Caribbean & Central America - November 2023

On 6 October Trinidad & Tobago’s Prime Minister Keith Rowley presented the government’s 2023/2024 budget, which, according to finance minister Colm Imbert, will ensure that “the economic recovery is anchored on sound and stable economic conditions”. Opposition leader Kamla Persad-Bissessar retorted that it was a “painful” document that perpetuated the country’s over-reliance on the energy sector.

The new budget totals TT$59.2bn (US$8.7bn) and is built on the assumptions that international oil and gas prices (the country’s key exports) will average respectively US$85/barrel and US$5 per million Btu (British thermal units), assumptions which seem reasonable given current market conditions, influenced by the global repercussions of the Israel-Gaza crisis that broke out in early October. The government is projecting a fiscal deficit of TT$5.19bn, equivalent to 2.7% of GDP. Annual inflation currently stands at 4% while GDP growth in Q1 2023 year-on-year eased down to 3% (from 3.6% in Q4 2022).

By government departments, the top three budget lines have been proposed for education and training; health; and national security, with social development spending coming in fourth position. Imbert sought to highlight good news items, such as a recent fall in unemployment (down to 3.7% in the quarter to June, from 4.9% in the quarter to March). He also noted that public service workers will be receiving promised back-pay, and that plans are underway to increase the minimum wage by 17%.  Less popular may be the government’s proposal to raise the age of retirement to 65 years from 60 years currently. Work is also in progress to introduce a 3% annual property tax. Given widespread concern over crime, the police service is to triple its annual recruitment drive and receive extra funds for vehicles, equipment, and new container scanners for the country’s main port.

Reactions were mixed. Persad-Bissessar said the budget failed to fully address the surge in crime and that the fiscal statistics were being manipulated to create a false sense of security. The Tobago House of Assembly (THA) said its regional budget was insufficient. On the other hand, the Trinidad and Tobago Manufacturers’ Association (TTMA) was upbeat, welcoming the introduction of e-payments and promises of expanded access to foreign exchange through the Exim Bank and for small and medium-sized enterprises.

TTMA response

TTMA head Roger Roach said he welcomed a government push for growth led by the non-energy manufacturing sector and supported by an environment favouring increased business competitiveness.

The dollar problem

Some analysts accuse the government of failing to resolve a long-running problem: the scarcity of US dollars. Barbados-based economist Marla Dukharan says the problem exists because the government subsidises its dollar sales, pricing them at below the black-market rate, something which boosts demand and causes scarcity at the official rate. In her view this creates speculation and economic distortion. Subsidised dollars have artificially boosted imports and created a “perverse and harmful incentive to hold or transfer US dollars overseas”, she wrote in an October report.

Dukharan has likened Trinidad and Tobago’s split exchange rate system to the multiple rates used in Argentina which have also exacerbated dollar shortages. She argues that the government could fix the problem by moving to open-market dollar auctions and a single free-market rate. But in his budget speech Imbert said the government intended to “move aggressively to develop strategies to increase the repatriation of foreign exchange earned overseas by local and foreign businesses operating in T&T”. Dukharan described this as “gun talk” warning that “preferential access creates perverse incentives and corruption opportunities”.