T&T Fiscal Balance will Narrow in FY2026

  • Trinidad and Tobago's (T&T’s) mid-year budget review and updated fiscal projections indicate that the government expects the fiscal balance to narrow in FY2026[1] from -4.6% in FY2025 to -3.5% of Gross Domestic Product (GDP). On June 15, T&T’s Minister of Finance Davendranath Tancoo presented the government's mid-year budget review, outlining updated fiscal projections and providing details on the supplemental budget appropriation that was approved last week.
  • In line with BMI’s long-standing view, Minister Tancoo revealed in his review that revenues exceeded projections (TTD30.1Bn relative to TTD28Bn) for the first seven months of the fiscal year, attributing this performance to a range of factors, including elevated oil prices and newly implemented tax measures such as levies on landlords, special consumption taxes, and electricity surcharges. In addition, the review outlined a supplemental budget allocation that increases expenditures for FY2026 from TTD59.2Bn to TTD62.2Bn, bringing the government's expenditure projection in line with expectations.
  • BMI is upbeat about the near-term revenue performance, through both energy and non-energy channels. Expectations are that elevated global energy prices will support T&T’s revenue mobilisation and overall fiscal outlook through Q2 2026. Of course, a one-dollar increase in Brent crude is associated with roughly a 0.1 percentage point increase in central government revenues as a share of GDP.
  • Furthermore, newly implemented revenue measures will meaningfully boost non-energy revenues by expanding the tax base and raising taxes on goods with inelastic demand, such as alcohol and tobacco. The government's budget also included measures to strengthen tax compliance and collection, which will boost revenues. Finally, with new gas fields expected to come online in the coming quarters, the related near- and medium-term boost in output will help support public finances.
  • As a result, the government projects that the primary balance will shift to surplus in FY2027, a view BMI also shares, with the primary surplus projected to average 1.3% of GDP from 2027 to 2035. This, in turn, will see debt stabilise and recede over the longer term, falling to around 65% of GDP by 2035.
  • That said, downside risks arise primarily from a more subdued growth picture and the risk of fiscal slippage. Slower-than-expected domestic and global growth would affect public finances directly through lower-than-projected revenues and indirectly through increased political pressure on the government to loosen fiscal policy to support the lacklustre domestic economy, which saw muted activity in the most recent GDP print from Q3 2025.
  • While the recently signed deal between the U.S. and Iran has sent prices lower, renewed tensions could drive a more sustained increase in energy prices, which would likely see revenues overperform and support the fiscal path.

(Source: BMI, A Fitch Solutions Company)

 

[1] T&T’s fiscal year extends from October to September in the following year.