IMF Welcomes Trinidad And Tobago Fiscal Progress

by Amanda Banks, Tax-News.com, London

14 February 2012

Welcoming measures taken to date by Trinidad and Tobago, the International Monetary Fund (IMF) in its latest report has urged the importance of ensuring that the territory continues to appeal to international investors when it begins to reverse fiscal stimulus and considers measures to consolidate the territory's deficit.

Commenting on the territory's most recent package of measures contained in the 2011/12 budget, the IMF noted that the government maintained the high level of government expenditure to support the economic recovery. The IMF agreed that supportive fiscal policy should remain in place in the near-term, alongside the timely implementation of the investment program, to attract new business.

The IMF said, however, that “over the longer term, a shift in the fiscal trajectory will be needed to continue building net savings for future generations while maintaining public investment to support diversification and growth of the non-energy sector. Such a strategy would focus on containing increases in transfers and subsidies while better targeting social benefits to vulnerable groups. It would also include a strengthening of the tax effort through ongoing improvement of tax and customs administration and a broadening of the tax base.”

The IMF noted support also for government efforts to improve the regulatory and administrative framework in place for private sector activity, to foster investment, to support the planned divestment of public sector entities and to facilitate public/private partnership programs.

Discussing the health of the territory's financial centre, the IMF said that while not immune to the global economic downturn, Trinidad and Tobago's commercial banks remain well capitalized, profitable and liquid. The sector's non-performing loan rate has increased however, and provisioning has declined. The IMF recommended that intensified monitoring and surveillance of the financial system is warranted, and underscored the importance of strengthening the territory's regulatory and supervisory framework, including the enactment of legislation on insurance, credit unions and securities.

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