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Mottley warns about T&T’s high subsidies

Vasant-Bharat at-ICATT

T&T should not feel comfortable that its debt to Gross Domestic Product (GDP) ratio is lower that the rest of the region as the country’s subsidies are consuming a large part of its budget, Wendell Mottley, chairman, Unit Trust Corporation (UTC), said yesterday.  “Many of the regional countries have put on the fiscal accelerator and this has led to a very high debt to Gross Domestic Product (GDP) ratio. There is Barbados with 72.3 per cent of debt to GDP, Grenada with 116 per cent and T&T at the low end with 36.4 per cent. 

“We in T&T have no reason to be comfortable because on the other side of that equation, T&T has a high of 47 per cent of its revenues in transfers and subsidies, what Americans call entitlement,” he said. Mottley was speaking yesterday at the two day conference of the Institute of Chartered Accountants (ICATT), Avoiding the Fiscal Cliff, at the Hyatt Regency in Port-of-Spain. He said this situation has led to a future of unsustainability for the entire Caribbean region.

“We are all in the same boat up against the fiscal cliff. What do we do to get out? What do we do to stimulate the investments and in particular foreign direct investment? What are we doing to get high levels of productivity? What do we do in terms of instruments of industrial policy so that we grow out of this fiscal cliff?” Mottley asked. Senator Jepter Ince, parliamentary secretary in the Ministry of Finance, Barbados, said the recession and financial instability gripping the globe go against conventional economics.

“This recession is not driven by normal economics. What we are seeing is the collapse of the global financial industry that impeded the movement of capital and has undermined the production process within countries,” he said. Ince said the fiscal cliff, although new to the US, is not new to the Caribbean as regional economies have been experiencing that situation for decades.

“Barbados in the Caribbean has always had a challenge and it is nothing new. We have heard many of these terms before. When the recession started to impede the global economy we heard the term ‘stimulus package;’ Caribbean governments have been implementing stimulus packages for years. For me that was nothing new,” he said.

Trade Minister Vasant Bharath said T&T is second largest trading partner is Caricom and when their economies do not do well it affects T&T: “What happens globally affects us significantly. We are no longer sheltered from the ravages from other parts of the world.”