The In­ter­na­tion­al Mon­e­tary Fund (IMF) and Moody’s Rat­ings (Moody’s) per­form two dif­fer­ent but sim­i­lar func­tions, one medi­um-term and one short-term.

 The IMF’s main role is to mon­i­tor the in­ter­na­tion­al mon­e­tary sys­tem and the eco­nom­ic and fi­nan­cial poli­cies of its 190 mem­ber coun­tries. In ad­di­tion to in­ter­na­tion­al eco­nom­ic sur­veil­lance, it mon­i­tors the eco­nom­ic health of its mem­bers through what is known as “Ar­ti­cle IV Con­sul­ta­tions”. Moody’s ex­am­ines the same da­ta to pro­vide an eval­u­a­tion of the coun­try’s cred­it­wor­thi­ness (abil­i­ty to re­pay its debt) and as­signs a “rat­ing” which is used by in­ter­na­tion­al lenders to gauge how much to lend, and at what price/ in­ter­est rate. Moody’s re­ports tend not to look much be­yond two years.

Giv­en the roles, the lan­guage used by each or­gan­i­sa­tion is very dif­fer­ent. Moody’s lan­guage is sharp­er and more point­ed. It reaf­firms GORTT’s rat­ing as BA2 pos­i­tive but de­scribes T&T as “a ma­ture hy­dro­car­bon pro­duc­er” with de­clin­ing sup­ply trends with ten years of re­cov­er­able gas re­serves “which ex­pos­es the coun­try to very high en­er­gy tran­si­tion and eco­nom­ic di­ver­si­fi­ca­tion risks.”

It notes that “a com­par­a­tive­ly weak” growth trend and ad­just­ed gen­er­al gov­ern­ment debt. The pos­i­tive out­look is based on an “im­proved gov­ern­ment ef­fec­tive­ness as­sess­ment” that in­creas­es the prospect that the “post-pan­dem­ic fis­cal wind­fall” will be pre­served.

Moody’s points to the strong fis­cal buffers, the HSF and forex re­serves as strengths and notes GORTT’s low vul­ner­a­bil­i­ty to liq­uid­i­ty risks. Con­verse­ly, it notes that the GORTT debt is high rel­a­tive to its peers and its de­pen­dence on the en­er­gy sec­tor which is “ma­tur­ing” is risky. The as­sess­ment notes that the rat­ings could im­prove if there is tan­gi­ble suc­cess in grow­ing the econ­o­my and im­prov­ing its re­silien­cy. It men­tions gov­ern­ment man­age­ment of its fi­nances and its abil­i­ty to gen­er­ate enough rev­enue to cov­er its ex­pen­di­ture (pri­ma­ry sur­plus) and the per­for­mance of the en­er­gy sec­tor as im­prove­ment ar­eas.

Like Moody’s, the IMF notes an im­proved fis­cal bal­ance, mean­ing that the Gov­ern­ment mod­er­at­ed its ex­pen­di­ture rel­a­tive to its rev­enue. How­ev­er, it does not ex­pect this trend to con­tin­ue in the short run and ex­pects the 2024 deficit to be twice as large. But the gen­er­al tone of the re­port is pos­i­tive, not­ing that it ex­pects growth to con­tin­ue in the medi­um term based on the strength of the non-en­er­gy sec­tor. This non-en­er­gy sec­tor, how­ev­er, is not well de­fined. The petro­chem­i­cal sec­tor is now in­clud­ed in the man­u­fac­tur­ing sec­tor and there­fore counts as part of the non-en­er­gy sec­tor. This com­pli­cates things as petro­chem­i­cal man­u­fac­tur­ing de­pends on nat­ur­al gas pro­duc­tion, a com­pli­ca­tion left unclar­i­fied in the re­port.  

