Gov­ern­ment has tak­en a US$200 mil­lion loan from a Latin Amer­i­can bank to fund the new ANR Robin­son Air­port. At cur­rent ex­change rates, that trans­lates to a new TT$1.35 bil­lion loan on the books.

Last week, Fi­nance Min­is­ter Colm Im­bert said that the up­grades to the To­ba­go air­port were pegged at $1.2 bil­lion.

He said then that the Gov­ern­ment would spend $36 mil­lion to up­grade the ex­ist­ing build­ing and $870 mil­lion to build the new air­port ter­mi­nal. He said the ad­di­tion­al TT$300 mil­lion was "raised" by the Min­istry of Fi­nance for the land ac­qui­si­tion.

How­ev­er, weeks be­fore Im­bert made that state­ment, Guardian Me­dia re­port­ed that the Gov­ern­ment got ap­proval for that $300 mil­lion loan from Sco­tia­bank to pur­chase 53 plots of land from res­i­dents in the ar­eas sur­round­ing the air­port.

With this new loan, it means that T&T's debt to a Latin Amer­i­can bank has now sur­passed the coun­try's ex­ist­ing in­debt­ed­ness to Chi­na.

Ac­cord­ing to the Min­istry of Fi­nance's 2020 draft es­ti­mate doc­u­ments, T&T bor­rowed over US$800 mil­lion from the De­vel­op­ment Bank of Latin Amer­i­ca (CAF) be­tween 2016 and 2018.

At the last count in 2018, Im­bert pegged T&T's debt to Chi­na at TT$2.2 bil­lion. How­ev­er, the coun­try's debt to the CAF stands at more than TT$5 bil­lion.

This in­cludes the $1.35 bil­lion loan for the up­grade to the ANR Robin­son Air­port in To­ba­go and road works in south Trinidad.

Ac­cord­ing to the Min­istry of Fi­nance Draft Es­ti­mate doc­u­ment for 2020, the fol­low­ing list is some of the ex­ter­nal debts that the coun­try has in­curred:

-US $7,540,000 Na­tion­al En­er­gy Skills Cen­tre

-RMB Yuan 812,000,000Na­tion­al Acad­e­mies for the Per­form­ing Arts

-US $150 mil­lion for six fast Pa­trol Crafts

-US $93,571,620. 75 for the Sup­ply of four He­li­copters

-US$550 mil­lion. 4.375% Notes ( 2013 - 2024)

- CDB Loan En­er­gy Sec­tor Sup­port Pol­i­cy-Based Loan

- US $169Mn (TT$1,077Mnl—Con­struc­tion of the Ari­ma Hos­pi­tal

- Eu­ro 91.769,213—TT$660Mnl Con­struc­tion of the Point Fortin Hos­pi­tal

- US $34.2Mn Chi­nese Mul­ti-pur­pose ves­sels

- EUR 168,532, Damen

- US $300Mn CAF

- US $1. OBn 4.5% f R B 2026

- US$180Mn CAF Pol­i­cy-Based Loan

- Eu­ro 81.4Mn—Point Fortin Hos­pi­tal

- US $120Mn CAF Pol­i­cy-Based Loan—Phase II

- US$200Mn CAF—ANR Robin­son Int'l Air­port Up­grad­ing

- US$104.3Mn Phoenix Park

- EU­RO $101 mil­lion San­gre Grande Hos­pi­tal Con­struc­tion

- US$58.5Mn In­cat fer­ry

- US$57. 2Mn Austal fer­ry

- US$200Mn CAf—In­vest­ment Loan (SWAP)

Back in 2018, the Min­istry of Fi­nance pegged T&T's debt to Chi­na at $2.2 bil­lion but since then the Gov­ern­ment has signed off on two new ma­jor loans in­clud­ing over $700 mil­lion loan for the de­vel­op­ment of the Phoenix Park In­dus­tri­al Es­tate in 2019 and an­oth­er more re­cent $100m loan for a new foren­sic cen­tre.

