Energy economist Gregory Mc Guire believes T&T is heading for a downward economic spiral because of Government's unwillingness to wean the public from its dependence on gas subsidies.Speaking at a post-budget forum at the Oilfields Workers' Trade Union's (OWTU) Paramount Building headquarters, San Fernando, yesterday, Mc Guire contended that exorbitant subsidies on gas and electricity could not be sustained over time, even though the economy was relatively stable.Noting that the subsidies had increased ten-fold from 2001 to 2011, Mc Guire said the path on which T&T was being steered was similar to what existed during the economic bust of the 1980s.
He added: "Sooner or later, we sense that some Government will find themselves in a situation where they will have no choice but to reduce the level on transfers and subsidies, which over the last ten years have increased ten-fold."In 2001, 25 per cent of Government expenditure went in transfers and subsidies, while in 2011, 56 per cent of Government's expenditure went to transfers."In other words, the money we earn from oil and gas, we are simply using to subsidise, rather than to create new capacity for growth of the economy.
"Therefore, in the face of a stagnant economy, a budget that increases subsidies, is a cause for concern. Citizens remain concerned about the future because of the absence of a clear sense of direction and new initiatives in the transformation process."Mc Guire said the notion that promoting CNG as an alternative fuel would reduce the subsidy over time was not feasible.He said: "In my judgement, they need to do much more than that. This subsidy cannot be sustained over time. We need to wean the population out of it."We need to track the subsidy at the budget price of oil, so if the budgeted price of oil is $75 a barrel, anything above $75 should be passed on to the public. "They also need to improve the alternative means of transportation so public transportation will be more efficient."If this happens, everyone will not see the need to purchase a car and if they do, they will not use it everyday," Mc Guire contended.
Asked by students whether T&T could be headed to the IMF after a third year of deficit spending, Mc Guire said that was uncertain."The answer to that question is we don't know. It depends on the extent to which we are continuing on the path that we are on. "The path that we are on could lead to destruction if we do not pause for a moment and take a different direction," Mc Guire warned.He explained that in the boom days of the 70s calls were made to slow down the transfers on subsidies and expenditure, but it was not done and in the 1980s all subsidies had to be cut and State enterprises had to be divested.Meanwhile, former senior economist of the RBTT Group, Hayden Blades, described the budget as visionless.Labeling it Economic Recovery Plan, Part 2, Blades said he had yet to see constitutional reform and reform with regards to party financing.He called for collaboration with Government and warned that antagonism from the labour movement would not do T&T well.