A Catch-22 sit­u­a­tion is de­scribed as a dilem­ma or para­dox from which there is no es­cape be­cause of mu­tu­al­ly con­flict­ing or de­pen­dent con­di­tions. In this con­text, one can­not avoid a prob­lem be­cause the so­lu­tion to the prob­lem de­pends on cir­cum­stances that make the so­lu­tion im­pos­si­ble. The term comes from the ti­tle of a 1961 book by US au­thor Joseph Heller.

Ap­ply­ing the con­cept to the 2026 Bud­get, Min­is­ter Dave Tan­coo was trapped by an elec­tion plat­form promise so cost­ly that it cre­at­ed the very sit­u­a­tion he was elect­ed to solve. Were the promise kept, it would lead to a sig­nif­i­cant bud­get deficit, in­creased na­tion­al debt, high­er debt ser­vice costs, and ex­pan­sion­ary con­di­tions that would fur­ther de­plete the of­fi­cial for­eign re­serves.

The last gov­ern­ment missed its tax rev­enue tar­get by 11 per cent in 2024 and 2025. Since enough has been said about the 2026 Bud­get rev­enue as­sump­tions, those de­tails will be ig­nored here. The ex­pen­di­ture num­bers are of greater in­ter­est be­cause the Fi­nance Min­is­ter has more dis­cre­tionary con­trol over spend­ing than he does over rev­enue. Fur­ther, gov­ern­ment ex­pen­di­ture is at the heart of this Catch-22.

Min­is­ter Tan­coo, like Mr Colm Im­bert, is nei­ther mir­a­cle work­er nor ma­gi­cian. Even with the best will in the world, they could not change the coun­try’s struc­tur­al is­sues and could on­ly work with­in the fi­nan­cial con­straints. If one is de­ter­mined to keep spend­ing with­in the avail­able rev­enue, then cer­tain ex­pen­di­tures must be cut. This is un­palat­able, as ex­pen­di­ture cuts could in­duce a po­lit­i­cal back­lash, es­pe­cial­ly from civ­il ser­vants who ex­pect­ed that their salary de­mands would be met at the first avail­able op­por­tu­ni­ty.

Min­is­ters can­not suc­cess­ful­ly im­ple­ment any pol­i­cy with­out the as­sis­tance of the pub­lic ser­vice. Sim­i­lar­ly, a gov­ern­ment needs the co­op­er­a­tion of the pri­vate sec­tor and the labour move­ment to achieve suc­cess. This re­quires im­proved pro­duc­tiv­i­ty and per­for­mance and a high lev­el of co­or­di­na­tion and co­op­er­a­tion. To demon­strate com­mit­ment to the union move­ment, sev­er­al trade union­ists were ap­point­ed min­is­ters. Fail­ing to de­liv­er the promised ten per cent wage of­fer could have led to a neg­a­tive re­ac­tion from union mem­bers. Keep­ing the promise would lead to a high­er deficit and high­er debt. Con­verse­ly, if Min­is­ter Tan­coo was de­ter­mined to keep spend­ing with­in avail­able rev­enue, then ex­pen­di­tures must be re­duced, an ex­pen­sive po­lit­i­cal op­tion.  

To solve the Catch-22, Min­is­ter Tan­coo was du­plic­i­tous. The promise of a ten per cent wage set­tle­ment was de­liv­ered in the bud­get speech, but no al­lo­ca­tion was pro­vid­ed in the ex­pen­di­ture es­ti­mates. Dur­ing the Stand­ing Fi­nance Com­mit­tee meet­ing, Min­is­ter Tan­coo al­so con­firmed that in­creased em­ploy­er NIS con­tri­bu­tions were al­so omit­ted. The bud­get deficit is there­fore gross­ly un­der­es­ti­mat­ed. The promise ar­tic­u­lat­ed on page 78 that T&T ”… will meet the high­est in­ter­na­tion­al stan­dards in fi­nan­cial in­tegri­ty” was im­me­di­ate­ly com­pro­mised.

Sim­i­lar­ly, if the wage set­tle­ment of­fer was omit­ted from the es­ti­mates, did the es­ti­mates pro­vide for the ad­di­tion­al po­si­tions/jobs an­nounced? Al­so, since the job eval­u­a­tion ex­er­cise is es­ti­mat­ed to be com­plet­ed with­in the next six to eight months, did the es­ti­mates pro­vide for the salary in­creas­es that would re­sult there­from? The es­ti­mates do not sug­gest that these con­sid­er­a­tions were fac­tored in­to the num­bers.

The key con­cern from the fore­go­ing is the size of the deficit and the fi­nanc­ing re­quire­ment. The es­ti­mates in­di­cat­ed a bor­row­ing re­quire­ment of $19 bil­lion. Ex­clud­ing the deficit of $3.8 bil­lion, $15.2 bil­lion must be re­fi­nanced, rene­go­ti­at­ed, or rolled over. By in­ter­na­tion­al stan­dards, this is small. But the “re­al” deficit is un­known at this point.

Min­is­ter Tan­coo was care­ful not to pro­vide an es­ti­mate of the un­bud­get­ed ten per cent wage set­tle­ment of­fer or the im­pact of the high­er NIS con­tri­bu­tions. So the deficit is sub­stan­tial­ly more than stat­ed.

This is im­por­tant giv­en the S&P rat­ing eval­u­a­tion on Sep­tem­ber 25. Of the three ma­jor rat­ing agen­cies (Fitch, Moody’s and S&P), on­ly S&P gives T&T an in­vest­ment grade rat­ing of “BBB-”, which is the low­est on the in­vest­ment grade scale. But it changed its out­look to neg­a­tive and not­ed that it could low­er the rat­ing over the next 6-24 months if “… the Gov­ern­ment fails to take time­ly cor­rec­tive steps to strength­en the sus­tain­abil­i­ty of pub­lic fi­nances, en­sure long-term bal­anced eco­nom­ic growth, and main­tain the coun­try’s strong ex­ter­nal pro­file”.

The cur­rent ad­min­is­tra­tion is fail­ing these three mea­sures. In the first three months of tak­ing of­fice in April, the net Gov­ern­ment debt had in­creased from $140.8 bil­lion (81.8 per cent of GDP pg 25) to $147.5 bil­lion (85.7 per cent of GDP) at the end of Ju­ly 2025. Con­verse­ly, dur­ing the same pe­ri­od, Net Of­fi­cial Re­serves de­clined from USD $5.27 bil­lion to $4.8 bil­lion at the end of Ju­ly 2025. Both sta­tis­ti­cal mea­sures wors­ened very quick­ly. A high­er bud­get deficit would have made the po­si­tion much worse and has­tened a down­grade, as the num­bers are head­ing in the wrong di­rec­tion.

Whilst it would be ar­gued that the Gov­ern­ment has been in of­fice for six months, the bud­get is not geared to take time­ly cor­rec­tive ac­tion. Even with the best of in­ten­tions, ad­dress­ing the key struc­tur­al is­sues will cause aus­ter­i­ty and pain. Min­is­ter Tan­coo at­tempt­ed to tele­graph this in his In­de­pen­dence Day mes­sage. How­ev­er, when faced with the re­spon­si­bil­i­ty of send­ing a clear mes­sage re­gard­ing the sac­ri­fices re­quired to ad­dress the eco­nom­ic chal­lenges, Min­is­ter Tan­coo tanked. Cred­i­bil­i­ty once squan­dered can­not be eas­i­ly re­gained.

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al School of Busi­ness.