The EX­IM Bank of Chi­na seems to be the go-to loan fa­cil­i­ta­tor for the State as in 2016, the Gov­ern­ment ac­cessed an­oth­er mul­ti-mil­lion dol­lar loan from it, this time to fund the pur­chase of the "mul­ti-pur­pose ves­sel, pro­vi­sion of lo­gis­tic sup­port for the ac­qui­si­tion of naval as­sets and main­te­nance and train­ing for the ac­qui­si­tion of 12 naval as­sets."

Ac­cord­ing to the 2016 Pub­lic Ser­vice In­vest­ment Pro­gramme, the ex­ter­nal fund­ing which to­talled $358.7 mil­lion was fi­nanced from ING (Hol­land) and EX­IM Bank of Chi­na.

Ac­cord­ing to the same doc­u­ment, the loans for the ves­sels, the train­ing and main­te­nance were sourced from three in­sti­tu­tions: US$30 mil­lion loan from ANSA, US $183 mil­lion from ING (Hol­land), and the US $24 mil­lion from EX­IM Bank (Chi­na).

In the same year, the Gov­ern­ment al­so drew down an­oth­er $120 mil­lion from EX­IM Bank of Chi­na for the con­struc­tion of the Ari­ma Hos­pi­tal.

Ac­cord­ing to the 2018 State En­ter­pris­es In­vest­ment Pro­gramme doc­u­ment, Gov­ern­ment al­so sourced $532 mil­lion in loans from the EX­IM Bank of Chi­na for the Na­tion­al Ten­nis Cen­tre, Tacarigua, the Na­tion­al Cy­cling Velo­drome, Cou­va and a mul­ti­pur­pose youth sport­ing fa­cil­i­ty, San­gre Grande (for­mer­ly con­struc­tion of three mul­ti­pur­pose sport/youth fa­cil­i­ties)

Ac­cord­ing to the 2020 PSIPs, Chi­nese in­vestors have al­so been se­lect­ed for the sale of 50 per cent of the in­dus­tri­al es­tates now un­der the re­mit of Evolv­ing Tech­nolo­gies and En­ter­prise De­vel­op­ment Com­pa­ny Lim­it­ed (eTecK).

Chi­nese in­vest­ment has al­so been sought for the par­tial di­vest­ment of 49 per cent of the share­hold­ing of Lake As­phalt of Trinidad and To­ba­go (1978) Lim­it­ed.

The 2018 debt fig­ure in­clud­ed the fol­low­ing:

•Con­struc­tion of the Na­tion­al Acad­e­my for the Per­form­ing Arts and South­ern Acad­e­my for the Per­form­ing Arts.

•Out­stand­ing debts from loans for the two are $440,295,212 and $180,835,533 re­spec­tive­ly.

•Loan for the con­struc­tion of the Cou­va Hos­pi­tal cur­rent­ly stands at $924,511,500.

•The Gov­ern­ment is al­so ow­ing to a fi­nance fa­cil­i­ty that al­lowed for the con­struc­tion of six sport­ing fa­cil­i­ties.

•Then there is a debt for the pur­chase of a mul­ti-pur­pose pa­trol ves­sel based on a cred­it fa­cil­i­ty, amount­ing to $138,609,487.

No com­ment from Fi­nance Min­is­ter

Guardian Me­dia was un­able to find 2011-2014 Draft Es­ti­mate doc­u­ments on the Min­istry of Fi­nance web­site.

Guardian Me­dia al­so called and texted Fi­nance Min­is­ter Colm Im­bert for up­dat­ed fig­ures and emailed the Min­istry's Per­ma­nent Sec­re­tary for a re­sponse. Nei­ther of them re­spond­ed.

Dukha­ran:

One econ­o­mist and two for­mer gov­ern­ment min­is­ters ex­pressed their con­cern over not on­ly the num­ber of gov­ern­ment loans but the fact that it's in the al­ready scarce US dol­lar.

Guardian Me­dia sent ques­tions to econ­o­mist Mar­la Dukha­ran on Thurs­day re­gard­ing the uptick in loan ac­tiv­i­ty.

