Econ­o­mist Dr Mar­lene Attzs is ad­vis­ing that the sit­u­a­tion fac­ing T&T re­gard­ing short­falls in forex earn­ings is a com­plex one re­quir­ing a mul­ti-pronged ap­proach.

As a short-term mea­sure, she said the Gov­ern­ment might need to ad­just its bud­get to ac­count for the de­crease in rev­enue from the en­er­gy sec­tor.

“This could in­volve Gov­ern­ment cut­ting spend­ing – per­haps hav­ing an­oth­er look at trans­fers and sub­si­dies - but in cut­ting ex­pen­di­tures Gov­ern­ment must en­sure that the im­pact of any fis­cal mea­sures they take, do not sig­nif­i­cant­ly af­fect the vul­ner­a­ble in our so­ci­ety and those at the bot­tom of the so­cio-eco­nom­ic lad­der,” Attzs said.

She fur­ther rec­om­mend­ed that con­ver­sa­tions around di­ver­si­fi­ca­tion and struc­tur­al ad­just­ment must take cen­trestage as the need to di­ver­si­fy this coun­try’s rev­enue streams is be­com­ing more and more ev­i­dent giv­en what is cur­rent­ly tak­ing place in the glob­al en­er­gy mar­ket.

Attzs made the com­ments against the back­drop of the Cen­tral Bank’s 2023 an­nu­al re­port which states that T&T’s en­er­gy-re­lat­ed rev­enues were im­pact­ed by soft­er en­er­gy prices cou­pled with low­er do­mes­tic en­er­gy pro­duc­tion.

The re­port stat­ed that pre­lim­i­nary es­ti­mates from the Min­istry of Fi­nance showed the Cen­tral Gov­ern­ment ac­counts reg­is­tered a deficit of $3.4 bil­lion in FY2022/23 (1.8 per cent of GDP).

This com­pares with an orig­i­nal­ly bud­get­ed deficit of $1.5 bil­lion and an ac­tu­al fis­cal sur­plus of $1.3 bil­lion in FY2021/22.

Gov­ern­ment rev­enue de­clined by $787.7 mil­lion from the pre­vi­ous fi­nan­cial year to $53.8 bil­lion, due to a fall-off in en­er­gy re­ceipts which were part­ly off­set by high­er non-en­er­gy rev­enue.

To­tal ex­pen­di­ture in­creased by $4.0 bil­lion to reach $57.2 bil­lion, due in part to high­er trans­fers and sub­si­dies.

In shar­ing her in­sights, Attzs said, “Based on an ini­tial pe­rusal of the CBTT’s 2023 an­nu­al re­port, the bank is re­port­ing that rev­enues from the en­er­gy sec­tor, the pri­ma­ry source of for­eign cur­ren­cy in­flows for T&T, were low­er. This was due to soft­er en­er­gy prices and low­er pro­duc­tion. If you’re pro­duc­ing less and sell­ing it for a low­er price, it leads to a dou­ble wham­my on rev­enue.”

She said the low­er forex in­flows would re­sult in tighter con­di­tions, which means it be­comes more dif­fi­cult and ex­pen­sive to buy for­eign cur­ren­cy.

“In T&T, we have a num­ber of busi­ness­es and in­di­vid­u­als con­sum­ing for­eign cur­ren­cy to im­port goods, to trav­el, or to in­vest over­seas.

“If there’s a de­crease in for­eign cur­ren­cy en­ter­ing the coun­try (low­er in­flows), this re­duces the over­all sup­ply of for­eign cur­ren­cy avail­able in the mar­ket and what fol­lows in the­o­ry, is with less for­eign cur­ren­cy avail­able (sup­ply) and con­sis­tent de­mand, the price of for­eign cur­ren­cy tends to rise,” Attzs added.

In its an­nu­al re­port the bank al­so de­tailed that con­di­tions in the do­mes­tic for­eign ex­change mar­ket tight­ened dur­ing FY2022/23 when com­pared to the pre­vi­ous year, due to rel­a­tive­ly low­er mar­ket in­flows.

Dur­ing the year, to­tal pur­chas­es of for­eign ex­change by au­tho­rised deal­ers from the pub­lic amount­ed to US$4,919.8 mil­lion, which was 8.2 per cent low­er when com­pared with the pre­vi­ous fi­nan­cial year.

Con­ver­sions by en­er­gy sec­tor com­pa­nies—the main source of for­eign ex­change in­flows to the mar­ket—fell by 16.5 per cent and ac­count­ed for 67.5 per cent of the deal­ers’ to­tal pur­chas­es from the pub­lic.

The bank stat­ed that it main­tained its reg­u­lar in­ter­ven­tions in the mar­ket, sell­ing a to­tal of US$1,333.1 mil­lion to the au­tho­rised deal­ers dur­ing the year.

