The In­ter­na­tion­al Mon­e­tary Fund mis­sion that re­cent­ly vis­it­ed T&T has called on the au­thor­i­ties to re­move all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions while pro­vid­ing suf­fi­cient for­eign ex­change to meet de­mand for all cur­rent in­ter­na­tion­al trans­ac­tions.

“The mis­sion un­der­scored the need for an ap­pro­pri­ate pol­i­cy mix to sup­port the ex­change rate regime and called for the re­moval of re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions. The au­thor­i­ties are en­cour­aged to mod­ern­ize FX and mon­ey mar­ket in­fra­struc­ture to re­duce in­ef­fi­cien­cies and im­bal­ances to sup­port the sus­tain­abil­i­ty of the ex­ist­ing arrange­ments,” the IMF stat­ed.

“Look­ing to the fu­ture, greater ex­change rate flex­i­bil­i­ty would re­duce the need for fis­cal pol­i­cy ad­just­ments to re­store ex­ter­nal bal­ance and cre­ate room for more coun­ter­cycli­cal mon­e­tary pol­i­cy. The mis­sion en­cour­aged the au­thor­i­ties to re­move all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions while pro­vid­ing suf­fi­cient FX to meet de­mand for all cur­rent in­ter­na­tion­al trans­ac­tions,” it stat­ed.

The IMF made the com­ments in a Con­clud­ing State­ment is­sued yes­ter­day which de­scribed the pre­lim­i­nary find­ings of IMF staff at the end of an of­fi­cial staff vis­it to T&T.

IMF mis­sions are un­der­tak­en as part of reg­u­lar con­sul­ta­tions un­der Ar­ti­cle IV of the IMF’s Ar­ti­cles of Agree­ment, in the con­text of a re­quest to bor­row from the IMF, as part of dis­cus­sions of staff mon­i­tored pro­grams, or as part of oth­er staff mon­i­tor­ing of eco­nom­ic de­vel­op­ments.

Based on the pre­lim­i­nary find­ings of this mis­sion, staff will pre­pare a re­port that will be pre­sent­ed to the IMF Ex­ec­u­tive Board for dis­cus­sion and de­ci­sion.

In its re­port the IMF stat­ed that T&T is pro­ject­ed to have a strong eco­nom­ic re­cov­ery next year, the In­ter­na­tion­al mon­e­tary Fund has stat­ed in the Staff Con­clud­ing State­ment from its 2021 Ar­ti­cle IV Mis­sion to this coun­try.

How­ev­er the IMF has warned that the Cen­tral Bank need to re­main vig­i­lant to any build-up of fi­nan­cial vul­ner­a­bil­i­ties.

“Re­al GDP growth in 2022 is ex­pect­ed at 5.7 per cent, re­in­forced by the con­tin­ued pol­i­cy sup­port and the an­tic­i­pat­ed re­cov­ery in oil and gas pro­duc­tion. Still, out­put would re­main be­low pre-COVID-19 lev­els well in­to the medi­um-term. With de­mand pres­sures con­tained, head­line in­fla­tion in 2022 is pro­ject­ed at about 2.4 per­cent,” it stat­ed.

“The cur­rent ac­count sur­plus will re­main high over the medi­um term, sup­port­ed by the re­cov­ery of en­er­gy ex­ports, and for­eign re­serves would be at around sev­en months of im­ports,” it stat­ed.

T&T faced un­prece­dent­ed chal­lenges in 2020-21, the IMF stat­ed.

“The com­bined ef­fects of COVID-19, en­er­gy pro­duc­tion cuts, and price shocks pushed the econ­o­my fur­ther in­to re­ces­sion. The au­thor­i­ties’ de­ci­sive pol­i­cy re­sponse helped con­tain COVID-19’s spread, pro­tect lives and liveli­hoods, and pave the way for a strong re­cov­ery. The im­me­di­ate pri­or­i­ties are to ac­cel­er­ate vac­ci­na­tions and sup­port the eco­nom­ic re­cov­ery,” it stat­ed.

“Once the re­cov­ery is firm­ly in place, pol­i­cy at­ten­tion should fo­cus on re­duc­ing pub­lic debt lev­els and re­build­ing fis­cal buffers, sup­port­ed by a cred­i­ble fis­cal frame­work. The Cen­tral Bank should re­main vig­i­lant to any build-up of fi­nan­cial vul­ner­a­bil­i­ties. Struc­tur­al re­forms re­main vi­tal to sup­port sus­tain­able and in­clu­sive growth,” it stat­ed.

The IMF added that the au­thor­i­ties act­ed de­ci­sive­ly to con­tain the pan­dem­ic.

“Con­tain­ment and health mea­sures to fight the virus lim­it­ed the num­ber of cas­es and fa­tal­i­ties de­spite waves of in­fec­tions. Progress on vac­ci­na­tion ef­forts is on­go­ing, with about 45 per­cent of the tar­get­ed pop­u­la­tion ful­ly vac­ci­nat­ed as of No­vem­ber 15, 2021. More­over, the gov­ern­ment in­tro­duced a fis­cal pol­i­cy pack­age of about 4 per­cent of GDP to help the most vul­ner­a­ble, em­ploy­ment, and firms, while the Cen­tral Bank of Trinidad and To­ba­go (CBTT) eased mon­e­tary and fi­nan­cial sec­tor poli­cies to en­sure ad­e­quate liq­uid­i­ty and pre­serve fi­nan­cial sta­bil­i­ty,” it stat­ed.

The fis­cal deficit and pub­lic debt rose sharply over the pe­ri­od, the IMF stat­ed.

“The over­all fis­cal deficit widened to 11.6 per cent of GDP in FY2020 from 3.7 per­cent of GDP in FY2019, dri­ven most­ly by low­er en­er­gy tax pro­ceeds and out­lays to mit­i­gate the pan­dem­ic. At 10.1 per­cent of GDP, the over­all fis­cal deficit in FY2021 re­mained high due to con­tin­ued weak rev­enue per­for­mance,” it stat­ed.

The IMF stat­ed that the fis­cal deficit is ex­pect­ed to nar­row but pub­lic debt will re­main high.

“The fis­cal deficit is pro­ject­ed to nar­row to 7.5 per­cent of GDP in FY2022, re­flect­ing a com­bi­na­tion of high­er rev­enue mo­bi­liza­tion and mod­est spend­ing cuts. Over the medi­um term, the fis­cal deficit is pro­ject­ed to grad­u­al­ly nar­row and reach bal­ance by FY2027,” it stat­ed.

The IMF stat­ed that risks to the out­look are tilt­ed to the down­side.

“The emer­gence of new virus strains could de­rail the glob­al re­cov­ery, which would like­ly weak­en glob­al en­er­gy de­mand and prices, thus in­ten­si­fy­ing the eco­nom­ic im­pact on T&T. Un­ex­pect­ed sup­ply-chain or lo­gis­tics is­sues could af­fect lev­els of en­er­gy pro­duc­tion. The lin­ger­ing ef­fects of the re­ces­sion could ex­ac­er­bate fi­nan­cial sec­tor risks. On the up­side, stronger-than-pro­ject­ed glob­al re­cov­ery could re­sult in high­er en­er­gy prices, im­prov­ing the fis­cal and ex­ter­nal po­si­tions. Faster con­tain­ment of the pan­dem­ic and the im­ple­men­ta­tion of key struc­tur­al re­forms would boost non-en­er­gy sec­tor growth,” it stat­ed.