Trinidad and Tobago: Selected Issues

This Selected Issues paper explores different fiscal rule options for Trinidad and Tobago. Trinidad and Tobago’s public finances remain highly dependent on volatile energy revenues, contributing to procyclical fiscal outcomes and a sustained increase in public debt since the late 2000s. These challenges underscore the need for a fiscal framework that reduces exposure to energy price volatility while supporting long-term fiscal sustainability and intergenerational equity. Fiscal rules can play a central role in strengthening the fiscal framework by reinforcing policy discipline and protecting the budget from short-term pressures. Fiscal rules are durable constraints on fiscal policy designed to support fiscal discipline and ensure debt sustainability by placing limits on key fiscal aggregates. Their primary objective is to reduce procyclical biases and guide fiscal policy toward a more sustainable and well-calibrated stance. This note discusses alternative fiscal rule options to strengthen Trinidad and Tobago’s fiscal framework. The results suggest that Trinidad and Tobago is not saving sufficient resource revenues to preserve wealth for future generations.