Dec 2005 Financial News

IMF praises, cautions T&T

Dec 08, 2005

In spite of the International Monetary Fund (IMF) praising T&T’s robust economic growth and low rate of unemployment concerns were also raised about creeping inflation and existing rates of poverty.

In its 2005 Article IV consultation with the country, which assessed T&T’s economy, the IMF noted the country’s energy wealth resulted in T&T having one of the highest standards of living in the region.

The IMF also observed: “Nevertheless, income inequality and poverty rates are only at about regional averages.”

The assessment predicted that high energy prices as well as the new changes to the energy tax regime would lead to increased revenue from the oil and gas sectors but called on the country to increase the amount of energy revenues it saved.

The IMF also pointed to the growing non-energy fiscal deficit.

“Directors noted the that maximising the gains from energy windfall required a prudent mix of fiscal, monetary and structural policies,” the report stated. “Such policies should ensure that the public sector was getting value for its money and private sector competitiveness was maintained and enhanced. Directors considered that a careful balancing of priorities and policies was called for.”

Turning towards inflation, the IMF fingered volatile food prices as the culprit behind a significant portion of this inflation.

“Despite a sustained freeze of public utility tariffs and gasoline prices, headline inflation has crept up to seven per cent for the 12-month period in September 2005, up from two and three-quarters a year and a half ago,” the assessment said.

The assessment warned that the expanding non-energy deficit made public finances vulnerable to sudden downward swings in energy prices.

For the future, the IMF pointed out that progress on utility prices, privatisation and labour market reforms were crucial.

Sherwin Long
The Trinidad Guardian
Thursday, 8th December, 2005
http://www.guardian.co.tt/business1.html