An­tho­ny Wil­son

It is not of­ten that this col­umn agrees with the po­si­tions adopt­ed by for­mer deputy Gov­er­nor of the Cen­tral Bank, Ter­rence Far­rell, but there is con­cur­rence with his view, ex­pressed in a com­men­tary on April 2 that: "the (man­aged) flota­tion of the TT dol­lar over that East­er week­end in 1993 was, in my es­ti­ma­tion, one of the best planned and ex­e­cut­ed po�li�cy in­ter­ven­tions un­der­tak­en since In­de­pen­dence."

In this space, in the Feb­ru­ary 28 edi­tion, in a col­umn head­lined "Is de­val­u­a­tion the an­swer?" the fol­low­ing po­si­tion was out­lined: "It is clear that the flota­tion of the TT dol­lar in April 1993, along with oth­er mea­sures aimed at lib­er­al­iz­ing the do­mes­tic econ­o­my, was part­ly in­stru­men­tal in in­creas­ing the com­pet­i­tive­ness of the lo­cal man­u­fac­tur­ing sec­tor, which quick­ly be­came the dom­i­nant force in the Cari­com re­gion, as any­one who has been in­to a su­per­mar­ket any­where in the East­ern Caribbean at any­time in the last decade and a half can tes­ti­fy."

Yes­ter­day, the Sir Arthur Lewis In­sti­tute of So­cial and Eco­nom­ic Stud­ies held a fo­rum on "The flota­tion of the TT dol­lar: the ex­pe­ri­ence of the past 20 years." On the pan­el were Al­is­ter Noel, the se­nior man­ag­er of op­er­a­tions at the Cen­tral Bank, for­mer gov­ern­ment min­is­ter Mar­i­ano Browne and Prof Comp­ton Bourne, ex­ec­u­tive di­rec­tor of the Caribbean Cen­tre for Mon­ey and Fi­nance and for­mer pres­i­dent of the Caribbean De­vel­op­ment Bank. I was al­so in­vit­ed to make a pre­sen­ta­tion.

In do­ing the re­search, I learnt that the T&T econ­o­my ex­pe­ri­enced growth for 10 con­sec­u­tive years from 1973 to 1982 and then sev­en con­sec­u­tive years of de­cline be­tween 1983 and 1989.

The econ­o­my grew by 1.5 per cent in 1990 and by 2.7 per cent in 1991 be­fore de­clin­ing by 1.6 per cent in 1993–the year of the flota­tion. The T&T econ­o­my then grew for every year un­til 2009–15 years of con­sec­u­tive growth. That must mean that the flota­tion of the TT dol­lar at least con­tributed to the growth in the econ­o­my.

Not on­ly did the econ­o­my grow con­sis­tent­ly af­ter 1993, but af­ter the rate of in­fla­tion hit 10.8 per cent in 1993, it de­clined to 8.8 per cent in 1994 and re­mained be­low 6 per cent for every year un­til 2000.

T&T's main rev­enue earn­er, which in the 1980's was still the pro­duc­tion of crude oil, suf­fered a dou­ble wham­my in the pe­ri­od be­tween 1979 and 1986.

Ac­cord­ing to the an­nu­al re­port of what was then the Min­istry of Pe­tro­le­um and Mines, the coun­try's crude pro­duc­tion, which be­gan an up­ward trend in 1971 peaked in 1979 at an av­er­age of about 215,000 bar­rels of oil per day and un­der­went a sec­u­lar de­cline from that year.

In 1979, there was al­so a de­cline in drilling ac­tiv­i­ty and in the num­ber of well com­ple­tions.

By 1986, oil pro­duc­tion had plunged to about 176,000 bar­rels of oil per day–a de­cline of about 22 per cent from the peak pro­duc­tion.

The year 1986 is im­por­tant be­cause that was the year in which what was now called the Min­istry of En­er­gy and Nat­ur­al Re­sources de­clared: "The year,1986, wit­nessed the dra­mat­ic col­lapse in the price of oil thus clear­ly and un­am­bigu­ous­ly defin­ing the end of the oil boom era.

"From a na­tion­al per­spec­tive this in­di­cat­ed a sig­nif­i­cant short­fall in Gov­ern­ment rev­enues."

Ac­cord­ing to the Cen­tral Bank's use­ful In­fla­tion pub­lic ed­u­ca­tion pam­phlet, the av­er­age price re­ceived by T&T for its crude plunged from US$28 a bar­rel in 1985 to US$15 a bar­rel in 1986.

This de­cline in the coun­try's rev­enues forced the new Na­tion­al Al­liance for Re­con­struc­tion ad­min­is­tra­tion, which was elect­ed in De­cem­ber 1986, to quick­en the pace of the coun­try's ad­just­ment.

Short­ly af­ter the NAR un­der Mr Robin­son as­sumed of­fice, the cost of liv­ing al­lowances that pub­lic ser­vants had en­joyed were dropped and the salaries of pub­lic ser­vants were cut by 10 per cent.

The Gov­ern­ment then en­tered in­to ne­go­ti­a­tions for a stand-by agree­ment with the IMF which was con­sum­mat­ed in 1989, fol­lowed short­ly there­after by a Struc­tur­al Ad­just­ment Loan from the World Bank.One of the con­di­tion­al­i­ties of the the IMF loan was the de­val­u­a­tion of the TT dol­lar.

On the is­sue of the coun­try's over­all fis­cal bal­ance, the da­ta in­di­cate that T&T record­ed deficits be­tween 1983 and 1994, when the deficit was $6.41 mil­lion, com­pared with a deficit of $648 mil­lion in 1992. Be­tween 1995 and 2008, T&T record­ed 11 years of fis­cal sur­plus­es and three years in which the bud­get was in deficit–in 1998, when the deficit was $742.6 mil­lion; 1999 when it was $1.02 bil­lion and 2001 when the gov­ern­ment spent 40.6 mil­lion more than it col­lect­ed. It is quite like­ly that the flota­tion of the TT dol­lar con­tributed to the fact that the coun­try went from a deficit po­si­tion dur­ing and af­ter the oil boom to what was large­ly a sur­plus po­si­tion af­ter 1995.

In­ter­est­ing­ly, even though the flota­tion of the TT dol­lar led to a 35 per cent de­pre­ci­a­tion in the ex­change rate in the days im­me­di­ate­ly af­ter April 13, 1993, T&T's ex­ter­nal debt (ex­pressed in TT dol­lars was $9.45 bil­lion in 1993, $10.07 bil­lion in 1994; $9.73 bil­lion in 1995 and $9.58 bil­lion in 1996. While the fact that pri­va­ti­za­tion pro­ceeds were be­ing used to pay down the coun­try's sov­er­eign debt, it is re­mark­able that T&T's ex­ter­nal debt did not sky­rock­et as a re­sult of the de­pre­ci­a­tion in its val­ue.

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