A stark warning is emerging over T&T’s fiscal trajectory, with economist Dr Vanus James cautioning that behind modest headline figures lie an economy struggling to generate meaningful growth while taking on increasingly costly debt.
In his assessment of the Government’s mid-term fiscal review, which was delivered by Minister of Finance Davendranath Tancoo on Monday, James argued that the country is at risk of slipping into a pattern of slow expansion and rising borrowing, a combination that could undermine long-term economic stability if not urgently addressed.
He is urging citizens to examine budget data closely, rather than relying on broad narratives, noting that “the facts that count” point to deeper structural weaknesses.
“Citizens must read national budgets responsibly, by looking behind the smoke and mirrors to the data that count,” James said, as he laid out concerns about slow expansion, borrowing pressures and the lack of a clear long-term growth strategy.
Growth lagging behind cost of debt
Central to James’ analysis is the stark mismatch between economic growth and the cost of borrowing.
He noted based on available figures, nominal GDP rose by just 0.94 per cent in the period under review.
Once inflation of around 0.7 per cent is taken into account, real growth falls to an estimated 0.24 per cent—effectively signalling economic stagnation.
This slow pace of expansion is particularly worrying, James said when compared to the cost of debt as he further noted that borrowing costs over the past year have been around 6.5 per cent, or approximately 5.8 per cent in real terms.
“This is potentially dangerous unsustainability territory,” James warned, pointing out that the economy is growing far more slowly than the rate at which debt obligations are increasing.
That imbalance is compounded by new borrowing requirements tied to government spending.
At least $1.7 billion of the $2.93 billion in supplementary funding is expected to be financed through debt, including costs linked to a 10 per cent wage increase for public servants.
The overall fiscal deficit is projected at approximately $7 billion, or four per cent of GDP—slightly above the internationally accepted benchmark of three per cent.
While such a deficit may be manageable under strong growth conditions, James cautions that the current expansion rate is far too weak to provide that buffer.
“If growth does not accelerate significantly, the country risks a situation where debt continues to rise without a corresponding increase in productive capacity,” he suggested.
Spending skewed toward consumption
The composition of government spending is another major concern highlighted in the review.
Of the TT$2.93 billion in supplementary expenditure, TT$2.83 billion is allocated to recurrent spending—covering items such as transfers and subsidies, wages and goods and services
In contrast, James outlined that just TT$92.7 million is earmarked for investment in projects that could expand the country’s productive base and drive future growth. This means that only about 3.2 per cent of the additional spending is directed toward long-term economic transformation, with the remaining 96.8 per cent going toward consumption and upkeep.
“The arithmetic is 3.2 per cent of the total supplemental is to be spent on restructuring of production and trade, with the remaining 96.8 per cent to be spent on consumption and maintenance,” James said.
He argues that such a distribution does little to address the underlying challenges facing the economy. While recurrent spending may be necessary in the short term, it does not build new capacity or improve productivity—key ingredients for sustainable growth.
The economist also flagged concerns about the assumptions underpinning government revenue projections.
The budget is based on oil prices of US$85 per barrel and natural gas prices of US$4.50 per MMBtu.
Given the volatility of global energy markets, James cautioned against relying too heavily on these estimates.
“Revenues from oil and gas are highly uncertain. The industry is characterised by dramatic income booms and busts,” he noted, warning that current high prices cannot be treated as a reliable foundation for long-term fiscal planning.
Missing ingredients for sustainable growth
Beyond immediate fiscal pressures, James’ assessment raises deeper concerns about the country’s development strategy and its ability to generate meaningful, long-term growth.
While the supplemental budget outlines a range of initiatives—including investment in tourism, agriculture, energy and digital infrastructure—the economist questions whether these efforts can deliver the transformational growth required to stabilise debt and improve living standards.
A significant gap, he argued, is the absence of a clearly defined growth target.
“Careful reading of the supplemental reveals no target growth rate,” he noted, adding that similar omissions have persisted in budget statements over the past decade.
Without such a benchmark, he said, it is difficult to assess whether policy measures are adequate or appropriately aligned.
James also took issue with the sectors being prioritised.
He pointed out that agriculture and tourism—both highlighted in the development programme—have historically functioned as “wage suppressors,” with more than 80 per cent of workers in those sectors classified as unskilled and earning significantly below national averages.
Similarly, light manufacturing, another area of focus, has long struggled to generate innovation or high-value output.
“After more than six decades, these have proven to be unlikely foundations of transformational growth,” he said.
Instead, the economist argued that the country should pivot toward sectors with higher productivity and income potential, including information and communication technology, education, healthcare, financial services and the creative industries.
These areas, he noted, are capable of generating earnings significantly above national averages and are better positioned to compete in global markets.
They also rely heavily on knowledge, innovation and skills development—factors James believes are currently underemphasised in policy planning.
“What is missing?” he asked in the review, before outlining the need for “a programme to grow the speed of learning, raise the efficiency of use of imports and raise productivity across the economy.”
He also highlighted the absence of a coordinated push to expand exports in high-value sectors, describing this as a critical gap in efforts to diversify the economy and reduce dependence on energy revenues.
Ultimately, James framed the challenge as one of transformation. He argued that T&T cannot rely on traditional sectors or short-term spending to drive meaningful growth. Instead, sustained progress will require deliberate investment in productivity, innovation and human capital.
“Seventy years of national economic history say that not any growth will do,” he emphasised, warning that returning to dependence on oil and gas or low-productivity sectors would only reinforce existing vulnerabilities.
The key question, he said, is whether the current mix of policies and spending can generate the kind of expansion needed to stabilise public finances.
“Can the country achieve the necessary transformative 5.8 per cent growth rate in the future without these missing ingredients?” he asked, before answering his own question bluntly: “The evidence of history says no.”
As the government moves forward with implementation of its fiscal measures, James stressed that the effectiveness of public spending will ultimately be judged not by its size, but by its ability to deliver sustained, inclusive and high-quality economic growth.
