Stability not optional for Trinidad and Tobago

KENNY PERSAD

FOR YEARS TT has muddled through with incremental adjustments, patchwork measures, and fiscal Band-Aids. Each budget has promised course corrections, yet the structural weaknesses remain the same: low national savings, fragile foreign exchange (forex) reserves, stagnant productivity, and institutions that are struggling to support competitiveness under the previous finance minister.

The 2025/26 budget cannot be another exercise in tinkering. The economy has arrived at a point where stopgaps no longer restore balance. Without a decisive policy reset, the pattern of weak growth, fiscal stress, and external vulnerability will accelerate, eroding the country’s resilience and narrowing its choices.

Cracks beneath

the surface

While global uncertainties weigh on all economies, energy market volatility, stronger US interest rates, geopolitical risks, and TT’s pressures are largely domestic. Fiscal deficits have become chronic and are increasingly costly to finance. The foreign exchange market is unstable, marked by persistent shortages and widening spreads. Buffers are eroding, with foreign reserves thinning at the very moment when confidence is in need of reinforcement.

On the real economy side, productivity growth is weak, wages are distorted, and non-energy investment is slow. Instead of policy levers working in concert – interest rates, exchange rates, tariffs, and wages – measures often clash. One decision cancels another, leaving markets distorted rather than corrected. The bigger danger is that each year these pressures pile atop each other, creating a cycle where corrective tools lose credibility.

Lessons abroad,

warnings at home

There is nothing inevitable about small states being trapped at low growth. Consider the Gulf economies: They used energy windfalls to build buffers, establish sovereign wealth funds, and reduce dependency on short-term rents.

Or consider the Asian tigers, which began constrained in resources but accelerated growth by mobilising savings, investing in technology, and driving efficiency in capital use. It was vision and execution, not size or resources, that were shared. They understood that durable growth comes from reducing waste, building institutions, and making each unit of investment produce more output.

Equitable development was not treated as charity but as the very engine of transformation.

Over the last decade, TT was going in the opposite direction. Savings remain low, both at the household and corporate level. Public projects often fail to deliver efficiency, while private capital hesitates in the face of policy uncertainty. Productivity has not kept pace with global competitors, and institutions have not adapted quickly enough to enforce coherence in policy design.

This is not simply about growth rates. It is about credibility: the confidence of households that save, businesses that invest, and international partners who lend and trade. Without credibility, even the best growth numbers can prove fragile. Using Heritage saving funds and borrowing locally are not fiscal prudence; that are an approaching disaster.

What old

tools won’t fix

For the past decade, the instinct in difficult times has been to rely on conventional adjustments: deficit financing, devaluation, or vague promises of diversification. Each has its place, but none addresses the structural foundations of resilience.

Deficit spending widens financing gaps without building competitiveness. Devaluation risks inflation and does little to ease forex constraints when import dependence is high. Diversification often ends up as rhetoric unless backed by the hard work of shifting incentives and investing in productive capacity.

The reality is clear: TT can no longer rely on the old playbook. The challenges have outgrown quick fixes.

What budget

should do

The 2025/26 budget will be measured less by its spending announcements and more by whether it sets a coherent direction. Four priorities stand out:

Anchor policy on

external stability

For an open economy, external credibility is non-negotiable. A transparent and credible strategy for the balance of payments, including a realistic foreign exchange regime and reserve management plan, must be the starting point.

Mobilise

national savings

Households, businesses, and the sovereign must be given frameworks to save and invest productively. This is how small states create breathing room and power future capital formation. A robust savings/investment framework should be part of the budget, not an afterthought.

Improve capital

efficiency

It is not only about spending more but about spending smarter. Public investment must be evaluated by the output it generates, not just the money allocated. Private investors need incentives to adopt technology and raise productivity. Lowering inefficiency is just as critical as raising inflows.

Reinforce

institutions

Markets cannot clear when incentives are distorted. Rationalising tariffs, linking wages more closely to productivity, and modernising fiscal oversight all form part of rebuilding coherence. Strengthened institutions, from the Central Bank to oversight bodies, are a prerequisite for credible reform.

This is not to say the budget can deliver transformation overnight. It must lay the stepping stones, balancing short-term stabilisation with longer-term reforms. Credibility comes not only from what is promised, but also from showing a clear trajectory with milestones that citizens, investors, and partners can follow.

A moment

for leadership

Budgets tell stories. For too long TT’s budgets have told a story of improvisation rather than ambition. Each year has been about easing immediate pain rather than charting a durable course. That story must change.

The 2025/26 budget presents an opportunity to signal that the government is willing to lead not only with spending, but also with discipline. To show that confidence will be rebuilt through coherence and that stability will be managed not as an aspiration, but as an obligation.

The choice before the government is simple. Continue tinkering and risk accelerating decline. Or seize the moment to begin transforming the economic model from one of fragmentation to one anchored in savings, efficiency, and credibility.