Episode Transcript
[00:00:01] Speaker A: The best insight, instant feedback, accountability. The all new Talk Radio Freedom 106.5 once again.
[00:00:09] Speaker B: Good morning. Good morning, Good morning Trinidad and Tobago. It's now time for us to turn our attention here on Freedom 106.5 FM. I'm expected to chat with the former, a former Finance Minister and Minister of Trade and Industry, Mr. Mariano Brown. Good morning to you this morning. Sir, you have to unmute.
[00:00:34] Speaker A: Yes, all right.
[00:00:36] Speaker B: You probably wouldn't see me at this time.
I'm operating in a different studio this morning as per usual. I'm in a next studio and hopefully by later today we should be back in our regular studio where our cameras are there. So forgive me if you're just seeing a Freedom poster but you look nice and bright this morning, all bright eyed and bushy tailed. How are you sir?
[00:00:58] Speaker A: Thank you very much. I'm up.
[00:01:01] Speaker B: I'm happy to hear from you this morning as per usual. You know we're talking economy, the economy this morning and a lot is happening that persons don't understand.
We are currently at approximately $145 billion with debt to the GDP ratio at around 70%.
Now when we look back at these statistics we would have seen what the People's Partnership government inherited from the pnm. The debt that they inherited and they took it up.
Now I think it was somewhere 36, 48 billion. I think it was around $48 billion somewhere around there. The People's Partnership would have inherited from the PNM government, which is Mr. Patrick Manning back in 2010. They would have escalated the GDP by another $36 billion over their five year stint at approximately 7 point something billion a year.
And then the PNM took over. The debt would have moved up from 48 to 84 billion and then it continued for another 10 years at approximately 3 point something billion per year, which is now seeing somewhere.
They took it up to about 117 which takes us to 145 somewhere thereabouts. Can you help Trinidad and Tobago understand this debt, this deficit, why we in this mountainous debt even when at a time when the price of oil was, the price was healthy. Can you explain this as a former finance minister, help the populace understand this whole $145 billion debt that the central bank statistics is now projecting.
[00:02:59] Speaker A: Well make a distinction between short and long term debt. Now short term debt is not covered here and short term debt is when we borrow using treasury bills for example to make good any what we call in year differences, differences in revenue. So for example I could budget an expenditure of $50 billion during the course of the year.
But I may not get $50 billion. I will not have $50 billion at the start. I'll get revenue during the course of the year and some months will be a little higher and some months will be a little lower depending upon what the quarterly revenue are.
People pay tax literally almost every quarter, every month, depending on the circumstances. And on that basis that's where my revenue comes from. But sometimes I may not have enough, or I may not have collected enough, or there may be delays in payment.
So I will use treasury bill market. I'll use the treasury bill market to make good those differences. Now those are short term borrowings which are generally retired in 90 days.
Now government also undertakes longer term projects.
And the longer term projects, for example, could include like the Cuver Hospital, the Central Government Plaza, those type of things for which they will borrow on a longer term basis. Those loans would be commercial type loans, you know, generally 5, 10 or 15 year loans. Sometimes it could be longer depending upon what they are and they national the debt figure, what we call the central government debt figure is really made up of borrowings for those type of things.
Now in the short run we have also had periods where we've been running deficits which are much larger than what we'll call just simply short term fluctuations. So for example, you'll find that when PNM came into office in 2020, 2015, revenue would have been about $33 billion and the expenditure would have been about 50 something.
So they had to borrow about $17 million. Now they would not have borrowed that on the short term market. Short term market is not big enough for that. So they would have made a long term loan stretching out over a period. Now the bad thing about that effectively is we are borrowing long term money to finance recurrent expenditure. And why did that happen? Well, there was a huge drop in revenue when oil prices went went down in 2014.
So you can see that during the period 2010, 2011 to 2015, the revenues were, sorry, 2014 revenues were generally buoyant so that the revenue figure kept going up.
So you would find that the revenue figure grew from approximately 42 billion in 2011 and it grew to about 59 billion in 2015, which was the last year in office of the UNC.
The difficulty however is that the expenditure position grew faster than the revenue.
So I think in the last year we operated about a revenue position of 59, just under 60 billion doll, but we had an expenditure position of approximately about 63. That's a $5 billion difference.
