An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

A staff mis­sion from the In­ter­na­tion­al Mon­e­tary Fund (IMF) yes­ter­day re­port­ed that for the first time in a decade, T&T is un­der­go­ing a grad­ual and sus­tained eco­nom­ic re­cov­ery.  

The IMF mis­sion, led by Cami­lo To­var, was in Port of Spain be­tween Feb­ru­ary 28 and March 8, dur­ing which they held con­sul­ta­tions with stake­hold­ers, in­clud­ing gov­ern­ment de­part­ments, pri­vate-sec­tor or­gan­i­sa­tions, and state in­sti­tu­tions un­der Ar­ti­cle IV of the in­sti­tu­tion's ar­ti­cles of agree­ment.

In a news re­lease con­tain­ing its main con­clu­sions and rec­om­men­da­tions, the IMF said T&T's eco­nom­ic growth is pro­ject­ed to gain mo­men­tum in 2024 af­ter it is es­ti­mat­ed to have fur­ther ex­pand­ed by 2.1 per cent in 2023.  

"Re­al GDP (gross do­mes­tic prod­uct) is ex­pect­ed to ex­pand by 2.4 per cent in 2024, sup­port­ed by the non-en­er­gy sec­tor and new en­er­gy projects com­ing on­stream—which will help off­set the struc­tur­al de­cline in en­er­gy pro­duc­tion," said the IMF.

The IMF mis­sion not­ed that in­fla­tion de­clined sharply to 0.3 per cent in Jan­u­ary 2024, af­ter peak­ing at 8.7 per cent in De­cem­ber 2022, main­ly due to de­clin­ing food and im­port­ed goods in­fla­tion.

"Banks’ cred­it to the pri­vate sec­tor con­tin­ues to ex­pand and the fi­nan­cial sec­tor ap­pears sound and sta­ble. The cur­rent ac­count is es­ti­mat­ed to have re­mained in a sur­plus in 2023, and for­eign re­serves cov­er­age is ad­e­quate at 8.3 months of prospec­tive to­tal im­ports,” said the IMF.

The fis­cal bal­ance in the fi­nan­cial year of 2023 the IMF said was broad­ly in line with the bud­get and the over­all fis­cal deficit was es­ti­mat­ed at 1.1 per cent of GDP in FY 2023, 0.2 per­cent­age points bet­ter than ini­tial­ly bud­get­ed.  

“This re­flects high­er non-en­er­gy rev­enue and low­er than bud­get­ed cap­i­tal ex­pen­di­ture. Cen­tral gov­ern­ment debt in­creased to 54.3 per­cent of GDP in FY2023 (from 50.7 per cent of GDP in FY2022) and pub­lic debt reached 70.9 per cent of GDP in FY2023 (from 67.0 per cent of GDP in FY2022). Pub­lic fi­nan­cial buffers re­mained strong with to­tal as­sets in the Her­itage and Sta­bil­i­sa­tion Fund at US$5.5 bil­lion (19.2 per cent of GDP) by end-FY2023,” the IMF stat­ed in its analy­sis.

Bal­ance of risk  

The IMF out­lined that in the near term, down­side risks stem from ex­ter­nal fac­tors af­fect­ing en­er­gy mar­kets (e.g., an abrupt glob­al slow­down) and dis­ap­point­ments in do­mes­tic en­er­gy pro­duc­tion (e.g., de­lays in new projects or un­ex­pect­ed dis­rup­tions in cur­rent pro­duc­tion)

 In the medi­um term, it iden­ti­fied that the bal­ance of risks is to the up­side, stem­ming from ad­di­tion­al new nat­ur­al gas projects and the im­ple­men­ta­tion of planned struc­tur­al re­forms, which could boost growth.  

Main­tain­ing fis­cal dis­ci­pline

Fur­ther, IMF staff es­ti­mat­ed that the fis­cal deficit will widen to 2.7 per­cent of GDP in FY2024 and this re­flects low­er en­er­gy rev­enues due to de­clin­ing prices and do­mes­tic pro­duc­tion, in­creased cap­i­tal spend­ing, and a high­er wage bill—due to the long-stand­ing pub­lic wage set­tle­ment with some unions.  

IMF staff al­so recog­nised that the procla­ma­tion of the Pro­cure­ment and Dis­pos­al of Pub­lic Prop­er­ty Act in April 2023 will en­hance the le­gal and in­sti­tu­tion­al frame­work for trans­par­ent and com­pet­i­tive pub­lic pro­cure­ment.  

“It will al­so help im­prove the ef­fi­cien­cy and qual­i­ty of pub­lic spend­ing. Cen­tral gov­ern­ment debt is pro­ject­ed to in­crease to 56.0 per­cent of GDP and pub­lic debt to 73.4 per­cent of GDP in FY2024, be­low the au­thor­i­ties’ soft debt tar­get of 75 per­cent of GDP,” the IMF point­ed out.

