Emile Elias

Colm Im­bert will be re­mem­bered as the worst min­is­ter of fi­nance in the his­to­ry of Trinidad and To­ba­go (T&T). But he did not act alone. For 10 years, every reck­less de­ci­sion he made with re­spect to our ex­change rate was en­dorsed, de­fend­ed and en­abled by for­mer Prime Min­is­ter Dr. Kei­th Row­ley.

Row­ley in­ex­plic­a­bly kept him in the crit­i­cal po­si­tion of min­is­ter of fi­nance of­fice for al­most 10 years, and al­lowed Im­bert to pre­side over the most de­struc­tive decade of eco­nom­ic man­age­ment this coun­try has ever en­dured. This re­sult­ed in a wrecked econ­o­my, van­ish­ing for­eign re­serves and a na­tion brought to its fi­nan­cial knees.

Im­bert’s cen­tral blun­der was aban­don­ing the “man­aged float” sys­tem, ad­min­is­tered by the Cen­tral Bank (CBTT) that had served this coun­try very well. A man­aged float would have al­lowed the TT dol­lar to de­cline grad­u­al­ly, cush­ion­ing in­fla­tion, pre­serv­ing our for­eign ex­change re­serves, and sus­tain­ing our role as the fi­nan­cial pow­er­house of the Caribbean.

In­stead, Im­bert locked us in­to a de fac­to fixed ex­change rate with a ceil­ing of $6.79 to US$1. For a decade, he made the CBTT sell for­eign ex­change cheap­ly, squan­der­ing our na­tion­al wealth while try­ing to main­tain a false il­lu­sion of sta­bil­i­ty.

The con­se­quences have been cat­a­stroph­ic. Our re­serves, US$11.45 bil­lion in 2014, have now col­lapsed to per­ilous lows. Colum­nists/an­a­lysts such as Ralph Maraj and Dr. Ter­rence Far­rell and oth­ers have shown that once you deduct our bal­loon­ing for­eign debt, our net re­serves are to­day al­ready ef­fec­tive­ly ze­ro. Add to that the huge in­crease in TT’s debt, es­pe­cial­ly and crit­i­cal­ly, our for­eign debt.

Worse, those for­eign bor­row­ings were most­ly not for our coun­try’s de­vel­op­ment or growth. They were large­ly used to pa­per over the cracks and keep up ap­pear­ances of avail­able for­eign re­serves. Im­bert con­tin­ued to ex­e­cute this il­lu­sion of an econ­o­my “in good shape” up to his last day in that of­fice, be­fore he was un­cer­e­mo­ni­ous­ly sacked by new Prime Min­is­ter Stu­art Young.

To­day, Trinidad and To­ba­go is starved of for­eign ex­change. Crit­i­cal projects that would have cre­at­ed jobs and growth have stalled be­cause US dol­lars for im­port­ed equip­ment and ma­te­ri­als sim­ply can­not be found.

A thriv­ing, un­doc­u­ment­ed black mar­ket has emerged that is as bad as it has ever been since 1993, with the US dol­lar sell­ing for as much as $9 to US$1 out­side the bank­ing sys­tem. This is Im­bert’s lega­cy: short­ages, stag­na­tion, and the rise of a shad­ow econ­o­my.

All the while, every warn­ing was ig­nored. Econ­o­mists, busi­ness lead­ers and colum­nists made clear that this pol­i­cy was un­sus­tain­able. But Im­bert brushed them aside. His ar­ro­gance has drained our for­eign re­serves, stran­gled our econ­o­my, and brought us to the brink of an In­ter­na­tion­al Mon­e­tary Fund (IMF) pro­gramme.

And if the IMF comes, the peo­ple of this coun­try will pay: cuts in gov­ern­ment spend­ing, mass un­em­ploy­ment, re­duced trans­fers and sub­si­dies, high­er wa­ter and elec­tric­i­ty rates and forced de­val­u­a­tion. That is the bit­ter med­i­cine in­her­it­ed by the new Gov­ern­ment who must now re­solve this crit­i­cal is­sue be­fore it is too late.

And yet, dur­ing the last elec­tion cam­paign, the Peo­ple's Na­tion­al Move­ment reck­less­ly ac­cused the Unit­ed Na­tion­al Con­gress of plot­ting to float the TT dol­lar to $15 to US$1. The truth is the op­po­site: it was the Im­bert who en­gaged in a ten-year “cheap sale” of for­eign ex­change, stran­gling our re­serves and de­stroy­ing in­vestor con­fi­dence.

