Trinidad and Tobago must wisely invest windfall from high energy prices

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In 2005, Trinidad and Tobago's economy grew by about 8 percent, underpinned by strong growth in the energy sector, according to the IMF's annual economic review. The nonenergy sector, also vibrant, expanded by 7¾ percent, thanks to public infrastructure spending and rapid credit growth that fueled private spending. With global energy prices still high, the economy is on pace to expand by 12½ in real terms in 2006.

Trinidad and Tobago has one of the highest per capita incomes in Latin America and the Caribbean, with much of its wealth stemming from oil and gas reserves. The energy sector accounts for over 40 percent of GDP, about 90 percent of exports, and over half of government revenues. Rising energy revenues have helped improve the government's balance sheet. But the underlying fiscal position has deteriorated. Rapid increases in public spending-reflecting rising transfers and subsidies on utilities and fuels and mounting public investment-contributed to a nonenergy deficit that widened by about 2 percentage points to 10¼ percent of GDP in 2004-05.

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Executive Directors welcomed Trinidad and Tobago's strong economic performance while stressing that the current favorable environment presents both opportunities for...