An International Monetary Fund staff team led by Ana Guscina visited Trinidad and Tobago from January 27 to February 9, 2026, to conduct the country’s latest Article IV consultation. The mission noted that the economy is gradually returning to pre-pandemic levels, supported mainly by growth in the non-energy sector, particularly manufacturing and services. However, activity continues to be constrained by stagnant production in the mature energy sector. Inflation and unemployment remain low, the banking system is broadly stable, and private sector credit growth is strong. The current account remains in surplus, although foreign exchange shortages persist. International reserves cover about 6.4 months of imports, while the Heritage and Stabilization Fund holds roughly US$6.38 billion, providing an additional financial buffer.

A new administration that took office in May 2025 is pursuing an economic revitalization agenda focused on boosting energy output through mature field development, deepwater exploration, and regional cooperation. At the same time, the government aims to support non-energy growth by improving the business environment, attracting foreign direct investment, and promoting economic diversification. Despite these efforts, fiscal pressures remain elevated. The fiscal deficit for FY2025 is estimated at 5.5% of GDP, and public debt has risen to 67.8% of GDP at the central government level and 84.2% across the public sector. The country nevertheless retains investment-grade market access and successfully issued a US$1 billion 10-year bond in January 2026, which was heavily oversubscribed.

Economic growth is expected to remain subdued in the near term. The economy is estimated to have expanded by 0.8% in 2025, with growth projected at 0.7% in 2026, as stronger non-energy performance partly offsets weaker energy production. Over the medium term, new energy projects, particularly the Manatee field, are expected to lift growth to around 2.9% in 2027 and 3.5% in 2028, while inflation is projected to remain near 2%. The current account surplus is expected to average about 4% of GDP over the medium term, although risks remain from weaker energy output, global financial tightening, and persistent foreign exchange shortages.

The FY2026 budget targets a deficit of 2.2% of GDP and includes several new revenue measures. However, IMF staff estimate that the deficit could remain closer to 5% of GDP without additional action. The Fund therefore recommends a more realistic deficit target of about 3.5% of GDP, supported by tax base broadening, gradual removal of untargeted subsidies, improved spending efficiency, and reforms to state-owned enterprises. It also welcomed recent pension reforms, which are expected to extend the life of the system by about 15 years.

The IMF noted that maintaining the current exchange rate arrangement has required significant foreign exchange sales, contributing to reserve pressures. It recommended tighter fiscal and monetary policies to support the exchange rate, or alternatively, greater exchange rate flexibility to help restore external balance and support private sector activity. Overall, the Fund concluded that while the economy is stabilizing, stronger fiscal discipline, structural reforms, and a more balanced policy mix will be essential to secure sustainable growth over the medium term.

Source: (IMF)

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