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Monday, July 14, 2025

Econ­o­mist Mar­la Dukha­ran on er­rors and omis­sions in T&T’s bal­ance of pay­ments :

T&T ‘loses’ US$25B in 12 years

by

Geisha Kowlessar-Alonzo
344 days ago
20240803

GEISHA KOW­LESSAR-ALON­ZO

T&T born Caribbean Econ­o­mist Mar­la Dukha­ran is con­tend­ing that on av­er­age over US$2 bil­lion “dis­ap­pears” from this coun­try, adding that on a per capi­ta ba­sis, T&T is the world’s largest losers of for­eign cur­ren­cy.

She made the com­ments in an es­say ti­tled, “T&T is the world’s largest los­er (not user) of for­eign ex­change” in her Ju­ly 2024 Caribbean Month­ly Eco­nom­ic Re­port, which was re­leased last Wednes­day.

Mem­bers of the lo­cal busi­ness com­mu­ni­ty con­tin­ue to ex­press con­cerns about the avail­abil­i­ty of for­eign ex­change, which has neg­a­tive­ly im­pact­ed busi­ness sus­tain­abil­i­ty in some in­stances.

How­ev­er, in look­ing deep­er at the is­sue of T&T’s for­eign ex­change regime, Dukha­ran said, “When next you hear the au­thor­i­ties say Trin­bag­o­ni­ans de­mand too much for­eign ex­change, we im­port too many ‘lux­u­ry’ items, we shop on­line too much, we use for­eign cred­it cards too much, we trav­el too much, and we get blamed for all the for­eign ex­change prob­lems in T&T, stop and think about this; for the past 12 years (2011-2023), over US$25 bil­lion has gone miss­ing from our coun­try.

“On av­er­age, over US$2 bil­lion each year just dis­ap­pears, and no­body has been able to ac­count for it, ever. But have you ever seen this in the news?”

Us­ing the In­ter­na­tion­al Mon­e­tary Fund’s (IMF) glob­al data­base with da­ta for 2011 to 2022, Dukha­ran fur­ther not­ed that the er­rors and omis­sions (E&O) item for T&T shows a net out­flow of US$23 bil­lion that “we can’t ac­count for.” The ad­di­tion­al US$2 bil­lion comes from Cen­tral Bank da­ta, she said.

She said er­rors and omis­sions is sup­posed to be an in­signif­i­cant bal­anc­ing item due main­ly to sta­tis­ti­cal er­rors on the bal­ance of pay­ments ac­count, which ac­counts for all the cross-bor­der trans­ac­tions of a na­tion, such as in­ter­na­tion­al trade, for­eign di­rect in­vest­ment re­mit­tances.

She said the US$25 bil­lion that has gone miss­ing is about 77 per cent the size of the econ­o­my (2022, IMF) and over US$16,000 per per­son.

“On a per capi­ta ba­sis, we are the world’s largest losers of for­eign cur­ren­cy, mean­ing if we take er­rors and omis­sions loss­es and di­vide it by the coun­try’s pop­u­la­tion, we have lost the most glob­al­ly. On­ly 20 coun­tries glob­al­ly have lost more in ab­solute US-dol­lar term than we have from 2011 to 2022. And if T&T’s er­rors and omis­sions loss­es are di­vid­ed by our gross do­mes­tic prod­uct (GDP) on­ly three coun­tries – Dji­bouti, Liberia and the Mar­shall Is­lands – have lost more rel­a­tive to GDP,” Dukha­ran fur­ther stat­ed.

Not­ing that T&T’s na­tion­al debt lev­el is low­er than 77 per cent of GDP, Dukha­ran said this means T&T has lost more US dol­lars than the Gov­ern­ment has bor­rowed.

“...T&T is the on­ly coun­try in the re­gion where re­serves con­sis­tent­ly trend down­wards, de­clin­ing by 48 per cent from the US$11.5 bil­lion peak in 2014 to US$5.98 bil­lion in June 2024. In the ab­sence of Gov­ern­ment bor­row­ing and with­drawals from the Her­itage and Sta­bil­i­sa­tion Fund (HSF), T&T’s for­eign ex­change re­serves would be on­ly US$157 mil­lion in March 2024, which is rough­ly one week of im­port cov­er,” she said.

E&O haem­or­rhag­ing?

Dukha­ran al­so asked what ex­plains er­rors and omis­sions haem­or­rhag­ing as she looked at the sta­tis­ti­cal in­fra­struc­ture.

In a sub­head ti­tled, “We lose the most US dol­lars per capi­ta in the world via er­rors and omis­sions” Dukha­ran ex­plained, “The weak­er the sta­tis­ti­cal in­fra­struc­ture, the less ac­cu­rate the da­ta will be, so this (not sur­pris­ing giv­en our over­all weak and de­clin­ing in­sti­tu­tions) is one like­ly ex­pla­na­tion. But if sta­tis­ti­cal weak­ness was the biggest ex­plana­to­ry fac­tor, one would ex­pect the er­rors and omis­sions item to be a fair­ly ran­dom num­ber – pos­i­tives and neg­a­tives, large and small.

