GEISHA KOWLESSAR ALONZO
As T&T approaches its upcoming national budget presentation under the weight of a severe dual crisis: pervasive violent and white-collar crime alongside an acute shortage of foreign exchange.
While public discourse frequently treats public safety and balance-of-payments constraints as distinct policy domains, leading economist and advisor on the Caribbean Marla Dukharan argues that the two issues are deeply interconnected and mutually reinforcing.
In her analysis of the nation’s macroeconomic posture ahead of the fiscal package, Dukharan framed the central premise directly as she told the Business Guardian, “The two most immediate challenges Trinidad and Tobago faces today, in my view, are crime (both violent and white collar) and inadequate access to foreign exchange reserves. And though it might not seem obvious, I believe that these two problems, in particular, are closely related.”
The security landscape remains fragile despite state interventions. Although security operations and temporary emergency measures produced a drop in homicide figures in 2025 relative to the previous year, she warned against prematurely interpreting this as a permanent fix.
“The recurrent States of Emergency and the actions taken have, so far, yielded a decline in the 2025 homicide rate versus 2024, but it is not yet clear that this is a trend, versus an anomaly,” Dukharan said adding,”Furthermore, the international travel advisories and other manifestations of low levels of confidence persist.”
The confidence loop and illicit flows
At the core of the foreign exchange constraint is a fundamental erosion of institutional trust.
Market confidence in a country’s economic health dictates confidence in its domestic currency.
When local confidence drops, businesses and individuals actively seek refuge in foreign currencies—most notably the United States dollar—driving up both speculative and precautionary demand as Dukharan noted, “Confidence in our economy is a major determinant of confidence in our currency. And in so far as the confidence in our economy is weak, this stokes demand for other currencies, most notably, US$. And this is partly why I think the two major issues - crime and foreign exchange availability, are related.”
This dynamic is further exacerbated by the nexus between high-level financial facilitation and organised crime.
A major public disclosure recently highlighted the extent of illicit capital flight, as Dukharan cited when the Prime Minister had revealed in June 2026, “The State is getting foreign assistance to track billions of US dollars that has been sent out of the country over the last 20 years. Some current and former high-ranking officials of local banks facilitated the sale of massive amounts of foreign currency to local businesses, which was then transferred to foreign accounts linked to cartels and also used to purchase real estate holdings and businesses in collaboration with cartels.”
Dukharan pointed out that this relationship creates a destructive macroeconomic feedback loop stating,”The feedback loop is real - high crime, low confidence, higher demand for USD vs TTD, foreign exchange availability and reserves in steady decline prompting even more speculative and precautionary demand, and encouraging even more criminal activity.”
Legal agreements and de facto restrictions
The operational management of foreign exchange has also drawn serious legal and policy scrutiny.
In 1993, Parliament amended the Exchange Control Act to liberalise access to foreign exchange and eliminate formal administrative controls.
Furthermore, international treaties and agreements with multilateral bodies like the International Monetary Fund (IMF) bind the state to maintain open currency access.
However, the day-to-day reality for local businesses and citizens involves severe administrative rationing, commercial bank waiting lists and restricted credit card limits.
Dukharan emphasised that these informal restrictions run directly counter to statutory law saying, “Furthermore, since 2016, as discussed here, the IMF pointed out that our Government is in breach of the international agreements it signed on behalf of the people of T&T regarding foreign exchange management. Since 1993, the Government amended the Exchange Control Act to ‘liberalise’ access to and remove controls on foreign exchange access. So the foreign exchange restrictions we face today, the (de facto) controls that are currently in place, the calls for ‘transparency’ (and controls) on who has access to foreign exchange, are all in breach of the prevailing laws and agreements that our Government has signed/enacted on our behalf internationally and domestically.”
Looking toward the presentation of the upcoming fiscal package, she issued a direct call for legislative alignment: “I would like to see our Minister of Finance make an announcement that we as a country will no longer be in breach of international laws and agreements which we signed, and remove the de facto foreign exchange controls which are outside of our own legislation as well.”
Missing foreign exchange and accountability demands
The sheer magnitude of unrecorded foreign exchange leaving the country highlights the need for institutional transparency. Central Bank balance-of-payments data over the 2011 to 2026 period shows a massive drain under net errors and omissions.
Detailing the comparative scale of this loss, Dukharan points out: “That US$25 billion has gone missing from our country’s foreign reserves (according to CBTT data from 2011 to 2026), means that on a per capita basis, we are the world’s largest losers of foreign currency. Only 20 countries globally have lost more in absolute USD than we have from 2011–22, and only three countries — Djibouti, Liberia, and the Marshall Islands — have lost more relative to GDP in that time.”
Borrowed reserves and rising debt
Regional comparative data underscores the structural nature of T&T’s foreign exchange drain.
Drawing from her September 2026 Caribbean Economic Report, Dukharan noted that the nation stands as a stark regional outlier saying, “If you look at my last monthly report you will see very clearly that T&T is the only country whose foreign exchange reserves have displayed steady decline for more than a decade. But this is not news. People are aware of this, and this creates even more speculative and precautionary demand for US$.”
A critical, often overlooked dimension of the reserve statistics is that the nation’s foreign reserve buffer is composed entirely of external debt rather than organic savings.
With external debt hovering around US$5.7 billion, the country’s gross international reserves are fully offset by foreign liabilities.
As Dukharan explicitly stressed, “I also point out in my monthly Caribbean Economic Report, that our entire foreign exchange reserves, and more, are borrowed, given that our external debt is about US$5.7 billion. This means we do not have any true reserves - they are funds owed to foreign lenders, with interest.”
This structural borrowing is driven by a persistent fiscal habit of spending beyond national earnings.
Even during historic revenue peaks, fiscal discipline remained elusive.
“This current Government presided over the highest level of fiscal revenue our country ever saw in 2014 at close to TT$60 billion, which was more than was budgeted / expected, and still somehow they managed to spend more than they budgeted and still ran a fiscal deficit and therefore had to borrow. As such, I am not holding my breath and expecting much, but moving closer to a balanced budget would be a welcomed development in this budget,” Dukharan said.
With overall public debt approaching 90 per cent of Gross Domestic Product (GDP), arguments that current debt levels remain manageable face severe mathematical hurdles and evaluating the debt trajectory against international benchmarks, Dukharan cautions
“And for anyone who thinks the current level of debt approaching 90 per cent of GDP is somehow manageable, I point them to the fact that our reserves are more than 100 per cent borrowed, we have a primary fiscal deficit which means we are borrowing just to pay the interest on existing debt, and the established debt sustainability metrics for Caribbean countries is around 55 to 56 per cent debt/GDP, which we crossed several years ago.”