Forex short­ages

It high­light­ed that al­though the Cen­tral Bank’s ad­di­tion­al for­eign ex­change in­ter­ven­tion last year helped re­store con­fi­dence and sta­bilise the for­eign ex­change mar­ket, it did not ad­dress the un­der­ly­ing struc­tur­al for­eign ex­change short­fall in the mar­ket.  

The IMF out­lined that mov­ing to­wards a more ef­fi­cient and mar­ket-clear­ing in­fra­struc­ture for al­lo­cat­ing for­eign ex­change would help cre­ate a more con­ducive busi­ness en­vi­ron­ment for the pri­vate sec­tor to in­vest in and di­ver­si­fy the econ­o­my.  

“The re­moval of all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions and greater ex­change rate flex­i­bil­i­ty over the medi­um term would help meet the de­mand for forex, re­duce the need for fis­cal pol­i­cy ad­just­ments to re­store ex­ter­nal bal­ance, and cre­ate room for more counter-cycli­cal mon­e­tary pol­i­cy,” the IMF con­clud­ed.
Fi­nance Min­is­ter Colm Im­bert in a news re­lease yes­ter­day said that the find­ings of the IMF on­ly hap­pened be­cause his min­istry and the Gov­ern­ment "have ex­er­cised fis­cal dis­ci­pline over the last eight years, thus cre­at­ing the con­di­tions for sus­tained growth."

Econ­o­mist re­sponds

Com­ment­ing on the rec­om­men­da­tions, Econ­o­mist Dr Vaalmik­ki Ar­joon told Guardian me­dia that while IMF’s da­ta shows re­cov­ery, he said this pos­i­tive trend fol­lows a sig­nif­i­cant down­turn due to the pan­dem­ic – af­ter TT hit rock bot­tom, and there is on­ly a place to go and that’s up.  

“It would be more in­tu­itive to com­pare our cur­rent state to the pre-pan­dem­ic pe­ri­od, which shows that we con­tract­ed by 6.4 per cent from the end of 2019 to 2023, leav­ing us much be­low our 2019 eco­nom­ic per­for­mance,” Ar­joon high­light­ed.

He in­di­cat­ed while some re­gion­al coun­tries have sur­passed their 2019 lev­els – the Ba­hamas grew by 6.7 per cent, Bar­ba­dos by 0.7 per cent, Ja­maica by 1.1 per cent, and Guyana by 287 per cent thanks to its hy­dro­car­bon surge and for­eign in­vest­ment – T&T may not reach our 2019 lev­els un­til 2026.

The econ­o­mist said that to sur­pass this coun­try’s 2019 per­for­mance, T&T needs to re­move busi­ness bar­ri­ers for the pri­vate sec­tor, re­duce crime, en­hance for­eign ex­change earn­ings and ac­ces­si­bil­i­ty and at­tract mean­ing­ful for­eign di­rect in­vest­ment (FDI).  

“The lat­est FDI da­ta from 2022 stands at neg­a­tive US$913.5 mil­lion, in­di­cat­ing sig­nif­i­cant for­eign in­vest­ment leav­ing our shores. Im­prov­ing on all these fac­tors will re­build the con­fi­dence in the econ­o­my, has­ten the di­ver­si­fi­ca­tion thrust, in­crease pro­duc­tive em­ploy­ment op­por­tu­ni­ties, pro­duc­tion, ex­ports, and State rev­enues earn­ings, while al­so low­er­ing pover­ty,” he said.

As it per­tains to en­er­gy pro­duc­tion, Ar­joon said it re­mains a con­cern.  

He said Cen­tral Bank da­ta re­veals a short­fall of ap­prox­i­mate­ly 1.1 bscf/d in nat­ur­al gas pro­duc­tion to sat­is­fy lo­cal elec­tric­i­ty, down­stream plants, and At­lantic LNG de­mands, which ex­plains why nine down­stream plants are cur­rent­ly closed and At­lantic LNG is op­er­at­ing at just over 60 per cent ca­pac­i­ty.

“The suc­cess of the Drag­on Gas project is cru­cial, as it promis­es 3.2 tcf of gas and could pave the way for more cross-bor­der en­er­gy ini­tia­tives. In­creased in­vest­ment in en­hanced oil re­cov­ery and small on­shore fields by Her­itage could al­so boost oil pro­duc­tion, which cur­rent­ly stands at 54,400 bpd,” he de­tailed.

The econ­o­mist said while in­ter­na­tion­al agen­cies like the IMF, Moody’s, and S&P view TT’s for­eign ex­change re­serves as healthy, the for­eign re­serve bal­ance of US$5.8 bil­lion has been bol­stered by for­eign debt and with­drawals from the HSF.  

“The net re­serves, when fac­tor­ing in our US$5.2 bil­lion for­eign debt, stand at ap­prox­i­mate­ly 600 mil­lion USD. How­ev­er, the HSF main­tains a ro­bust bal­ance of US$5.6 bil­lion,” he added.