Economists cautious on Budget

Sagewan-Alli said it is naive for anyone including Imbert to expect to rely on a rebound in energy prices, because many things have changed in the global space.

Hosein warned that globally oil consumption and demand are now both in balance, so he could not see where any anticipated rise in price would come (due to no expected hike in demand).

Sagewan-Ali said TT’s core revenue- earner — oil and gas — has fallen to an extent that is frightening.

“We are in a difficult situation.” Despite TT having had the boom-bust experience twice before, a changed global energy scene means one now cannot rely on any price rebound.

Saying 50 percent of the Budget is spent on transfers and subsidies, she welcomed a shift away from such spending but said so far she has only heard about cuts in GATE and the diesel fuel subsidy, asking, “So where’s the rest?” She urged a shift from transfers and subsidies to funding economic diversification, such as taking 25 percent from the Cepep allocation to set up a new partnership with the private sector in the productive sector and create jobs in agriculture and manufacturing. “Different governments have incentivised poverty,” she said of make-work schemes.

Saying life has no guarantees, Sagewan-Alli questioned Finance Minister Colm Imbert’s high hopes of future revenues from new gas fields and the Loran Manatee cross-border exploitation proposed in collaboration with Venezuela.

Hosein warned that new gas fields will have a productive life of just 18 months to 2.5 years. He alleged that TT had lost much revenues over the years by transfer- pricing practices used by big energy companies, two of which he named. He was not surprised at TT’s current economic predicament, saying it is a classic Dutch Disease economy,” and the result of 18 years of squandermania.

Even if deposits of two million barrels of oil are discovered somewhere, TT will never again earn the energy revenues seen in 1999 to 2010, he warned.

Saying he had last year urged VAT to be held at 15 percent but with a widened base of VATable items, Hosein said Imbert had ignored him and dropped VAT to12.5 percent, so leading to a reduction in annual VAT collection from $7.8 billion to $7.01 billion.

Hosein queried Imbert’s diversification plans. “Will we import labour for the Sandals project? For agro-processing, is 75 percent local input practical? Will the high crime rate deter business investment?” He displayed a graph that showed TT’s yearly growth in oil extraction is not followed by immediate growth and commensurate GDP, but one seemingly delayed in time and of a smaller and disproportionate increase than expected.

Hosein urged the Government to put the Etek parks on the front burner, asked why the Economic Development Board reports only to Prime Minister Dr Keith Rowley, and alleged that Cepep had crippled agriculture and manufacturing even when, since 2004, it should have been allowed to naturally wither away in the face of falling unemployment.