aug-2017c

6 7 IMF CONCLUDES MISSION TO TRINIDAD AND TOBAGO A n International Monetary Fund (IMF) staff team, led by Elie Canetti, visited Trinidad and Tobago from July 20 to August 2, 2017, to conduct the annual Article IV consultation.At the end of the visit, Canetti issued the following statement in Port of Spain: “Trinidad and Tobago continues to face economic challenges stemming primarily from the sharp de- clines in global energy prices since 2014, combined with a fall in natural gas and oil production in recent years.These,alongwith the prolonged eco- nomic stagnation,capital allowances,and challenges with taxadministration have continued to contribute toweak revenue collections,leading to still significant fiscal deficits and rising publicdebt levels. “Although preliminary data shows that the econ- omy contracted in the first half of the year on weak energy production and spillovers to the non-en- ergy sector, the economymay be starting to turn a corner as a result of a projected recovery in gas output, though growth may still be flat or some- what negative for the year as a whole.The econom- ic improvement that is now beginning is projected to continue into the medium-term, notably given a pipeline of projects that will improve the supply of natural gas to the downstream energy sector.Oil output is growing due to state-owned Petrotrin’s recent exploration efforts and refinery upgrade.As the energy sector recovers, the non-energy sector is expected to rebound due to positive energy-related spillovers, and as implementation of the Public-Sec- tor Investment Program picks up. “The teamwelcomed ongoing fiscal policy adjust- ments, including the government’s efforts to reform the energy tax regime and to boost domestic rev- enues.Nonetheless, it cautioned that sustainable OPENING LINES fiscal adjustment will require additional measures (including containment of current expenditure) to rebalance the public finances, especially as one-off, non-debt creating financing options such as asset sales will diminish over time.The team urged the authorities to undertake amedium-term,modestly front-loaded fiscal adjustment to rebalance the public finances and put debt on a sustainable path.Delaying fiscal adjustments would onlymake it harder to arrest rising debt levels and restore confidence down the road. In addition,the teamsees the need for an increase in capital investment to set the stage for a lasting recovery in economicgrowth and for economicdiversification. The authorities and the teamheld fruitful discussions on a number of adjustment measures to achieve the necessaryfiscal consolidation. “AlthoughTrinidad and Tobago still holds healthy levels of international reserves, there has been a sharp drop in foreign exchange inflows as energy prices and volumes have both fallen.This, combined with still high demand for foreign exchange, has created a notable imbalance in the foreign exchange market that has had a number of adverse consequenc- es.The teamcontinues to believe that reducing and eventuallyeliminating the imbalance in the foreign exchangemarket is of paramount importance,and outlined that a range of measures will likelybe neces- sary to do so.These include fiscal adjustment,structural reforms to enhance the country’s foreign exchange earnings capacity,and operating the foreign exchange market with a greater degree of flexibility. “Wide-ranging structural reforms will be needed to enhance the functioning of the government and increase the scope for growth and diversification. These include carrying through with envisaged procurement reforms, continuing to ease the costs of doing business,modernizing financial supervision, and continuing to push through reforms that will en- hance, and speed-up the production of, the country’s economic statistics.”