Like Moody’s, the IMF al­so notes the strong fis­cal buffers (HSF and Forex re­serves) as pos­i­tives. It al­so wel­comed “the au­thor­i­ties” ef­forts to en­hance rev­enue mo­bil­i­sa­tion,” mean­ing the GORTT’s ef­forts to in­crease tax­a­tion (eg, prop­er­ty tax, gam­bling tax, and the op­er­a­tional­i­sa­tion of the T&T Rev­enue Au­thor­i­ty). It al­so sug­gest­ed that the Gov­ern­ment should tax the en­er­gy sec­tor more by ad­just­ing the fis­cal regime, boost­ing non-en­er­gy rev­enue, and strength­en­ing tax com­pli­ance and ad­min­is­tra­tion.

The IMF’s out­look as­sumes im­proved tax­a­tion, man­ag­ing gov­ern­ment ex­pen­di­ture more tight­ly and boost­ing fu­ture nat­ur­al gas pro­duc­tion. But it al­so rais­es some im­por­tant red flags. Whilst it sug­gests con­tin­ued growth in the medi­um term it re­mains silent on the size of the growth rate. If re­al growth re­mains low the coun­try will not be able to main­tain the gen­er­ous lev­el of trans­fers and sub­si­dies which ac­count for ap­prox­i­mate­ly 50 per cent of GORTT ex­pen­di­ture. In­stead, it speaks to the need for fis­cal dis­ci­pline, a “rules-based medi­um-term fis­cal frame­work will en­hance fis­cal dis­ci­pline, avoid pro­cycli­cal spend­ing, and mit­i­gate fis­cal risks.” How many politi­cians will agree to that giv­en the in­her­ent lim­i­ta­tion on spend­ing?

Gov­ern­ment pub­li­cists will speak to the fact that the IMF re­port is pos­i­tive on medi­um-term growth be­cause it is con­sis­tent with the elec­toral five-year cy­cle. Big­ger risks con­tin­ue be­yond the elec­toral cy­cle, for ex­am­ple, the abil­i­ty to gen­er­ate for­eign ex­change. The warn­ing is very sub­tle. The glob­al en­er­gy tran­si­tion “will im­pact the vi­a­bil­i­ty of fos­sil fu­el ex­trac­tion and re­sult in low­er gov­ern­ment rev­enues. To avoid dis­rup­tive pol­i­cy ad­just­ments, it is im­por­tant to de­sign a sus­tain­able long-term fis­cal strat­e­gy.”

This is very diplo­mat­ic lan­guage as is the ar­gu­ment that there is a struc­tur­al im­bal­ance in the for­eign ex­change mar­ket which can­not be ad­dressed by us­ing the cur­rent oli­gop­o­lis­tic “ra­tioning” sys­tem (my words). It says ad­dress­ing this weak­ness is a pri­or­i­ty. The cur­rent ap­proach main­tains the ex­ist­ing busi­ness struc­ture and does not fa­cil­i­tate change

How can there be growth, sta­bil­i­ty and re­silience in the medi­um term if the so­cial se­cu­ri­ty sys­tem is fi­nan­cial­ly un­sus­tain­able? Eco­nom­ic growth is pred­i­cat­ed on in­vest­ment ex­pen­di­ture, in­vest­ing for the fu­ture which in turn de­pends on sav­ings for the long term. This means pen­sion mon­ey. The IMF qui­et­ly points out the po­ten­tial fis­cal risks posed by the widen­ing fis­cal deficit in the Na­tion­al In­sur­ance sys­tem but avoids ad­dress­ing the big­ger risk posed by the Gov­ern­ment’s un­fund­ed pen­sion plan to its pub­lic sec­tor em­ploy­ees which is a mul­ti­ple (3X) of the NIB fund. Chang­ing the re­tire­ment age is on­ly a small step in a se­ries of steps that need to be im­ple­ment­ed with some ur­gency

If these two re­ports were fo­cused on pro­vid­ing an eval­u­a­tive sum­ma­ry they would both say that there has been some im­prove­ment, but a con­sid­er­ably greater ef­fort is re­quired.