Dukha­ran said US loan means US re­pay­ment.

"When you take on USD debt, you have to re­pay it in USD, and if you don’t have enough USD, that means you have a bal­ance of pay­ments or debt cri­sis, and you have to go to the IMF for as­sis­tance," she said.

"This may sound far off, but con­sid­er this—we have lost USD4.6 bil­lion in re­serves since the peak in 2014, and re­serves have fall­en to just about USD6.9 bil­lion at the end of 2019, which is about sev­en months of im­port cov­er.

"Now, im­port cov­er is not just about how much you im­port to con­sume, it al­so needs to take in­to ac­count the amount of USD you need to re­pay your debt and oth­er oblig­a­tions.

"So the more we bor­row in USD, the more we must re­pay, the faster these re­serves will be ex­haust­ed, and the soon­er we de­fault on our oblig­a­tions and have to turn to the IMF," Dukha­ran warned.

Com­ment­ing on the coun­try's ris­ing lev­el of in­debt­ed­ness, Dukha­ran said T&T's lev­el of debt was al­ready "around TT$ 120 bil­lion and ris­ing steadi­ly."

"We ex­ceed the sus­tain­abil­i­ty thresh­old by about TTD30 bil­lion which means our debt lev­el is 33 per cent over and above that which is deemed sus­tain­able," she said.

"An­oth­er in­di­ca­tion of our debt’s un­sus­tain­abil­i­ty is the fact that we have had a pri­ma­ry fis­cal deficit since 2016—this means that we are bor­row­ing just to pay the in­ter­est on our ex­ist­ing debt."

Dukha­ran said de­spite this, the coun­try con­tin­ues to pile on more debt.

"This is a gross­ly un­sus­tain­able and un­healthy sit­u­a­tion and it means that the clock is now tick­ing even faster un­til we can­not re­pay our debts, and there is a de­fault.

"Our debt is spec­u­la­tive and risky. And it is my view that very soon, S&P (af­ter hav­ing down­grad­ed last year al­ready) will down­grade us to junk, just as Moody’s had done. One may be able to ar­gue that debt in TTD is not so risky since the au­thor­i­ties can print the TTD they need to re­pay the debt.

"But what about the USD de­nom­i­nat­ed debt we have tak­en on?" Dukha­ran asked.

She said that the coun­try was forced to bor­row in US be­cause the TT dol­lar "is about 40 per cent over­val­ued."

"When the of­fi­cial rate is about TTD6.80 but the black mar­ket rate is about TTD7.50-TTD8.00 for USD1.00, and this (over­val­ued) of­fi­cial ex­change rate is de­cid­ed strict­ly by the au­thor­i­ties, and not even par­tial­ly by de­mand and sup­ply forces, it means that the au­thor­i­ties have de­lib­er­ate­ly, con­scious­ly de­cid­ed to sub­sidise im­ports and pe­nalise ex­ports. This means we will earn less USD," she said.

"This means we will con­tin­ue to have a net out­flow of USD. This means that we are more like­ly to run out of USD faster than if the TTD was not over­val­ued. And the ex­cuse for main­tain­ing an over­val­ued cur­ren­cy that the au­thor­i­ties al­ways use—that they wish to pro­tect the pur­chas­ing pow­er of the poor man, as a de­val­ued TTD will mean con­sumers will pay more for their im­port­ed gro­ceries for ex­am­ple is an in­valid ex­cuse be­cause im­porters have al­ready priced in a de­val­u­a­tion and are pric­ing their goods based on the black mar­ket rate they al­ready pay for USD," she said.

Dukha­ran re­called the Prime Min­is­ters in­ter­view with Guardian Me­dia's Khamal Georges where he said his rea­son for not de­valu­ing the TT dol­lar was be­cause peo­ple were hoard­ing US in hopes of mak­ing a quick re­turn.

"This ex­cuse al­so holds no wa­ter, as hold­ers of USD will hold on to USD even more when the TTD is over­val­ued, and this in­cen­tive to buy and hold USD will not ex­ist if the TTD was not so over­val­ued. The au­thor­i­ties have cre­at­ed the per­fect in­cen­tive for a black mar­ket for USD, and for peo­ple to buy and hold USD in the hope of a de­val­u­a­tion," Dukha­ran said.

