Economist Mary King said the issues which prompted Moody's Investors Services downgrade of T&T's bond and issuer ratings are not new.
King, speaking at a forum hosted by Democracy Watch, said the International Monetary Fund (IMF) in a country report on T&T last June, called for further diversification of the economy. She added that spending was is the answer to decreasing the deficit.
"This spending has not been used to diversify our economy. We have maintained the status quo and yet our government is still trying to persuade us that they have now turned the economy around via increased spending, which is now 35 per cent above GDP and our total debt is approaching 50 per cent of our GDP. That's when Moody's came into the picture," she said.
King said the Government paid no attention to what economists were predicting last year, noting that the latest Moody's rating "is not different from what the IMF was telling us in 2014. We are still in that situation that Moody's has to come in and tell us what we already know."
She added: "Moody's isn't talking to the private sector, it is talking to the Government. It has to be a direct intervention. A new private sector-type has to be rebuilt. The appropriate financial and knowledge-generating systems have to be put in place. The local and international networks have to be established."
Referring to excess liquidity in the economy, King said the excess funds can be used to create diversification projects.
"With the low velocity of money, much of this wealth is now being stuck in the banks and the financial system of the country. We are actually seeing the Central Bank raising local bonds, pay interest on these bonds, and freezing the proceeds, simply to take money out of circulation to reduce that liquidity. Have you ever hear anything more senseless?
"Why can't we not think of using some of this money in our diversification exercise?"
King, a former People's Partnership Planning Minister, said government's spending accounts for 25 per cent of T&T's GDP and half of that goes into subsidies and transfers and 50 per cent of that revenue is earned from the energy sector.
Late last week, Moody's downgraded T&T's government bond rating and issuer rating to Baa2 from Baa1 and changed the outlook for the country from stable to negative due to persistent fiscal deficits, the decline in oil prices and a weak macroeconomic policy framework. The ratings agency said its negative outlook for T&T reflected the impact the sharp drop in oil prices was expected to have on the economy and fiscal accounts.