Caribbean & Central America - October 2021

Trinidad & Tobago has been suffering from years of slow or negative growth which has now been compounded by the effects of the coronavirus (Covid-19) pandemic even though Trinidad is not one of the Caribbean’s severely tourist-dependent countries. In the 12 years from 2009-2020, the country has recorded no less than eight years of negative growth. Only in four out of the last 12 years has it shown growth, and the best of those years was as far back as 2010 when the economy bounced back with a 3.5% expansion after the 2009 contraction of -4.8%. Since 2015, when the economy grew by 1.5%, the results have been consistently dire, with 2016’s contraction of -5.6% followed by -3.0% in 2017, 0.1% in 2018, and -1.2% in 2019. Then the Covid-19 pandemic struck, leading to a contraction of -7.8% in 2020. This was the background against which Finance Minister Colm Imbert presented his 2021/22 budget to parliament on 3 October.

The last Article IV Consultation with the International Monetary Fund (IMF) was in 2018, with the report completed in August, so comfortably before the impact of Covid-19. The IMF reported that the country was slowly recovering from a deep recession and should return to positive growth from 2018. It also reported that “good progress has been made in fiscal consolidation through spending cuts, but public debt continued to rise, approaching the government’s soft target of 65% of GDP”.

The IMF reported: “Gradual recovery in the non-energy sector should help stabilise growth at 1.5% over 2018-2023, with inflation projected to rise along with non-energy sector recovery to 3.8%. The fiscal deficit is projected to narrow to an average 4% of GDP over the medium term as energy revenues rise, non-energy revenues recover, and the efficiency of transfers and subsidies improve.” But then Covid-19 struck, the economy suffered further sharp contractions, and the debt-to-GDP ratio soared to 85%.

The budget presented by Imbert on 3 October reflected this dire setback to the economy. He said the economy’s decline would “decelerate…to 1.4% in 2021 and look forward to a strong recovery in 2022”. In the meantime, though, the TT$55.43bn (US$7.86bn) 2021/2022 budget projects revenue of TT$43.33bn (US$6.50bn) to give a deficit of TT$9.09bn (US$1.36bn), or 5.8% of GDP. The slightly better news, however, was that the budget was based on an oil price of US$65 per barrel and a gas price of US$3.75 per MMBtu whereas on budget day the actual prices were, respectively, US$75 and US$5.80.

The opposition leader, Kamla Persad-Bissessar, responded to the budget by arguing, with some justification, that the country’s economic difficulties could not be laid entirely at the door of the pandemic. She said the main problem was the ruling People’s National Movement (PNM) and Prime Minister Keith Rowley – “Covid did not crash the economy, it is the PNM led by Rowley who crashed the economy” – and she argued that the government had no new ideas other than to reintroduce the “dreaded property tax”. In his budget presentation, Imbert had said that the resumption of the property tax was “long overdue” and could become “a significant revenue item for local government in the years ahead”.

In the face of such difficulties, talk of calling in the IMF is never far away, but the government is adamant that this won’t happen. Imbert pointed out that the country last entered an IMF programme in 1988 and that it had had “a severe adverse impact on the social fabric of Trinidad & Tobago” (see sidebar).

• Imbert on the IMF

Speaking about the IMF, Imbert said “In the classic IMF model…once you enter an IMF programme you must reduce government spending to match government revenue. This inflexible one-size-fits-all policy has led to serious unrest in countries that had no choice…We see no need to seek any…form of assistance [other than surveillance, technical assistance, and capacity advice] from the IMF at this time or in the near future.”