FINANCE Minister Colm Imbert says there are significant benefits to borrowing domestically.
He made the point on Tuesday when he opened debate in the Senate on a motion to increase the statutory limit of borrowings under the Developmental Loans Act from $65 to $75 billion.
The House of Representatives passed the motion on March 15.
On that day, Imbert said, “In fiscal 2024, thus far, we have borrowed to finance approximately 60 per cent of this year’s deficit, leaving a headroom of just $2.5 billion left under the Developmental Loans Act.”
He added that the majority of the government’s borrowings were done through this legislation. “We are able to lock in more favourable rates and reduce our borrowings’ cost using this act, in contrast to the other acts, as we borrow in TT dollars.”
He said a government’s ability to borrow money can help to stimulate an economy through expenditure on developmental projects, provide protection for the most vulnerable in society and offer protection against unforeseen macroeconomic shocks. Imbert reiterated those points to senators on Tuesday.
He said, “When you borrow domestically, the money stays in Trinidad and circulates in the economy. You have the multiplier effect. It stimulates economic activity.”
Imbert added, “You borrow overseas, you have pay back overseas, the money leaves Trinidad and Tobago.” He said it was for those and many other good reasons that Government focused its borrowings domestically.
Imbert told senators events such as the covid19 pandemic and its associated global economic recession and the Russia-Ukraine war created a situation where all countries had to engage in borrowing to stimulate their economies and protect their most vulnerable people. As a result, he continued, the public debt of many countries has increased.
But Imbert said because of Government’s prudent fiscal management, TT’s debt levels have gradually decreased. He also said that TTs public sector debt to GDP ratio is lower than several other Caricom countries such as Barbados, Antigua & Barbuda, Jamaica, Suriname, St Lucia, the Bahamas, Dominica and St Vincent and the Grenadines.
Imbert said international ratings agencies such as Moodys and Standard and Poors recognise that all countries have to do different levels of borrowing to help stimulate economic activity as they continue to recover from the socio-economic effects of the covid19 pandemic.
In that regard, he told senators these agencies do not see borrowing as a bad thing as “as long as the borrowing is targeted towards the productive sector.”
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