Maroc - NEWSDAY.CO.TT - A la Une - 17/Oct 10:46

Budget economically precarious

OSAZÉ MORALDO-BOWEN IN MY opinion, the 2025-2026 national budget was delivered with confidence and compassion. It promises relief for motorists, long-overdue wage increases for public servants, laptops for students, and thousands of affordable homes. It also pledges fiscal prudence, projecting a modest deficit of 2.17 per cent of GDP. Yet, based on my understanding, this sense of stability rests on assumptions that are far more optimistic than market realities support. At the heart of the fiscal framework is one critical variable: the assumed oil price of US$73.25 per barrel. That single figure, in my view, underwrites the entire budget. The problem is that it’s probably too high. Global forecasters, including the IMF and the World Bank, expect Brent crude to average closer to US$60-65 per barrel in 2026. By my calculations, that’s roughly 15-20 per cent below what the government has used. With national oil output still around 55,000 barrels per day, that US$10-$12 difference translates into a petroleum revenue shortfall of about $1.3 to $1.6 billion. When combined with slightly lower gas prices or delays in gas field development, total revenue could, in my estimation, fall short by $4-5 billion. If that happens, the real deficit would not be the $3.86 billion presented in Parliament. It would likely be closer to $8-9 billion, or around five-six per cent of GDP. This isn’t me being alarmist. It’s simply arithmetic. The budget also assumes that natural gas production will rise from 2.6 to 3.2 billion cubic feet per day by 2027, largely because of projects like Shell’s Manatee field. Based on my understanding of industry timelines, even a one-year delay could erase the incremental gains assumed in the medium-term projections. Oil production, meanwhile, remains near historic lows, with no major new finds monetised. To me, that makes the energy narrative more hopeful than evidential. Where the budget is most ambitious (perhaps strategically so) is in its expenditure profile. The government has (somewhat) committed to a ten per cent public-sector wage increase, costing $214 million annually, plus $730 million in arrears. It has also cut the price of super gasoline by $1 per litre, effectively reinstating part of the fuel subsidy. Add to that multi-billion-dollar allocations for infrastructure, education, and social support, and, in my opinion, the cost structure becomes much heavier and harder to unwind. Each of these measures may be defensible on its own. But together they embed a permanently higher wage and subsidy bill that will persist even if oil and gas prices do not. To raise non-energy revenue, the government introduced several new measures: a 0.25 per cent asset levy on banks and insurers, a $0.05 per kilowatt-hour electricity surcharge, and higher excise duties on alcohol and tobacco. By my estimates, these might yield $1-1.5 billion in additional revenue. That helps, but not nearly enough to fill a $4 billion hole. And based on my understanding of how banks respond to cost increases, the new levy will likely be passed on to consumers through higher lending rates and service fees, potentially damping private-sector investment. The development promises are equally expansive: 20,000 affordable homes, $150 million for laptops, and major allocations for roads, health, and coastal defences. In my opinion, the intentions are sound but the targets overly ambitious given the country’s current fiscal capacity and implementation track record. Without strong private-sector partnerships or multilateral financing, many of these projects may face delays or downsizing once fiscal pressures build. Tobago’s 6.3 per cent allocation (about $3.7 billion) is a modest improvement. But nationally, the ten per cent wage increase across the public service represents a structural shift in expenditure. Once that higher wage cost is baked in, it limits future flexibility unless revenues rise sharply. Something that, in my view, looks unlikely under current global energy conditions. If oil averages US$62-65 and gas production stays flat, I estimate total revenue around $51-52 billion, against expenditure of $59 billion. That means a deficit closer to $7-8 billion, not $3.9 billion. Financing that would require either new borrowing or drawdowns from the Heritage and Stabilisation Fund, both of which, in my opinion, would weaken fiscal resilience. Therefore, I would argue that while the 2025-2026 budget is socially generous, it is economically precarious. It expands social spending, rewards the public sector, and offers short-term relief but it rests on assumptions that are, in my view, too optimistic. If oil prices disappoint or energy projects slip even slightly, the government will face tough choices: borrow more, cut spending, or dip into reserves. None of these are painless options. Ultimately, in my opinion, this budget trades short-term satisfaction for long-term vulnerability. It is politically astute, crafted to comfort citizens after years of austerity, but it bets heavily on an energy rebound that may not materialise soon enough. And that, by my reckoning, is the real risk: a country counting on oil dollars that the market may never deliver. The post Budget economically precarious appeared first on Trinidad and Tobago Newsday.