|T&T Not in crisis: IMF|
"With substantial financial buffers and low, albeit rising levels of public debt, Trinidad and Tobago is not in a crisis" the organisation said in a media release from Washington Thursday.
It said this finding is based on the annual Article IV consultation that the organisation conducted in Port of Spain between march 3 and 15 under the leadership of Elie Canetti.
Canetti said the IMF is projecting a one per cent drop in GDP this year. He said this projection is based on available information "including (data) on job losses and continued supply-side constraints in the energy sector."
The IMF said declines in energy-based revenues will constrain the Government’s ability to act as an engine of growth. "Beyond 2016, new energy projects will modestly boost energy production, while non-energy growth could start to recover, provided there is confidence in the country’s ability to navigate the harsher global environment," the IMF stated.
The organisation expressed confidence it Trinidad and Tobago because of its "enormous strengths", which include a well-educated work force and a stable political system.
|T&T has "enormous strengths": IMF|
It noted that the new Government agrees that policy adjustments are needed and has taken "some difficult but necessary steps", including widening the VAT tax base, cutting fuel subsidies, reducing the number of Ministries with a view to streamlining the civil service, and instituting spending cuts.
However it said despite these measures, it expects the national deficit to grow and suggested that there is further scope to widen the VAT base and increase some excise taxes, which it said are low by the region’s standards.
The IMF said it supports the Government’s intent to conduct a national dialogue on fuel subsidies with a view to phasing them out over time, and to review the CEPEP and URP Government employment schemes and the Government Assistance for Tuition Expenses (GATE) program to make them more cost-efficient. "Reducing such expenditures would also leave room for a needed reorientation towards development spending," the IMF mission said.
It added that greater flexibility in the foreign exchange market would be critical to resolving the foreign exchange shortages. "While it is appropriate that the Central Bank paused in its interest rate hiking cycle in January, there is little scope, as The Bank agrees, to cut interest rates, at least until shortages of foreign exchange are ameliorated," the IMF said.
Despite that the IMF said, "The financial system remains sound, but some reform legislation has been lagging." It added that procurement reform is needed to assure contractors of an even playing field and reduce perceptions of corruption.
It said, "The authorities were in broad agreement with the mission’s assessment.”
Press Release: IMF Staff Completes 2016 Article IV Mission to Trinidad and Tobago