An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

Po­lit­i­cal econ­o­mist, Dr Derek Ram­samooj, has warned that T&T’s per­sis­tent for­eign ex­change cri­sis is not the re­sult of re­cent mis­steps, but the cu­mu­la­tive ef­fect of decades of eco­nom­ic mis­man­age­ment and unchecked con­sump­tion pat­terns.  

He be­lieves the sit­u­a­tion now de­mands struc­tur­al re­form rather than short-term in­ter­ven­tions or pol­i­cy rhetoric.

Speak­ing to the Busi­ness Guardian on Tues­day, Dr Ram­samooj traced the roots of the coun­try’s for­eign ex­change chal­lenge to the 1970s oil boom, which, he said, fos­tered an un­sus­tain­able de­pen­den­cy on im­port­ed goods and for­eign com­modi­ties.

“We no longer pro­duce enough com­modi­ties to earn for­eign ex­change, yet our de­mand for for­eign goods and ser­vices con­tin­ues to rise,” he not­ed. “From food to phar­ma­ceu­ti­cals to ve­hi­cles, our con­sump­tion pat­terns re­main deeply for­eign dri­ven.”

The econ­o­mist said T&T suf­fers from a “dire man­u­fac­tur­ing prob­lem” and a weak sup­ply chain for pro­duc­tion in­puts. He ar­gued that the coun­try’s eco­nom­ic mod­el must be re­struc­tured from the ground up, start­ing with re­order­ing so­ci­etal con­sump­tion habits.

Ram­samooj al­so crit­i­cised the state’s wel­fare frame­work, stat­ing that so­cial as­sis­tance of­ten fu­els for­eign de­mand rather than bol­ster­ing lo­cal pro­duc­tion.

“We are giv­ing peo­ple mon­ey to buy for­eign goods. That’s not sus­tain­able. It will take at least five to sev­en years to re­form our de­mand struc­ture, but it must be­gin with po­lit­i­cal will,” he high­light­ed.

Ram­samooj al­so weighed in on the com­mer­cial banks fol­low­ing crit­i­cisms from cer­tain busi­ness own­ers over the dis­tri­b­u­tion of for­eign ex­change.  

“We need to un­der­stand why banks be­have in such a dis­crim­i­na­to­ry fash­ion as this speaks to broad­er is­sues of pro­cure­ment, ac­count­abil­i­ty and the lack of reg­u­la­to­ry over­sight,” the po­lit­i­cal econ­o­mist em­pha­sised.  

He called for greater scruti­ny of mo­nop­o­lis­tic be­hav­iour in the bank­ing and con­struc­tion sec­tors, and warned that with­out cam­paign fi­nance re­form and in­sti­tu­tion­al checks, po­lit­i­cal in­flu­ence over the econ­o­my would re­main a key hur­dle.

“Are we will­ing to deal with the car­tels?” he asked. “Our in­sti­tu­tions have failed to evolve, and the po­lit­i­cal rhetoric must now give way to ac­tion.”

Cen­tral Bank Gov­er­nor Lar­ry Howai, who has been en­gag­ing with var­i­ous stake­hold­ers since his ap­point­ment in June, faces the im­me­di­ate chal­lenge of man­ag­ing for­eign ex­change dis­tri­b­u­tion while con­tend­ing with deep­er struc­tur­al is­sues.

Ram­samooj cau­tioned that the prob­lem ex­tends be­yond the Cen­tral Bank’s dis­burse­ment of for­eign ex­change.

“The banks are not just gate­keep­ers of for­eign ex­change, they’re key play­ers in the econ­o­my. We need an­ti-mo­nop­o­lis­tic reg­u­la­tion, a re­struc­tur­ing of the fi­nan­cial sec­tor, and a com­mit­ment to re­duc­ing eco­nom­ic con­cen­tra­tion.”

He stressed that dig­i­tal trans­for­ma­tion and fin­tech de­vel­op­ment must al­so be care­ful­ly reg­u­lat­ed to pre­vent fur­ther en­trench­ment of eco­nom­ic mo­nop­o­lies.

De­val­u­a­tion not the so­lu­tion

On the re­cur­ring de­bate over whether the Gov­ern­ment should de­val­ue the TT dol­lar, Ram­samooj was un­equiv­o­cal.

“De­val­u­a­tion won’t solve our struc­tur­al prob­lems. It will sim­ply mask them,” he stat­ed.

Ram­samooj drew par­al­lels to the Na­tion­al Al­liance for Re­con­struc­tion (NAR) ad­min­is­tra­tion of the late 1980s, which at­tempt­ed eco­nom­ic re­form but was re­ject­ed by a pop­u­la­tion un­pre­pared for change.

“This is as much a psy­cho­log­i­cal is­sue as it is eco­nom­ic. We must ed­u­cate cit­i­zens on re­spon­si­ble con­sump­tion and boost do­mes­tic pro­duc­tion in key sec­tors like agri­cul­ture.”

US tar­iffs and oil agree­ments add pres­sure

Com­ment­ing on the re­cent­ly im­posed 15 per cent US tar­iff on T&T ex­ports, Ram­samooj warned it will fur­ther strain the man­u­fac­tur­ing sec­tor and re­duce ex­port com­pet­i­tive­ness.

Ram­samooj al­so ques­tioned Cari­com’s abil­i­ty to re­spond with a unit­ed front and chal­lenged the T&T Gov­ern­ment to adopt a more as­sertive for­eign pol­i­cy stance, in­clud­ing pur­su­ing reci­procity in ar­eas such as visa fees and trade.

