## Press Release: Statement by an IMF Mission to Trinidad and Tobago

_IMF News, July 21, 2006_

## Source details

**Canonical URL:** [Press Release: Statement by an IMF Mission to Trinidad and Tobago](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr06162)

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## Bibliographic details
- Published: July 21, 2006

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### Mission visit and consultations
- Mission dates: July 10-21, 2006.
- Statement issued: July 21, 2006.
- Mission leaders: Ms. Caroline Atkinson, Deputy Director in the Western Hemisphere Department, and Mr. Max Alier, mission chief for Trinidad and Tobago.
- Counterpart meetings and consultations included:
  - Prime Minister the Honorable Patrick Manning
  - Ministers Conrad Enill and Christine Sahadeo in the Ministry of Finance
  - Minister of Trade and Industry Kenneth Valley
  - Central Bank Governor Ewart Williams
  - Chief Secretary of the Tobago House of Assembly Orville London
  - Leader of the Opposition Kamla Persad-Bissessar
  - Other senior officials, representatives from the private sector, and labor unions

### Economic outlook and key indicators
- Real output growth projected to exceed 12 percent in 2006.
- Drivers of growth:
  - Surging energy prices and output
  - Expanding industrial capacity
  - Buoyant construction activity
- External and fiscal indicators:
  - Current account surplus now exceeds 20 percent of GDP
  - FDI inflows are high
  - Fiscal surpluses driven by energy revenues
  - Public debt is on a downward trend
- Signs of capacity constraints and overheating:
  - Economy operating near capacity
  - Accelerating inflation
  - Rising real estate prices
  - Capacity constraints in some sectors
  - Tightening labor market

### Fiscal policy guidance and sustainability
- Central recommendation: fiscal policy should be at the forefront in fighting demand pressures.
- Role of fiscal tightening:
  - Help curb inflation
  - Take pressure off the labor market
- Containment of public spending to reduce the non-energy deficit, which "has widened significantly in recent years."
- Fiscal sustainability anchor:
  - Mission's sustainability exercise: prudent to keep the non-energy deficit bounded at not more than 20 percent of non-energy GDP—or about 10 percent of total GDP over the medium term.

### Priorities to improve fiscal policy quality
- The mission supports the following priorities:
  - (i) improving further the efficiency of the tax system;
  - (ii) developing a medium-term fiscal and budgetary framework and strengthening evaluation, selection, and implementation of spending programs;
  - (iii) designing well-targeted social programs so that the population at large benefits from the energy windfall; and,
  - (iv) ensuring adequate checks and balances on the special purpose vehicles recently created to implement the public investment program.

### Revenue Stabilization Fund and Heritage Stabilization Fund (HSF)
- Observation: sizable balances in the interim Revenue Stabilization Fund.
- Authorities' plan: create a permanent Heritage Stabilization Fund (HSF) to institutionalize a long-term savings framework.
- Conditions for HSF effectiveness:
  - Appropriately disciplined fiscal policies
  - Well designed fund structure
  - Transparency in HSF management and its relation with the budget
  - Adequate parliamentary oversight

### Monetary policy recommendations
- Monetary policy role: important in managing price pressures amid rising energy revenues.
- Authorities' actions noted:
  - Central bank reducing liquidity by selling more foreign exchange
  - Allowing interest rates to rise
- Mission position: supports these measures and agrees further steps are needed to strengthen monetary management.

### Structural reforms and competitiveness
- Boosting non-energy sector competitiveness requires productivity gains through structural reform.
- Key reform areas:
  - Address infrastructure bottlenecks
  - Improve the business environment to remove impediments to economic diversification and growth in the non-energy sector
  - Overhaul of the regulatory and supervisory framework of the financial sector (mission supports authorities' program underway)
- Regional integration: mission welcomes progress in establishing the CARICOM Single Market and Economy (CSME).

### Closing
- The IMF mission thanked the government and the people of Trinidad and Tobago for their hospitality and wished them success in building a strong, prosperous, and diversified economy.

*International Monetary Fund (IMF) — Press Release No. 06/162, July 21, 2006.*

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## References

- [Trinidad and Tobago and the IMF](http://www.imf.org/external/country/TTO/index.htm)
- [Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr06162_