Economist Dr Roger Hosein is appealing to Government to cut the country's fiscal imbalances. He said while the debt level was currently manageable, T&T was moving in the wrong direction and there was too much wastage.T&T recorded its largest fiscal package of $61.4 billion in last year's budget with a deficit of $6.3 billion.
"The Government has to try and cut the extent of fiscal imbalances it has been running. This is not healthy and while the economy's debt level is currently manageable, it is my opinion that we are moving in the wrong direction. There has been way too much wastage taking place," he added.
Hosein warned that the T&T economy could take a serious hit if the energy sector was put in an unfavourable position and debt levels could rise as the economy ran extensive periods of fiscal imbalances. He advised that Government should create greater stimulus in the non-petroleum sector.Hosein was giving his recommendations ahead the 2014-2015 budget, which will be delivered by Finance Minister Larry Howai on September 8.
He said: "I am sure that most people wish that we did not host conferences like CHOGM (Commonwealth Heads of Government Meeting) and the Fifth Summit of the Americas. Basically nothing came of these two lavish conferences and it used a serious chunk of national resources.
"Whilst we can fire the CEO of a company and change political regimes when dissatisfied, the loss of national resources via those types of wasteful expenses remains. These type of decisions stifle the block of resources available to do real structural interventions, such as promoting the diversification drive."Just consider, for example, the boom to manufacturing that could have occurred if those resources were used to recapitalise the Export/Import Bank or to enhance port efficiency."
Petrotrin needs overhaul
Hosein also recommended that Howai to set up a committee to look into the infrastructure of Petrotrin over a three-month period, since he believes the company's pipelines and other support equipment require a major overhaul.At the end of the committee's 90-day investigation, he said, Petrotrin could determine if there was need for infrastructural upgrade and associated costs.
Last December, the Environmental Management Authority (EMA) fined Petrotrin $20 million for its role and response to multiple oil spills in the Gulf of Paria."I would say to Minister Howai that we need to consider whether we are at that crossroad where the pipelines and other support infrastructure of State-owned Petrotrin require an overhaul," he said.
Hosein said while Howai's hands may be partially tied because 2015 is a general election year, the fuel subsidy should be cut because it a heavy burden on the economy.
Diversification critical
With nine years of oil and 14 years of gas reserves remaining, Hosein called for processes to be put in place to smoothen the diversification process before it is too late.Last year, the petroleum sector accounted for 43 per cent of total economic activity, he noted.
"This is not trivial. Even more, the sector accounts for about 50 per cent of total government revenues. The petroleum sector also accounts for around 92 per cent of all the foreign direct investment into the T&T economy and again this is something we need to work hard and try to change."It is absolutely critical that we try to woo foreign direct investment into the economy to help diversify the non-petroleum production base.
"Petroleum revenues account for a significant share of total government revenues and as a consequence, when energy prices plummeted in 2008 after the global financial crisis, the export revenues earned by the economy took a hit and plunged," he said.
If oil were to nose-dive from US$100 a barrel, that would choke the amount of export revenues in flow, he said.Hosein said Government may also need to reassess the way it participated in the international energy market place.
He added: "Citizens benefit in a very real short-term way from the energy rents that the energy sector generates."This country has a vast miscellany of handouts it provides to Gate, Cepep, public transportation and the fuel subsidy."We need to be very careful here, as the redistribution of the rents in a generalised form can lead to moral hazard consumption. We need to be careful in the use of revenues from natural resources so that we don't convert the resource wealth into a resource curse."