Vasant Bharath: S&P rating a sobering message to government

STANDARD AND POOR’S (S&P’s) latest ratings report has given Trinidad and Tobago a sobering insight into its economic standing.

While the sovereign rating has remained at BBB-, but the outlook has been revised from stable to negative because the country’s fiscal and external buffers “have eroded gradually over many years.”

While TT is still considered creditworthy, S&P estimates there is now a one-in-three chance of a downgrade within the next two years. The move would raise borrowing costs, strain reserves and restrict government’s ability to sustain social programmes.

But former senator Vasant Bharath said the country does not stand empty-handed as its democracy remains resilient, net debt is moderate and both the Heritage and Stabilisation Fund (HSF) and Central Bank reserves represent buffers equal to more than half of GDP.

Unfortunately, assets alone are not enough. He said markets are looking for proof the state can use its resources wisely and consistently.

Bharath believes the government’s immediate task should be to increase credibility, at home and in the eyes of regional and international partners. He said recovery must be anchored on both credibility and growth, and they have to be pursued together.

“In the short term, we must demonstrate discipline, transparency and independent oversight. In the medium term, we must legislate reforms that prevent a downgrade. And in the long term, we must invest in new industries, create jobs, build food security and create broad-based growth.

“S&P’s decision is a warning, but it is also an opportunity. TT has the buffers and the institutions to succeed. This government, with its recent landslide victory at the polls and substantial goodwill, is well poised to accomplish both,” he said in a news release on September 27.

Bharath believes the next six months should be dedicated to stabilising markets and proving that any fiscal plan is time-bound, transparent and measurable. He said the next budget should be presented as a fiscal stabilisation plan, with clear revenue and expenditure targets, particularly in the non-energy sector, as well as defined debt and deficit levels. He also called for clarity on growth targets, the sectors that will drive this growth and the jobs that will follow.

He believes non-essential projects should be frozen for half a year, with resources redirected to health, education and targeted social support, while critical infrastructure and productive capital expenditure should remain priorities.

He said a recent Inter-American Development Bank (IDB) study ranked TT’s spending as among the most wasteful in Latin America and the Caribbean, so waste and duplication, starting with state rentals and security details, must be cut back.

Bharath emphasised the need for a debt management strategy, particularly as the country faces repayment of a US$1 billion bond next year. He stressed that the HSF should not be treated as “easy cash” but should be reserved for debt smoothing and investments that create future industries. To build trust, he suggested monthly public updates on withdrawals and their use.

Bharath rejected higher taxes as an option, instead pointing to leakages in the revenue system. He proposed the creation of a new unit within the Board of Inland Revenue to digitise and modernise tax collections, arguing that closing the gap between what is owed and what is collected could bring in much-needed and fair revenue. Transparency, too, must be improved in the allocation of scarce foreign exchange, with priority given to food, medicine, and exporters’ inputs.

Beyond stabilisation, Bharath said government must pursue reforms that touch people’s daily lives. He suggested decentralising services away from Port of Spain, addressing chronic traffic congestion and tackling crime through a reformed Police Service working in collaboration with the Defence Force, Coast Guard, Customs, Immigration and Air Guard.

Oversight on food prices should be established to prevent price gouging, and the public service must be modernised to improve efficiency. State enterprises must be fixed or restructured to ensure they deliver value, while projects should be subjected to independent audits to protect taxpayers.

The longer-term challenge, Bharath warned, is to change the country’s growth story.

“We are being left behind. According to the S&P report, TTs real average growth per capita is below that of countries with similar income levels. For too long, we have been overly dependent on oil and gas. They remain important, but we must build other engines of growth.”

According to Bharath, that would mean a national push to reduce the food import bill by at least 30 per cent within five years, supported by stronger programmes for agro-processors and small farmers and state organisations mandated to purchase the majority of their supplies locally.

He also identified renewable energy, ICT, sport and medical tourism, marine services, yachting, and financial services as industries that can build the future. Special export zones with modern infrastructure and fast-tracked approvals could attract investment, while education reform must prepare young people for jobs in emerging fields such as artificial intelligence, robotics, cyber security, advanced manufacturing and telemedicine.

Bharath said with the government’s recent landslide victory at the polls and goodwill, it is well placed to restore confidence and chart a new economic path.

“With credibility first, and growth second, we can restore confidence, protect our most vulnerable, and lay the foundations for a stronger, more resilient nation.”