Andre Worrell
UWI economist Dr Anthony Birchwood warned on Tuesday that Government debt has entered a "danger zone" and more attention must be paid to fiscal consolidation and expenditure reduction.
Birchwood was part of a panel at a UWI Department of Economics Post-Budget Forum at the Daaga Auditorium on Tuesday evening, along with fellow economics lecturers Dr Daren Conrad and Dr Roger Hosein, and chaired by Lester Henry.
He said debt as a percentage of gross domestic product (GDP) had entered precarious territory with contingent situations likely to occur if left unmanaged.
"We have reached a debt to GDP ratio a little over 60 per cent which, by convention and economic literature, suggests that we have entered into a danger zone. If we have reached the danger zone it means we must be very careful about how we spend going forward and how we borrow," he said.
Citing some of the possible contingent circumstances arising out of the debt to GDP level, Birchwood said: "We run the risk of undermining confidence in the TT dollar and having to pay much higher rates of interest on any further borrowing the Government wishes to undertake."
He said successive administrations had spent money with no real translation into economic growth and development because they "felt that spending as much as they could would help grow the economy but evidence suggests that the economy did not grow in an equivalent manner and did not grow in a way to support that kind of expenditure."
On a more favourable note, Birchwood praised the initiative to bring a Sandals resort to Tobago.
"We need to ensure we get maximum value added from the potential of the Sandals project. We need to engineer firms that could take advantage of the possible economies of scale associated with Sandals. We must ensure that our local firms are active in the construction phase of the project as well as the supply phase in terms of the supply goods and services to the hotel," he said.
Conrad focused on the need for greater effort Government on economic diversification, deep assessment of the sale of state assets programme and freezing of negotiations with trade unions given the current fiscal position.
Hosein commented on the need for development of firms with foreign income earning capacity, which he called a "Born Global" initiative, as well as the need for Government to go further in reducing transfers and subsidies, particularly with regard to GATE and Cepep.
Hosein added that greater effort should be made to develop the E-teck parks which had the potential to attract foreign investments and offered local firms the potential to develop and grow.