His­to­ry of­fers a clear ex­am­ple of what re­al lead­er­ship looks like. In April 1993, for­mer (late) Prime Min­is­ter Patrick Man­ning and his then Fi­nance Min­is­ter Wen­dell Mot­t­ley, along with the CBTT, bit the bul­let and freed the cur­ren­cy, at the same time mov­ing it from $4.25 to US$1 to $5.75. To put this in­to per­spec­tive, it cost 35 per cent more TT dol­lars to buy US$1 af­ter this was done. To­day, a sim­i­lar pol­i­cy de­ci­sion would bring us to cir­ca $9:1.

That bold and his­toric step in April 1993, af­ter decades of con­trols, re­stored faith in our eco­nom­ic fu­ture, at­tract­ed in­vest­ment, and re­built re­serves year af­ter year for about 22 years!

As Lloyd Best told me in 1985, “the cor­rect ex­change rate is 10/1 and if im­ple­ment­ed, it will un­leash the pro­duc­tive forces of the coun­try.” That wis­dom is as ur­gent now as it was then.

Madam Prime Min­is­ter Kam­la Per­sad-Bisses­sar, the choice be­fore you is stark. Do we act now by tak­ing the dif­fi­cult but nec­es­sary steps to cor­rect 10 years of ex­change rate mis­man­age­ment, or do we sit back and wait for the IMF to dic­tate our fu­ture in two years’ time?

De­lay is the path of ru­in. Yes, ad­just­ment will be painful. But it can and must be man­aged with fair­ness and com­pas­sion. The gen­uine poor must be pro­tect­ed, while those who can af­ford it, should shoul­der more. The path for­ward is clear.

Here are some sug­ges­tions for your con­sid­er­a­tion:

• A $300 mil­lion tar­get­ted food stamp pro­gramme for gen­uine­ly poor fam­i­lies, lim­it­ed strict­ly to es­sen­tial items;

• Ad­just­ments to elec­tric­i­ty rates, spar­ing low-use house­holds while re­quir­ing the mid­dle and up­per class­es to pay more;

• An im­me­di­ate in­crease in the min­i­mum wage to $26 per hour (with fur­ther in­creas­es over the next two years) with a tar­get of $30 per hour, lift­ing thou­sands of work­ers out of pover­ty—no mat­ter the croc­o­dile tears of wealthy busi­ness own­ers liv­ing in lux­u­ry while pay­ing very low wages.

But let us not fool our­selves: tin­ker­ing at the edges or shift­ing who gets scarce for­eign ex­change will not solve this cri­sis. Di­ver­si­fi­ca­tion and dreams of a nat­ur­al gas and oil boom years away can­not save us if the TT dol­lar re­mains grotesque­ly over­val­ued. On­ly a de­ci­sive cor­rec­tion of the ex­change rate will.

Madam Prime Min­is­ter, his­to­ry has placed this re­spon­si­bil­i­ty on your shoul­ders. Please em­pow­er the Gov­er­nor of the Cen­tral Bank to man­age mon­e­tary pol­i­cy (in­ter­est rates and the ex­change rate), while your Min­is­ter of Fi­nance fo­cuss­es on fis­cal re­spon­si­bil­i­ty (the na­tion­al bud­get and lev­els of spend­ing).

If you act de­ci­sive­ly, your lega­cy will be that of the leader who re­stored san­i­ty to the ex­change rate, elim­i­nat­ed the black mar­ket, re­built re­serves, and re­stored T&T’s cred­i­bil­i­ty.

Overnight, the black mar­ket would dis­ap­pear. Ex­ports would rise. In­vest­ment in­flows would in­crease. And de­mand would nor­malise once cit­i­zens and busi­ness­es alike knew they could re­li­ably ac­cess US dol­lars through the bank­ing sys­tem, but at the cor­rect price.

This na­tion can­not for­get that it was Colm Im­bert who as Min­is­ter of Fi­nance was the ar­chi­tect of this cri­sis, but he was en­abled by many oth­ers who are the co-own­ers of this de­struc­tion. To­geth­er, they squan­dered a decade and sab­o­taged our eco­nom­ic fu­ture for po­lit­i­cal gain.

Madam Prime Min­is­ter, the coun­try is watch­ing. Please act with courage, hon­esty, and fore­sight.

Save T&T—move the rate to $9 to US$1 now.