The au­tho­rised deal­ers sold US$6,444.1 mil­lion to the pub­lic, 3.0 per cent high­er than the US$6,257.2 mil­lion sold dur­ing FY2021/22.

Not­ing that there has not been a de­pre­ci­a­tion in the ex­change rate, since the Cen­tral Bank in­ter­venes to man­age any volatil­i­ty of that rate, Attzs said the Bank’s in­ter­ven­tions in the forex mar­ket “…typ­i­cal­ly in­volve the sale of for­eign cur­ren­cy to au­tho­rised deal­ers to meet ex­cess de­mand but may al­so in­clude the pur­chase of for­eign cur­ren­cy from the au­tho­rised deal­ers in cas­es of ex­cess sup­ply.”

Cit­ing that the bank “in­creased its sup­port to the do­mes­tic for­eign ex­change mar­ket, sell­ing US$1,331.5 mil­lion to au­tho­rised deal­ers, US$83.1 mil­lion more than in the pre­vi­ous year…” Attzs said this sug­gests the na­tion­al ap­petite for im­ports, for which forex is re­quired, re­mains healthy while the in­flows of forex have de­clined.

How­ev­er, she said while there are buffers in terms of forex re­serves and Her­itage and Sta­bil­i­sa­tion Fund (HSF), she warned, “We ought not to be draw­ing down on these buffers to pay for con­sump­tion of im­ports – new cars, food stuff, for­eign trav­el etc.”

The re­port al­so not­ed that T&T’s gross of­fi­cial re­serves amount­ed to US$6,346.3 mil­lion at the end of Sep­tem­ber 2023, US$486.1 mil­lion low­er than the lev­el at the end of De­cem­ber 2022.

It stat­ed that the ex­ter­nal ac­counts, there­fore, reg­is­tered an over­all deficit in the first nine months of 2023.

The re­serves as at Sep­tem­ber 2023 rep­re­sent 7.9 months of prospec­tive im­ports of goods and ser­vices.

Re­gard­ing cur­ren­cy in cir­cu­la­tion as at Sep­tem­ber 30, 2023, there was ap­prox­i­mate­ly $8.9 bil­lion in cir­cu­la­tion, of which $8.7 bil­lion was held in ban­knotes and $267 mil­lion was in coins.

This rep­re­sent­ed an in­crease of 1.4 per cent from the $8.8 bil­lion in cur­ren­cy in cir­cu­la­tion as at Sep­tem­ber 30, 2022.

As at Sep­tem­ber 30, 2023, the $100 de­nom­i­na­tion rep­re­sent­ed the largest val­ue of all notes in cir­cu­la­tion, ac­count­ing for 90 per cent of to­tal val­ue.

On the oth­er hand, the $1 de­nom­i­na­tion ac­count­ed for the largest vol­ume of notes in cir­cu­la­tion at 44 per cent, while the $100 de­nom­i­na­tion ac­count­ed for 34 per cent, the re­port added.

On the per­for­mance of the gen­er­al do­mes­tic econ­o­my Cen­tral Bank Gov­er­nor Dr Alvin Hi­laire said it ex­pe­ri­enced a con­tin­ued re­vival in ac­tiv­i­ty, with sus­tained growth in busi­ness op­er­a­tions on the back of good mo­men­tum in the avail­abil­i­ty of cred­it, and high­er con­sumer con­fi­dence.

He al­so not­ed that un­em­ploy­ment con­di­tions im­proved, while do­mes­tic in­fla­tion mod­er­at­ed con­sid­er­ably.

On the mon­e­tary pol­i­cy front, Hi­laire cit­ed that the Cen­tral Bank kept the re­po rate at 3.50 per cent over the fi­nan­cial year, and in­ten­si­fied its use of open mar­ket op­er­a­tions.

At the same time, the mon­e­tary pol­i­cy com­mit­tee not­ed the need for care­ful on­go­ing mon­i­tor­ing of de­vel­op­ments in the de­ter­mi­na­tion of pol­i­cy mov­ing for­ward, par­tic­u­lar­ly in light of the evolv­ing sit­u­a­tion on ex­ter­nal in­ter­est rates.

Go­ing for­ward the Cen­tral Bank Gov­er­nor said for the new fi­nan­cial year, the bank re­mains nim­ble and well-equipped to face up­com­ing chal­lenges.

“The fo­cus will be on con­sol­i­dat­ing what we have achieved to date, by fur­ther strength­en­ing our process­es, con­trols, an­a­lyt­i­cal ca­pac­i­ty and com­mu­ni­ca­tions, while im­prov­ing the in­ter­ac­tions among de­part­ments and with ex­ter­nal agen­cies,” Hi­laire said.

He fur­ther ex­plained that four key ar­eas of fo­cus will be cy­ber­se­cu­ri­ty, the pay­ments sys­tem, fin­tech and pri­vate pen­sion re­form.