Report. By now you would be aware of the headline that says that by the end of 2025, estimated household debt in Trinidad and Tobago reached $72.3 billion, or 41.5 per cent of our gross domestic product.
I have been writing this column since 2004 and truth be told, my motivation for doing so was to try to avoid us getting to this place. Yet here we are and I have all the data over the years to show you how we got here.
In order to grasp what has happened you need to look at the trajectory over the past 20 years. During the energy boom years between 2004 and 2008, household debt averaged about 21 per cent of GDP. By 2015, it had climbed to roughly 29 per cent of GDP ultimately reaching the current levels of 41.5 percent.
Appreciate that the quality of the country’s economic management is best judged by what survives on your household balance sheet. That is the purpose of Government – to help you to become better off today than you were yesterday. Yet when we trace the economic forces from the early 2000s to 2026, we see how policy choices systematically pushed families into debt.
Property valuations
Our story begins in the early 2000s energy boom. As natural gas and petrochemical output expanded, huge windfalls flowed into the Treasury. Between 2000 and 2005, weekly earnings for industrial workers outside the energy sector rose by 49 per cent in nominal terms and about 18 per cent after accounting for inflation. It is estimated that by 2008/09, average monthly household income had more than doubled in nominal terms compared to a decade earlier.
Instead of saving most of that windfall or using it to build a diversified, self-sustaining economy, the Government of the day poured billions of dollars directly into domestic spending. In fiscal 2005/06, the State ran a non-energy fiscal deficit of 15 per cent of GDP. Net domestic fiscal injections pumped $7.2 billion into the local banking system in 2005 and another $10 billion in 2006.
Think about what happens when that much TT dollar liquidity floods a small economy with a shallow financial market. At first, money poured into mutual funds and the local stock market. Then you got too much money chasing too few stocks and an overheated stock market that peaked on May 17th, 2005, before falling by more than 20 per cent.
That wall of excess TT dollar liquidity did not disappear. It rotated straight into the local real estate market and this flood of liquidity triggered a prolonged wave of asset price inflation that drove property valuations to levels where even middle class families struggled to buy a home.
When the price of a standard house or apartment doubles or triples after 2005, every new homebuyer has to borrow a much larger principal sum just to get onto the property ladder. Today, consumer loans from the banking sector make up 68 per cent of all household debt, and real estate mortgages account for 43 per cent of those loans at $21 billion.
Further as rising valuations lifted the paper value of existing homes, collateral levels increased. Homeowners tapped their rising home equity through mortgage refinancing and debt consolidation loans to fund renovations, vehicles or consumption. Paper wealth in real estate was steadily converted into hard monthly debt obligations.
Unsustainable buffers
Why did households feel comfortable taking on much larger mortgages and consumer loans during that era? The answer lies in how Government subsidies created an illusion of permanent affordability. Between 2001 and 2005, real private consumption jumped by 38 per cent. Families were able to commit a larger share of their monthly paycheques to loan instalments because the State was picking up the tab for major living expenses.
Consider the buffers that were built into your household budget during the boom. Tertiary education was free, meaning parents did not have to set aside monthly savings for their children’s university degrees. Fuel at the pump was heavily subsidised, while electricity, water and public transport were priced far below actual cost. The time to remove those subsides was during that period which was also when wages were increasing.
At the same time, social programmes and mak- work schemes like CEPEP and URP expanded rapidly. Because the State cushioned education, utilities and transport, families mistook temporary energy subsidies for permanent disposable income and locked themselves into decades-long debt commitments.
That vulnerability was exposed when inflation surged and the 2008 global financial crisis and CL Financial collapse hit. Between 2007 and 2010, consumer prices jumped by 32.5 per cent while non-energy industrial weekly earnings rose by only 20 per cent, cutting real purchasing power by 9.5 per cent.
How did households bridge the gap between rising food and living costs and lagging real pay between 2010 and 2015? They borrowed, helped by falling interest rates. As excess liquidity built up in the banking system after 2009, the commercial bank prime lending rate fell from 12.44 per cent in 2008 down to 7.50 per cent by 2013 and 2014.
Lower interest rates made monthly loan payments look more manageable even as principal balances grew. From 2010 to 2015, banking system consumer credit expanded by an average of 7.6 per cent a year, with mortgages making up 42 per cent of balances, motor vehicles 16 per cent and debt refinancing and consolidation 12 per cent.
From 2015 to today
If the climb to 29 per cent of GDP by 2015 was driven by boom-era liquidity and cheap credit, the surge from 29 per cent in 2015 to 41.5 per cent of GDP today reflects a much harsher reality. After 2015, our economic foundation shifted. Natural gas production fell and real GDP contracted for four consecutive years from 2015 to 2018.
Recognize that the debt to GDP ratio is a fraction, with household debt in the numerator and economic output in the denominator. When the economy stagnates or shrinks while families keep borrowing to stay afloat, the debt ratio climbs from both ends. Nowhere was that shock felt more acutely than in the energy belt following the shutdown of the Petrotrin refinery in 2018.
As I have pointed out in previous columns, Petrotrin was much more than a state company on a narrow accounting sheet. It anchored an entire economic ecosystem beyond its fence line. When Petrotrin closed without a ready substitute, thousands of workers lost well paying jobs, while contractors, transport operators and retail businesses across south and central Trinidad saw their cash flows evaporate. Families who had qualified for mortgages and car loans based on energy sector and fence-line incomes suddenly faced a structural loss of earnings.
At the very same time that energy incomes contracted, those unsustainable boom era buffers were pulled back. GATE was scaled back and fuel prices at the pump were adjusted upward several times. Parents who had never budgeted for university tuition and commuters who had counted on cheap fuel now had to find cash out of pocket, squeezing the income left to service existing loans.
Compounding this pressure was the chronic delay in public sector wage settlements. Think about what a ten year wage delay does to your personal finances. Over the period from 2010 to 2025, consumer prices rose by 65 per cent while non energy industrial earnings rose 53 per cent, an 8 per cent decline in real purchasing power. At 2025 prices, $10,000 received in 2025, bought only what $7,727 bought in 2014. While waiting a decade for your salary adjustment, your bills did not wait. You had to lean on credit cards, overdrafts and personal loans, paying interest instead of earning compound returns on your own savings.
Then came the 2020 pandemic, which delivered the final blow to household buffers. When the Government instituted lockdowns and halted work, direct income replacement from the State was minimal. Left to fend for themselves, many families drained their savings. Meanwhile, post-pandemic inflation pushed 2025 prices 12.4 per cent above 2021 levels, and total employment in early 2026 remained roughly 27,000 jobs below its 2019 level.
Years of excess liquidity that inflated property values, unsustainable state subsidies, delayed wage settlements, the closure of Petrotrin and unbuffered pandemic shocks have all landed on the household balance sheet. Going forward until our economic management focuses on growing real incomes and rebuilding family savings, our household debt will remain the clearest measure of the cost of our economic mismanagement.
Ian Narine is a financial consultant who understands that when the State lives beyond its means, the bill eventually arrives on your doorstep. Please send your comments to ian@iannarine.com