At the same time, he ac­knowl­edged the po­ten­tial ben­e­fit of the Gov­ern­ment’s new deep­wa­ter en­er­gy agree­ment with Exxon­Mo­bil, which was signe­don Tues­day.

Break­down of forex cri­sis  

Re­search an­a­lyst So­raya Path­manan­dam, work­ing out of the Ram­samooj’s of­fice, broke down how far back this coun­try has been fac­ing this is­sue.

In her 17-page doc­u­ment, which she com­piled from sev­er­al bud­get pre­sen­ta­tions, Path­manan­dam’s re­search out­lined that be­tween 2001 and 2025,  T&T ex­pe­ri­enced sig­nif­i­cant vari­abil­i­ty in US-dol­lar ex­pen­di­ture and bud­get al­lo­ca­tions across dif­fer­ent po­lit­i­cal ad­min­is­tra­tions.  

Based on com­piled es­ti­mates, US-dol­lar ex­pen­di­ture in­creased from ap­prox­i­mate­ly US$21.25 bil­lion dur­ing 2001 to 2005, un­der the ad­min­is­tra­tion of Patrick Man­ning, to US$38.46 bil­lion dur­ing 2006–2010, when Patrick Man­ning was still prime min­is­ter.

The US-dol­lar ex­pen­di­ture peaked un­der the 2010–2015 Kam­la Pere­sad-Bisses­sar ad­min­is­tra­tion with an es­ti­mat­ed US$41 bil­lion, be­fore de­clin­ing to US$37 bil­lion USD from 2015–2020 un­der the Dr Kei­th Row­ley gov­ern­ment, and ris­ing again to $39.2 bil­lion USD in the 2021–2025 pe­ri­od un­der the sec­ond term of the Row­ley-led ad­min­is­tra­tion.  

Mean­while, the doc­u­ment stat­ed that na­tion­al bud­get al­lo­ca­tions over the same pe­ri­ods were ap­prox­i­mate­ly $16.9 bil­lion, $33.13 bil­lion, $44–$52 bil­lion, $46.35 bil­lion, and $47.8 bil­lion re­spec­tive­ly.  

This dis­con­nect be­tween US-dol­lar ex­pen­di­ture and to­tal bud­get al­lo­ca­tions rais­es ques­tions about forex pri­ori­ti­sa­tion, im­port cov­er­age and the fis­cal re­silience of the T&T econ­o­my, Path­manan­dam ar­gues.

Delv­ing fur­ther in­to the re­search, she said that when a coun­try ex­pe­ri­ences US-dol­lar scarci­ty, it typ­i­cal­ly re­flects broad­er macro­eco­nom­ic chal­lenges.  

This scarci­ty af­fects fi­nan­cial sta­bil­i­ty, in­vestor con­fi­dence, cred­it­wor­thi­ness, and so­cial con­di­tions.

Look­ing at the dif­fer­ent coun­tries, her re­search ex­am­ined Ja­maica’s econ­o­my, which is high­ly vul­ner­a­ble to USD short­ages due to its ex­treme de­pen­dence on tourism and re­mit­tances, which serve as the coun­try’s pri­ma­ry sources of for­eign ex­change.  

Glob­al shocks such as a pan­dem­ic or glob­al re­ces­sions can abrupt­ly cur­tail these in­flows, in­stant­ly re­duc­ing US-dol­lar liq­uid­i­ty and strain­ing both of­fi­cial and black-mar­ket cur­ren­cy ac­cess.

Path­manan­dam’s re­search out­lined that this com­bi­na­tion of rigid mon­e­tary pol­i­cy, eco­nom­ic con­cen­tra­tion and con­strained ex­ter­nal fi­nanc­ing makes Be­lize par­tic­u­lar­ly sus­cep­ti­ble to the macro-eco­nom­ic con­se­quences of for­eign ex­change short­ages.

The re­search in­di­cat­ed that Sri Lan­ka’s eco­nom­ic col­lapse dur­ing 2021-2022 il­lus­trates the ex­treme con­se­quences of pro­longed US-dol­lar scarci­ty, root­ed in years of high ex­ter­nal debt ac­cu­mu­la­tion through in­ter­na­tion­al sov­er­eign bonds and bi­lat­er­al loans. When the coun­try’s for­eign re­serves dwin­dled to crit­i­cal­ly low lev­els, with un­der US$50 mil­lion in us­able re­serves, it de­fault­ed on its ex­ter­nal debt for the first time in April 2022. That meant it lost ac­cess to glob­al cred­it mar­kets, which trig­gered an In­ter­na­tion­al Mon­e­tary Fund (IMF) led re­struc­tur­ing process.

Draw­ing lessons from coun­tries like Venezuela, Sri Lan­ka, Ja­maica, Be­lize, Bar­ba­dos, and Mau­ri­tius, Path­manan­dam de­tailed in the doc­u­ment that T&T faces sig­nif­i­cant risks if US-dol­lars short­ages in­ten­si­fy.

“If re­serves fall and ac­cess to the US dol­lar be­comes re­strict­ed, the coun­try may ex­pe­ri­ence a grow­ing black mar­ket, price dis­tor­tions, and pres­sure on the TT dol­lar, even with­in its man­aged ex­change rate regime. More­over, as in Bar­ba­dos and Be­lize, de­fend­ing the cur­ren­cy could come at the cost of so­cial spend­ing or eco­nom­ic growth,” Path­manan­dam con­clud­ed.