Could one of the Caribbean’s wealthiest countries be heading toward a debt crisis?

A prominent regional economist is warning that Trinidad and Tobago is on a dangerous fiscal path that could eventually lead to sovereign debt restructuring or even default.

Economist Marla Dukharan is raising concerns about Trinidad and Tobago’s growing debt burden following the country’s mid-year budget review.

According to Dukharan, Trinidad’s debt-to-GDP ratio has climbed to nearly 85 percent—the highest level in the country’s history. And much of the recent increase has come from foreign currency borrowing.

She warns that the government is now running what economists call a primary deficit, meaning it has to borrow money not just to fund spending, but also to pay interest on existing debt.

Dukharan also argues that Trinidad’s foreign exchange reserves may not be as strong as they appear.

She says a significant portion of those reserves has effectively been financed through borrowing, making the country more vulnerable if energy revenues decline or access to foreign currency becomes more difficult.

The warning is particularly striking because Trinidad and Tobago is one of the Caribbean’s largest energy producers and has traditionally been viewed as one of the region’s stronger economies.

But Dukharan says rising debt, persistent fiscal deficits and increased government spending are creating a risky combination.

Now to be clear, Trinidad is not in default.

And there has been no indication from the government, credit rating agencies or international lenders that a default is imminent.

But Dukharan argues that unless the country’s fiscal trajectory changes, the risk will continue to grow.

And that’s the Bottom Line.

So my Trini viewers, what do you think?  Are you worried about Trinidad’s debt levels?