Press Release No. 15/18

Press Release: IMF Team Concludes Visit to Trinidad and Tobago

January 28, 2015

An International Monetary Fund mission, headed by Mr. Elie Canetti, visited Trinidad and Tobago from January 19 - 26, 2015 for a regular staff visit. Mr. Canetti issued the following statement in Port of Spain at the conclusion of the mission:

“The recent changes in the energy markets represent a major economic challenge for Trinidad & Tobago, whose exports are heavily linked to these markets. Although it is difficult to know where the markets will settle, the drivers of energy price declines appear likely to endure. Therefore, we support the government’s prudent decision to prepare revised budget plans based on conservative price assumptions.

“The case for policy tightening remains intact as the economy seems to be close to, if not beyond, full capacity. For that reason, we agree with the authorities’ goal of returning to the original 2014/15 target of a fiscal deficit of 2.3 percent, which, barring the emergence of further downside risks, appears feasible. Over the medium term, the fiscal recommendations from the IMF’s latest annual report on the Trinidad and Tobago economy remain critical to achieving long-term goals of diversification, and saving and investing for the future. We reiterate our advice to scale down fuel subsidies, and note that the fall in global energy prices provides a unique opportunity to do this.

“Recent moves to tighten monetary policy appear appropriate. Shortages of foreign exchange remain a critical headwind for the economy, with businesses continuing to report severe difficulties in paying suppliers. We are encouraged, therefore, by the central bank’s intention to increase the size and frequency of foreign exchange injections until the backlog of orders is eliminated. It will be essential to continue to meet foreign exchange demands in a timely manner in order to restore the market’s confidence.

“There has been progress on the structural reform front. Data provision by the Central Statistical Office (CSO) has materially improved, but still falls short of acceptable standards. Therefore it will be important that the pace of CSO improvements is sustained, and we encourage the government to press ahead with its plans to put the CSO on an independent and well-funded footing within 18 months. There has also been further progress on financial reforms, while improvements in easing the costs of doing business have indeed been impressive. Procurement legislation has also been passed and, once implemented, should help to improve expenditure efficiency and allay concerns regarding corruption. However, improving the functioning of the civil service and reducing the distortions to the labor market caused by government temporary employment programs remain critical priorities.

“We look forward to continued discussions with the authorities, notably the 2015 Article IV consultation, which will be scheduled for later in 2015.”