So you would find that those shortfalls, those deficits would have helped push the debt up. But you would also remember that at the time, the government was also building out the point for the highway. Yes, some of that was financed out of cash flow, and some of that was financed out of local borrowings. They also built Couva Hospital, and that would have also been financed out of borrowings and a few other.
So that's how the debt goes up. But the debt went up fairly dramatically between 2011 and 2012, when it went from 48 billion to 64 billion.
Yes, 48 billion to 64 billion. It was 48 billion in 2010, and by 2014, it had gone up to 70, 70.2. And in the end, it was 76.5 in 2015.
So you can see a net increase of about 20 billion in that period of time.
[00:07:26] Speaker B: But what caused it?
[00:07:28] Speaker A: Well, there would have been the construction of the highway.
There would have been the construction of the Couvo Hospital.
There were a number of other things. I can't remember physically what they did in terms of what the borrowings were, but the point was that they were generally the UNC period. That period in office, the UNC was generally spending more than it was earning.
And if you're spending more than you're earning and the Treasury Bill market is not big enough to what you finance the gap, what you do is you'd borrow money. That, I think, is what happened and.
[00:07:58] Speaker B: What happened under the PNM administration when. Because they would have inherited somewhere, I think, 48 billion.
[00:08:05] Speaker A: No, no, the PNM inherited about.
[00:08:08] Speaker B: No, not the PNM. I'm talking about under Patrick Manning, Mrs. Kamala Passad Bisesa would have inherited the People's Partnership, a debt of around 48 billion that came from. That's what Patrick Manning would have left when she assumed office.
So we are trying to ascertain now figures because for the better part of 10 years, 12 ago, 10 years, approximately a decade, the blame laid squarely on the People's Partnership, that within recent memory, they are the ones. And when the PNM got into power, they inherited this huge debt and they couldn't come out of it.
[00:08:48] Speaker A: Well, the PNM problem when it came into office in 2015 wasn't the debt so much, it was revenue.
As I said before, the initial gap, the deficit was significant.
Right now, in 2008, under Patrick Manning administration, GDP would have been about $158 billion. $158 billion around that time, because of the increase in oil prices and energy revenues. By 2014, it increased 188 billion DOL.
That's what GDP is. Now, GDP is made up of literally all your expenditure and or all your revenue and all your production. So use one of those three things and we generally correct for differences between them, and that becomes your GDP figure. Now, GDP in 2014 was $188 billion. In other words, the economy grew very sharply between 2008 and 2014 on the backs of increase in energy prices, particularly oil.
But gas also went up at the same rate. So you'll find that GDP numbers in 2014 was fairly large.
By 2015, GDP number fell to $171 million. Now, that's a huge drop. That's a 17 million drop. That's a 10% drop. That 10% drop took place between 2014 and 2015 and is largely associated with the decline in oil prices. For example, for $114, it went down to something like about 80, right? It's a significant drop.
You're talking about what more than a 30% drop in terms of revenue, in terms of the external price of oil. And that same thing happened to petrochemicals and natural gas.
Right? And remember, natural gas is our largest revenue driver. So any prices of those of those products which are exported declines, then your revenue declines. So in 2014, between 2014 and 2018, you had a 10% decline in revenue.
So that when PNM came into office, GDP was much lower. And as a result, the tax take was much lower. And that's where you get a fairly large jump in borrowing between 2015 and 2016, an $11 billion jump. And that's because the revenue that year was about 33, $35 billion and the expenditure was about 50. That's a significant gap. You could borrow money, and that's what happened now.
And that's what happened between the period 2015 to 2020 21, GDP continued to fall into. It went from 171 million. So your income is falling now.
You are at a high of roughly 190. Let's round it off. $190 million in 2014, which is when the UNC in office, the BNM comes into office.
But revenue falls by $17 million, $170 million.
Then it falls again in 2016, and it falls again in 2017.
It kind of stabilizes in 2018 when Angelin and Jupiter comes in. But between 2017 and 2019, GDP, the country's revenue is stagnant at about $161 billion now. $161 billion in 2019 is a lot smaller.
There's a 20% decline in your income between 2019 and 2015.
Now that's why the borrowings are going up. Because the government, at that time, the PNM would have been borrowing money to compensate for its lack of income.
