IMF advises Government on spending

The International Monetary Fund (IMF) has advised Government that effective use of prospective higher energy revenues is key to TT’s future development.

While commending the plan to achieve developed country status by the year 2020 through establishing a highly educated workforce and strengthening infrastructure, the IMF warned Government that this would require “tailoring its spending in line with the country’s absorptive capacity.” The IMF also encouraged government to invest part of higher oil revenues abroad through the revenue stabilisation fund to generate income for future generations. These conclusions were contained in a report dated July 10, following the conclusion of Article IV consultation between the IMF Executive Board and TT on June 23. Increased spending on education, health and infrastructure was praised, however the IMF cautioned “that adequate attention should be paid to the efficiency of such spending.”

IMF Directors encouraged the authorities to give priority to developing well-articulated, medium-term macroeconomic framework underpinned by a three-year rolling budget. They “welcomed” some of the fiscal initiatives announced by Government—the plan to create a unified revenue authority was viewed as a major step in strengthening tax and customs administration; the introduction of a system of pre-announced repo rates as market benchmark, the newly established Capital Markets Committee, and moves to integrate the supervision of insurance companies and pension funds with that of commercial banks, under the authority of Central Bank. The directors commended Government’s planned participation in the financial assessment programme. They advised that recent steps to reinvigorate structural reforms should include pension reform. The proposed restructuring of Caroni (1975) Ltd was regarded as a “positive step.”

Directors urged Government to maintain the momentum of the structural reform agenda and stick to their divestment timetable. Government was encouraged to consider eliminating overlapping benefits in the national insurance scheme and other public pension schemes. IMF Directors said: “efforts should focus on streamlining and harmonising the system of old age benefits and pensions, as well as the public sector pension scheme.” They welcomed Government’s commitment to further trade liberalisation, and the decision to participate in a pilot study to adopt transparency guidelines under the Extractive Industries Transparency Initiative. Trinidad and Tobago recorded its ninth consecutive year of economic growth despite the global economic slowdown and lingering negative impact of the September 11 attacks. Unemployment fell from 14 percent in 1998 to about 10 percent in 2002.  In March 2003, Standard and Poor’s upgraded TT’s credit rating from BBB to BBB-.