“But T&T’s er­rors and omis­sions item has been con­sis­tent­ly neg­a­tive every year since 2011 (the ear­li­est da­ta avail­able), mean­ing we have an un­doc­u­ment­ed net out­flow of US dol­lars each year that we can’t ac­count for. Fur­ther­more, apart from 2012 and then 2020 to 2021 (COVID) the E&O item has con­sis­tent­ly ex­ceed­ed US$1 bil­lion each year, the high­est be­ing US$4.8 bil­lion in 2013. And this pat­tern in the da­ta sug­gests that some­thing else, apart from sta­tis­ti­cal weak­ness, is at play,” she said.

Ac­cord­ing to Dukha­ran, the TT dol­lar is over­val­ued ver­sus the black mar­ket for­eign ex­change rate which ranges from TT$7.50 to 10.00 to US$1, adding that by main­tain­ing the ex­change rate at rough­ly TT$6.76 to US$1, the Gov­ern­ment is ef­fec­tive­ly sub­si­dis­ing the sale of US dol­lars and there­fore, ar­ti­fi­cial­ly cre­at­ing a lev­el of (spec­u­la­tive) de­mand for US dol­lars that would oth­er­wise not ex­ist at “say TT$10.00/US$.”

Fur­ther­more, she said the un­avail­abil­i­ty of US dol­lars cre­ates a lev­el of pre­cau­tion­ary de­mand for US cur­ren­cy that does not ex­ist else­where in the Caribbean, for ex­am­ple.

All of this, Dukha­ran said dri­ves a lack of con­fi­dence in the TT dol­lar and a pref­er­ence for US dol­lars and cap­i­tal flight.

“The Gov­ern­ment has cre­at­ed a mas­sive in­cen­tive for us to find, earn, buy, hold and take over­seas as much US dol­lars as we can. And this per­verse in­cen­tive, com­bined with our weak in­sti­tu­tions and poor crime de­tec­tion is flam­ma­ble, bleed­ing in­to the (re­gion­al, gang-re­lat­ed) crime as­so­ci­at­ed with the north­ward move­ment of nar­cotics, and the safe re­turn (and laun­der­ing) of US dol­lars back to the pro­duc­ers pri­mar­i­ly in Latin Amer­i­ca,” she added.

Stat­ing that the best way for US dol­lars to leave T&T “un­doc­u­ment­ed” is via cash and portable, valu­able goods such as jew­el­ry, Dukha­ran said she was cer­tain that it is “pure­ly co­in­ci­den­tal that our er­rors and omis­sions loss­es took off just when the pre­vi­ous Gov­ern­ment in­tro­duced di­rect flights to Pana­ma and Lon­don (re­put­ed to be mon­ey laun­der­ing hotspots), and that our er­rors and omis­sions loss­es were low­est dur­ing the COVID-19 pan­dem­ic when our bor­ders were closed.”

She al­so not­ed that as with traf­fic jams and crime, this coun­try los­es im­mea­sur­able pre­cious time, ef­fort, tal­ent and per­haps even lives, nav­i­gat­ing the na­tion’s US-dol­lar short­age cre­at­ed not by any er­ror or omis­sion, but by suc­ces­sive Gov­ern­ments’ de­lib­er­ate and harm­ful pol­i­cy choic­es.

Last year, Fi­nance Min­is­ter Colm Im­bert not­ed that the de­mand for forex has been fu­elled part­ly by “an ex­plo­sion in on­line shop­ping over the last sev­er­al years.”

To deal with the forex prob­lem, com­mer­cial banks have placed a lim­it on the amount of US dol­lars that can be spent in any cred­it cy­cle.

Econ­o­mist Dr In­dera Sage­wan not­ed that the an­nounce­ment, two weeks ago, by RBC that there will be a re­duc­tion in its for­eign cur­ren­cy spend­ing lim­it for cred­it cards is mere­ly a re­flec­tion of the on­go­ing forex cri­sis in the coun­try.

That, she said, is yet an­oth­er blow to small and medi­um-sized En­ter­pris­es (SMEs) sec­tor, who are al­ready find­ing dif­fi­cul­ty in ac­cess­ing for­eign cur­ren­cy to pur­chase goods.

“For many of them, it the on­ly way they can do in­ter­na­tion­al trans­ac­tions be­cause they too can’t go to the bank and have easy ac­cess to for­eign ex­change. So by and large, it is the on­ly mech­a­nism that is avail­able to them. To fur­ther re­strict that means that the abil­i­ty to run your busi­ness­es will now be fur­ther con­strained,” Sage­wan stat­ed.

In its no­tice, RBC said ef­fec­tive Sep­tem­ber 1, 2024, for­eign ex­change lim­its on RBC cred­it cards for both per­son­al bank­ing and busi­ness bank­ing clients will be re­duced from TT$51,000 (ap­prox­i­mate­ly US$7,500) to $41,000 (ap­prox­i­mate­ly US$6,000).

This came just un­der a year af­ter Re­pub­lic Bank slashed the US spend­ing lim­it on its cred­it cards in half from US$10,000 to US $5,000 from Sep­tem­ber, 21, 2023.


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