Now that unfortunately has been the position between 2015 to 2025 that the revenue position has been lower than your expenditure. And that's one of the reasons why the debt to GDP ratio has been going up and the debt has been going up as well. And during that period as well, government has also been attempting to build new hospitals and a few other things that have gone on. But largely speaking, the expenditure has been because there's been a decline in revenue and the governments were borrowing to cover that decline in revenue between the period 2015 to 2025, that 10 year gap.
[00:13:12] Speaker B: Well, within that 10 year gap, right. Especially within the last, let's say, four years of this past administration.
What do you think, in your best respected opinion, could have been done differently to increase our gross domestic product?
Because when we look at Petrochlosia, which was the refinery, research has shown that we needed to push out anywhere in the vicinity of 150,000 barrels. We were barely breaking 45, 50,000, I think thereabouts, if memory serves me correct.
So it begs to differ. Our borrowing increases. At some point we had to pay this back.
Have we started as government? You know, when you borrow, and I want you to break down the science of this for our listening public, you go to the bank and you borrow money. The bank gives you a loan. In some instances you get according to what time of the month they may tell you, okay, you could start paying back at this month, you get 45 days loan or 36 days and the next month ends, they'll get a grace and then you have to start to pay this loan.
When government on this large scale borrows on the backs of already owing, what happens? How is that? How are those conversations happening?
[00:14:25] Speaker A: Well, all right. Well, for the benefit of the general public, while the debt is one number, there are multiple loans so that each loan, for example. So for example, if I have, if I owe say $95 million, I don't own $95 million to one person and I don't own $95 million in respect of one loan, there would be a series of loans and those loans would be stacked up on the basis of the repayment horizon. So, for example, in 2025 I am probably repaying debt that I borrowed in 2010, 15 years ago, and that may run off this year, and so on. So what you would find is that the repayments are loaded depending upon the structures of the individual loans and the repayment profiles of each individual loan.
And government repays those loans over time on the basis of its cash flow. Now that's what you call the debt service ratio.
Now, the debt service ratio is important because it means that you're using some of your current revenue to pay off past bills. And if your borrowing keeps rising, then your repayment obligations will also rise and therefore you will have less money to spend on goods and services and the provision, what one would call public goods, health care, salaries and so on and so forth. When you run into that position and the debt service starts to eat at your cash, then you find that you're unable to do extra things.
And by the extra things mean that your capital expenditure will fall.
So during the period 2015 to 2025, government's capital program, which generally averages about $5 billion a year, fell to something like about, you know, $1 or $2 billion.
So the repayment profile depends on the structure of loans.
In other words, the loans become a portfolio of loans you don't owe in respect of several different loans. And your repayments are structured according to each individual loan.
And those total resets of repayments for all of the different loans are what we call your debt service payments. I think last year the debt service payments amounted to something about $12 billion. It was big.
The year before it would have been eight. But that's what happens because what you're really doing is repaying past borrowings. And that affects your cash flow in the current year.
[00:17:03] Speaker B: Yeah, because once you're paying past borrowings, you still have current or recent loans that you have to also facilitate as well.
And, and you also have, you also.
[00:17:12] Speaker A: Have your normal expenditure.
[00:17:14] Speaker B: Exactly. Your recurring expenditure.
[00:17:16] Speaker A: That, that's the problem. That's what affects a country. That the fact that your past borrowings affects you this year, you still have to pay it. If your revenue falls in this year while you are, you're up a gum tree because you still have to maintain your debt. And that's, that's related to what people call the debt, what you call the debt ratings issue.
Now the debt ratings is a measure of how, of your ability to repay.
And over the last five years, Trinidad Tobago's debt rating has been declining.
And there are three major debt international debt rating agencies. Moody's, Fitch and Standards and Poor's and we have below what we call investment grade bond rating for two of those. Fitch and Moody's rank us as jump on status. Only S and P gives us the we are the last rung. In other words, there are gradations of credit. Credit ratings. You could be a triple A down to triple B.
Right. And some people vary the ratings between the agencies. The agencies don't have exactly equal ratings.
So you would find that like for example, recently, North America. In fact last month, Moody's last month, last week Moody's downgraded the United States from AAA to aa.
Now AA is still great, but the moral of the story is North America's debt is always considered to be the best of the best.
So when you downgrade them raises issues in the total market. Well, should we request or should we ask for a higher interest payment? Now that's the problem America faces. But Trinidad is in exactly the same position because over time our rating has been declining. So if I come to you to borrow money and your history has been you've been paying, but the same token you're becoming increasingly risky, what do I do when I change my interest rates? I charge you more.
