The In­ter­na­tion­al Mon­e­tary Fund (IMF) has rec­om­mend­ed that the Cen­tral Bank deal with re­cur­ring for­eign ex­change short­ages in the coun­try by adding more flex­i­bil­i­ty to the sys­tem.

In its lat­est coun­try re­port on T&T, the IMF said while there is "no con­crete ev­i­dence of ei­ther a par­al­lel mar­ket or ar­rears on for­eign ex­change", the Cen­tral Bank re­cent­ly had to see for­eign ex­change to clear the mar­ket. It said a re­cur­rence of the short­ages, which im­pose un­nec­es­sary eco­nom­ic costs, "could in­di­cate the ex­is­tence of an ex­change re­stric­tion."

The agency al­so said while struc­tur­al re­forms are un­der­way in the coun­try, more are need­ed to fos­ter a di­ver­si­fied eco­nom­ic base. It added that fi­nan­cial sec­tor re­form is ad­vanc­ing, in­clud­ing ex­pand­ing the Cen­tral Bank's reg­u­la­to­ry perime­ter to "sys­tem­i­cal­ly im­por­tant non-bank fi­nan­cial in­sti­tu­tions."

"Re­cent stream­lin­ing of reg­u­la­tions that have ham­pered busi­ness ac­tiv­i­ty is wel­comed, but needs to be fur­ther ad­vanced. Gov­ern­ment op­er­a­tions are in­creas­ing­ly ham­strung by a poor­ly func­tion­ing civ­il ser­vice. Per­cep­tions of cor­rup­tion can be re­duced by adopt­ing a trans­par­ent pro­cure­ment process," the IMF said.

"Pro­grammes that mask un­der­em­ploy­ment should be re­placed with more ef­fec­tive train­ing. Grow­ing sta­tis­ti­cal short­com­ings have ren­dered the con­duct of sur­veil­lance ever hard­er, and must be ad­dressed."

The agency al­so rec­om­mend­ed that the Cen­tral Bank care­ful­ly con­sid­er how to tight­en the mon­e­tary stance giv­en high ex­cess bank liq­uid­i­ty. It said sus­tain­able growth re­quires re-con­fig­ur­ing fis­cal pol­i­cy but con­ced­ed that "this will be chal­leng­ing for the time be­ing in view of na­tion­al elec­tions due in 2015."

"Ad hoc mea­sures should be re­placed with poli­cies that durably im­prove non en­er­gy-based rev­enues and spend­ing. The pro­ceeds from ex­tract­ing non-re­new­able re­sources should be saved and in­vest­ed as a step­ping stone to last­ing pros­per­i­ty."Fu­el sub­si­dies need to be cur­tailed and so­cial pro­grammes ra­tio­nalised. Non-en­er­gy sec­tor tax bases should be broad­ened and tax ex­pen­di­tures lim­it­ed. Greater flex­i­bil­i­ty is need­ed in the for­eign ex­change mar­ket."

Ac­cord­ing to the IMF, the T&T econ­o­my is em­bark­ing on sus­tain­able growth but still faces the chal­lenge of boost­ing long-run growth by struc­tur­al re­forms and re-ori­ent­ing fis­cal pol­i­cy.

It said: "Sup­ply-side slow­downs in the en­er­gy sec­tor are end­ing, while avail­able ev­i­dence sug­gests non-en­er­gy growth is ro­bust and eco­nom­ic slack is be­ing used up. Non-en­er­gy growth should set­tle around a long-term two to two-and-a-half per cent per an­num rate, while new en­er­gy sec­tor in­vest­ment may be­gin to bear sig­nif­i­cant fruit over the medi­um term."The IMF al­so re­port­ed a down­ward trend in head­line in­fla­tion and said core in­fla­tion re­mains mod­er­ate but do­mes­tic risks "are to the up­side."