|Port of Spain, Trinidad & Tobago|
In a media release from Washington Wednesday the IMF said the country's external reserves are at US$10.0 billion (TT$64 billion), while the Heritage and Stabilization Fund continues to grow.
The IMF visited Trinidad and Tobago between March 18 and April 1, 2014 to conduct the annual Article IV consultation. The team was led by Elie Canetti, who reported that the country is experiencing "robust growth".
The IMF said the non-energy sector was fairly buoyant in 2013, adding that it expects it to continue that way in 2014. It said it expects the current account to continue to be in double digits thanks to a strong rebound in energy exports from 2013.
In addition it said it expects the 2014 deficit to be about one and a half per cent of GDP in 2013/14, which is closer to balance than projected in the budget statement. It commended the government’s efforts to significantly reduce or eliminate arrears on energy subsidies, and VAT refunds to suppliers.
The agency also stated the there continues to be excess liquidity in the banking system, which was at TT$7.1 billion through the end of March 2014.
With respect to fiscal policy, the IMF said this should be set in a long-term context that ensures the country’s non-renewable energy reserves are used as a stepping stone to lasting prosperity.
"This requires increasing savings from the substantial resources extracted from this sector, which should be accomplished by moving the fiscal position into surplus within a few years," the IMF stated. "In addition, expenditures should shift away from consuming the country’s resources towards investing them for the future."
The agency reiterated its previous advice "to quickly move to start ending fuel subsidies", which it said are extremely costly and inequitable, "starving the government of resources that could be better targeted towards poverty reduction."
It added, "They also induce excessive reliance on automobiles, leading to pollution and traffic jams that have a materially adverse impact on productivity. In addition, overlapping social programs should be rationalized and better targeted to the less fortunate segments of society. Revenue policies should be aimed at broadening tax bases to ensure a level playing field across activities."
The IMF recommended that the government continue to build on recent successes in implementing structural reforms "to unlock the country’s full growth potential".
It stated that despite measurable progress in easing the impediments to doing business and in financial sector reforms, more remains to be done in both areas.
"The country would also benefit from reforms in procurement, corporate bankruptcy and bank resolution," the IMF said. "We wish to place the greatest stress on remedying the continued shortcomings of the Central Statistical Office (CSO) in generating critical data, which hamper effective policy making and lessen transparency."