And what does that do? That raises the cash flow requirement to repay the debt in the future. In other words, it means that your interest payments go up and that raises your debt service ratio.
That's a question which we find ourselves.
[00:19:30] Speaker B: One text is saying, plus the fact according to the pnm, the imf, modi's and others gave us such a great rating and said we had a stable economy, yet we owe over 140 billion in debt. So it's mind boggling to think if we have such a stable economy, why do we owe so much still?
[00:19:51] Speaker A: All right, well the answer to that is you have a stable economy, meaning that your rate of growth, you have a positive rate of growth, but you're growing. You have to remember that Trinidad during that period, 2015 to 2025, for much of that period, the national economy was declining. The economy declined between 14 and 15, between 15 and 16, between 16 and 17 to 18 to 19 to 2020 was Covid.
The total revenue of the country in 2020 was less than the total income of the country in 2008.
So you have to take that into consideration. Covid was a huge bite. In addition to the fact that energy prices were low, we own Trinidad and Trigoni experienced a little blimp in 2022 and 2023 because the price of oil and the price of ammonia and methanol and so on went up dramatically in 2022 the total exports of ammonia the number remained the same in terms of volume but the amount earned went up to $3.7 billion. In 2023 you exported the same amount but the amount that you earned was $1.6 billion. And in 2024 you exported the same amount but the amount that you earned was about 1.3 billion.
In other words, it was declining and that's what happened between 2020 22. That's one of the reasons why we had a surplus in 2022 but a deficit in 2023 and 2024 because we moved from income of 142 billion in 2020 which was low to income of 120 to $2 billion $200 billion in 2022 but by 2023 was back down to 184 and 2020, 2024 it was back down to 186.
So in. In 2024 we are earning as much money as we earned in 2014.
The income is income, your dollar value income. This is not taken into consideration inflation.
So your dollar income in other words the absolute dollar if you. If your salary is $10,000 in 2014 and the salary is $10,000 in 2024 which is. Which is approximately the position that's what the country earned same amount of dollars but it could buy less because it was. There was inflation all right, Inflation affect government the same way they affect you.
[00:22:33] Speaker B: Indeed so.
Hello. Good morning.
[00:22:36] Speaker C: Morning Davy.
[00:22:36] Speaker B: Good morning.
[00:22:37] Speaker C: And to Mr. Brown. Mr. Brown for example the financials of a country, for example, I can't remember any year in which the Minister of finance told us the debt servicing because to me let's say Your budget is 58 billion and your debt servicing at 12 million look at the amount you have to spend on the country.
So I am asking on the last Minister of finance never told us, right? He told us how much is pegging the oil at and gas at but I'm saying Mr. Myl Brown before the balance sheet is important for our budget but it tells first the total national debt and debt service is very important because if you want to discuss the excel of our country you must know the financial basis. Would you agree with that, sir?
[00:23:37] Speaker A: Yes, but the figures are there, you know it's just that he doesn't say it in the budget speech then they have to go and look for it and you'll find it in appendix 26 which is about. About the 200 page 218 and the document is 224 pages. Right. But you lose an appendix. Appendix 26, central government debt and Debt Service. So it's not to say it's. It, isn't it? It's not in the budget speech.
Right. But it's there.
[00:24:07] Speaker B: All right. With that being said, you know, I want to, I mean, before we wrap our interview this morning, I have another phone call. Hello. Good morning.
[00:24:14] Speaker A: Morning.
[00:24:14] Speaker D: Tuesday morning. Mr. Brown. Mr. Brown, before you leave, I just want to know what is the expectation of Trinidad and Tobago regarding revenue and investment? Thank you.
[00:24:24] Speaker B: All right.
[00:24:25] Speaker A: Well, that's a very broad question.
You mean national. National. National income.
But national income in 2025 is going to be approximately equal to where we were in 2024, which is about, what, 186, $88 billion.
It's growing by about, on average, 1.5% per year.
So you're talking about a very slow kind of growth rate, not like, for example, the difference between 2021 and 2020 or between 2022 and 2020. But that is that we only going back to where we were before 2020 was a very low year. So the outlook for government revenue, you would have to say, is stable.
The real problem is government debt service. So the question the caller before was asking, what about government debt service? Well, government debt service varies.