Browne:

For­mer min­is­ter in the min­istry of fi­nance Mar­i­ano Browne shared Dukha­ran's view.

Browne al­so ques­tioned the wis­dom of loans in US cur­ren­cy.

"Bor­row­ing in for­eign cur­ren­cy makes sense if it is tied to be used to buy for­eign in­puts to im­prove forex gen­er­a­tion. So that speaks to the pur­pose of the loans. Bor­row­ing abroad to fi­nance road im­prove­ments/resur­fac­ing is a no-no.

"Bor­row­ing to fi­nance the con­struc­tion/ex­pan­sion of ANR air­port in To­ba­go makes sense on­ly if there is a valid tourism im­prove­ment plan. No gov­ern­ment in the last 50 years has had one," he added.

Browne said that for­eign bor­row­ing in­creas­es the de­mand for US dol­lars and places ad­di­tion­al stress on the sys­tem since there isn’t enough to go around. This cre­ates a self-re­in­forc­ing dy­nam­ic that put pres­sure on the forex sys­tem, in­clud­ing the rate.

He said that T&T was ex­pe­ri­enc­ing a pri­ma­ry deficit on an on­go­ing ba­sis.

"Mean­ing that rev­enue is in­suf­fi­cient to meet op­er­a­tional costs and debt ser­vice. That means to meet debt ser­vice re­quire­ment we are bor­row­ing. This is un­ac­cept­able gen­er­al­ly but tol­er­a­ble in the short term if there is a way out or a method­ol­o­gy.

"There is none that I can see ex­cept that we are wait­ing for a turn­around in the en­er­gy sec­tor which is not go­ing to hap­pen any time soon."

Browne said that any bor­row­ing in­creas­es the debt to GDP ra­tio.

"What is bad about the in­creas­ing debt to GDP ra­tio over the last five years is that the for­eign debt com­po­nent is ris­ing at an alarm­ing rate. The dif­fi­cul­ty with this is the com­pe­ti­tion for for­eign ex­change with the non-en­er­gy sec­tor and the ex­po­sure that it brings to forex risk if the rate de­pre­ci­ates as it must in these con­di­tions," he said.

"The for­eign debt load is what pushed the clo­sure of the re­fin­ery as that bur­den would have fall­en to the State.

"Any for­eign bor­row­ing at this time must be ad­e­quate­ly jus­ti­fied from a busi­ness and eco­nom­ic an­gle. In the scheme of things po­lit­i­cal, the two To­ba­go seats are im­por­tant to the cur­rent ad­min­is­tra­tion. But that is not an eco­nom­ic jus­ti­fi­ca­tion. It is a po­lit­i­cal one," Browne said.

Bharath:

An­oth­er for­mer min­is­ter, Vas­ant Bharath al­so agreed with both Browne and Dukha­ran.

"They are hav­ing to bor­row as there are no new rev­enue streams to re­place that lost from low­er pro­duc­tion lev­els of oil and gas as well as de­pressed prices," Bharath said in re­sponse to ques­tions from Guardian Me­dia.

"In fact, we are now bor­row­ing to pay in­ter­est on ex­ist­ing debt, rob­bing the pro­duc­tive sec­tor of much-need­ed cap­i­tal."

"Ad­di­tion­al­ly, it is the first time since 1986 that the econ­o­my has suf­fered three con­sec­u­tive years of neg­a­tive growth and all fi­nan­cial pro­jec­tions point to a fourth. "To­tal ex­ports have de­clined by over $6bn for the pe­ri­od Jan­u­ary to June 2019 cf the same pe­ri­od in 2018. There has been ze­ro FDI in the non-en­er­gy sec­tor and forex re­serves have dwin­dled to US$7bn from US$11.4bn. The sit­u­a­tion is dire. At the cur­rent us­age rate four or pos­si­bly five years are left," he warned.