Last year, say 2024, debt service was $13 billion. Debt service in 2023 was $16 billion. But in 2022, debt service was 9.5. Now, that's because of the structure of the debts, the different maturities. So you can have debts, for example, a larger debt maturing this year, a smaller debt next year, depending upon what the portfolio of the loans look like. So debt service is a factual number which only government could give, and in particular this between the central bank and the Ministry of Finance. So those are things you have to look for in the, in the national accounts.
Because if, for example, I can't, if I, for example, I know that I'm going to have a lump, a big kick up in terms of the debt payment ratio, and it's going to affect how much money I could spend in the domestic economy. And you were the Minister of Finance, what would you do?
You'd borrow to cover it.
You postpone the problem.
Now, that's part of the difficulty when you're looking at the horizon in terms of what your debt service ratio is. And I think that we are at the stage where whenever the minister is doing a budget presentation or budget forecast, the debt service ratio becomes important.
Because if there's a huge if there's a jump in the figures that have to be repaid then it means that he's going to be able to spend less in terms of recurrent expenditure and recurrent expenditure is largely wages and salaries and purchases of goods and services for the public like medicines, like all the things that basically run an office and so on. Government has expenses too.
So that unfortunately is a position which Trinidad finds itself that the revenue position is flat and therefore the, the because of the large borrowing we've had over time it's going to give the, it's going to give the Minister a little bit of problem in terms of how he sorts that out.
[00:27:27] Speaker B: Wow.
[00:27:27] Speaker A: Hello.
[00:27:28] Speaker B: Good morning.
[00:27:29] Speaker D: Good morning sir.
Mr. Mariana Brown. Good morning.
[00:27:32] Speaker A: Good morning.
[00:27:34] Speaker D: First thing we have to understand oh I would like to explain of us in 2020 there was a global research under Mr. Manning Kinsara and Tobago didn't feel that get to know that Mr. Manning left office and left me 13 billion in NGC and if I'm mistaken 16 billion in somewhere else up comes 2010 an administration so all the expense that you're talking about you have to also include the 13 billion and the 16 billion that they also spent in the 5 years, 3 months and 14 days up comes this administration or the past administration and inherited 3/4 of negative growth.
Right. So for a small economy after going through all of that and a pandemic that we haven't seen for over 100 years and weren't we not in a very good place at that point in time, Mr. Brown?
[00:28:36] Speaker A: Well, good is relative.
[00:28:37] Speaker D: Well comparing to five years after and you look at small economies around the world like ours we are in a far better place at one point in time. Wouldn't you say so, sir?
[00:28:49] Speaker A: Well I, I can't, I can't, I can't, I can't verify or add to that unless you put it this way. All right. Relative to other in terms of its peer group of countries in other words countries of the same size with similar economies and so on Our debt to GDP ratio is high.
All right, that's that I don't think and all we have to do is go to the World Bank. Well it's a little difficult for people not accustomed doing it but you could actually pull out from there 194 countries in the world who give data to the World bank and to the imf. Now you there is an open data series which allows you to go and pull out payer complex and what we mean by that countries of a similar income bracket and a similar size of what you call it of income and similar population size and so on relative to GDP per head. And we can look at to see how they are performing and then you compare sets of how they are performing and you'll find we probably are not best in class.
We do have some significant problems that we have to manage now.
Everything is relative.
If I had a heart attack and I could recover in about three months and go back to work, well, you know, you still had a heart attack, you could go back to work. You can't do everything well, Trinidad is in that position.
So relatively we may be okay. But there are issues that we have to pay attention to. The national debt, size is one of them and the other part of that is the growth in recurrent expenditure. If your expenditure is consistently higher than your revenue, which is where we have been for literally the last 15 years, then you are going to have a problem and that's where we are.
[00:30:35] Speaker B: All right, Mr. Marianne Braun, I want to thank you very much. We are out of time at this time, but I want to thank you for chiming in for the last 26 minutes with us here, giving us a little detailed information as to how we can look at this debt to ratio, especially when it comes to the DSR and the GDP of the country. Thank you again so much and we will chat again in the not too distant future as we monitor these governments as they go forward in their day to day lives in governing Trinidad and Tobago. So thanks again very much.
[00:31:03] Speaker A: The best insight, instant feedback, accountability, the all new Talk Radio Freedom 106.5.
