The ex­change rate and for­eign ex­change scarci­ty have been top­ics of con­cern since 2014, when en­er­gy prices de­clined sharply. The el­e­vat­ed tone and the con­tin­u­ous chat­ter demon­strate the pub­lic’s con­cern.

In De­cem­ber 2014, net of­fi­cial re­serves amount­ed to USD 11.5 bil­lion and de­clined by 6.9 bil­lion to USD 4.6 bil­lion in Au­gust 2025. The CBTT gov­er­nor con­firmed the mar­ket dis­e­qui­lib­ri­um and ac­knowl­edged that al­low­ing the cur­rent sit­u­a­tion to con­tin­ue would lead the coun­try to a more dif­fi­cult po­si­tion.

Five fac­tors ac­count for the falling re­serves. First, the long-term de­cline in nat­ur­al gas pro­duc­tion is re­spon­si­ble for the de­cline in the ex­ports of LNG and petro­chem­i­cals. The sec­ond is that ex­port prices are soft and ex­pect­ed to re­main soft in the medi­um term. The third is the Cen­tral Bank’s sell­ing for­eign ex­change to sup­port the forex mar­ket, in ef­fect, sup­port­ing the ex­change rate, ie, main­te­nance of the sta­tus quo. The fourth is the in­creas­ing debt ser­vice re­quire­ments of the GORTT’s ex­ter­nal loans. Fifth, con­tin­u­ous bud­get deficits have kept de­mand buoy­ant.

Dur­ing his ten-year tenure as fi­nance min­is­ter, Mr Colm Im­bert ei­ther dis­missed, dis­par­aged, or down­played pub­lic con­cerns, wait­ing for the prover­bial in­crease in in­ter­na­tion­al en­er­gy prices. Con­se­quent­ly, the for­eign ex­change re­serves de­te­ri­o­rat­ed.

The price dis­par­i­ty be­tween the of­fi­cial and in­for­mal mar­kets can­not be ig­nored for­ev­er. Anec­do­tal ev­i­dence sug­gests that the TT dol­lar is weak­en­ing, as the “in­for­mal” con­ver­sion rate has slipped from $7.5 to USD1 to $8.5 at present. Air­port cam­bio rates (tra­di­tion­al­ly the high­est in the mar­ket) sell USD 1 at TTD 8.9.

Com­mer­cial banks buy at USD1 to TT 6.60 and sell at $6.8. Peo­ple earn­ing USD are un­like­ly to sell to the com­mer­cial banks if they can get a high­er price in the “par­al­lel” mar­ket, which is at least 21 per cent high­er than the bank rate. What is the in­ter­est rate re­quired to bring more USD de­posits in­to the bank­ing sec­tor? At $6.8 per USD 1, the com­mer­cial banks are sell­ing USD more cheap­ly than the par­al­lel mar­ket.

There­fore, for­eign ex­change de­mand at the com­mer­cial banks will al­ways be high. This is one rea­son why cred­it card us­age has surged. Com­mer­cial banks must meet their cus­tomers’ cred­it card oblig­a­tions with VISA and Mas­ter­Card to main­tain their cred­it­wor­thi­ness. As a re­sult, many busi­ness­es and in­di­vid­u­als have mul­ti­ple cards with mul­ti­ple banks. This ex­plains why banks have been re­duc­ing cred­it card lim­its.

Ar­gu­ing that cus­tomers are abus­ing their cred­it cards or that a car­tel is hog­ging the for­eign ex­change is to send the pub­lic on a wild goose chase. The largest pur­chas­er of eth­i­cal phar­ma­ceu­ti­cals is the pub­lic health care sys­tem. Giv­en the ex­is­tence of pro­cure­ment rules and the Fair Trade Com­mis­sion, there are many ways for the GORTT to de­ter­mine the ex­is­tence of a car­tel and whether it is guilty of price goug­ing. It has all the tools re­quired at its dis­pos­al and does not need to al­ter bank­ing rules to ad­dress this is­sue.

Large firms will have large de­mands, as they will have more and larg­er cus­tomer de­mands to meet than small­er ri­vals. That is nor­mal, but it does not make larg­er firms a car­tel. The ev­i­dence for this so far is spu­ri­ous and amounts to noth­ing more than fear-mon­ger­ing. In this re­gard, the cur­rent ad­min­is­tra­tion is in­creas­ing­ly sound­ing like the pre­vi­ous ad­min­is­tra­tion in its avoid­ance of the key rea­son un­der­ly­ing the for­eign ex­change short­age: an over-con­cen­tra­tion on the ex­port of nat­ur­al gas and its de­riv­a­tives.

Be­tween 1974 and 1993, the Cen­tral Bank tried to reg­u­late the for­eign ex­change mar­ket us­ing a wide range of tools. These in­clud­ed the use of a fixed ex­change rate sys­tem but­tressed by se­lec­tive cred­it con­trols, high in­ter­est rates, ra­tioning for­eign ex­change (ECZero and EC1), and fea­tured a two-tiered ex­change rate for a short time, fa­cil­i­tat­ing es­sen­tial goods (food and phar­ma­ceu­ti­cals) at the low­er rate. These tech­niques failed, as the CBTT was un­equal to the task of al­lo­cat­ing scarce for­eign ex­change more ef­fi­cient­ly than the mar­ket. Then, as now, an in­for­mal mar­ket de­vel­oped as the pri­vate sec­tor found dif­fer­ent ways to meet its for­eign li­a­bil­i­ties.

In April 1993, the TT dol­lar was de­val­ued from TT4.25 to 5.76 to USD 1, and these tech­niques were dis­card­ed in favour of a more mar­ket-based ap­proach, a man­aged float. There was no safe­ty net when the change was made, as of­fi­cial re­serves were neg­a­tive. Cou­pled with a pru­dent fis­cal ap­proach, the pri­vate sec­tor re­spond­ed pos­i­tive­ly. The rate re­mained rel­a­tive­ly sta­ble, slip­ping from $5.76 to $6.41 to USD 1 in 2014.

The re­luc­tance to ad­dress the ex­ist­ing im­bal­ance be­tween de­mand and sup­ply us­ing more di­rect tech­niques is twofold. First, the mem­o­ry of the po­lit­i­cal demise of the NAR (Na­tion­al Al­liance for Re­con­struc­tion) and its de­val­u­a­tion and aus­ter­i­ty mea­sures. It came in­to of­fice with a mas­sive land­slide vic­to­ry (33-3) in 1986 and left of­fice in 1991 with a whim­per (2-34) af­ter the al­liance frac­tured. The sec­ond is the eco­nom­ic ex­pe­ri­ence of Ja­maica and Guyana. In Ja­maica, the ex­change rate plum­met­ed from J8.00 to USD 1 in 1990 to J162 to USD 1 in 2025. The Guyanese dol­lar fared the same fate, de­clin­ing from G 39.53 in 1990 to G 210 per USD.

A braver ap­proach is need­ed to ad­dress Trinidad and To­ba­go’s eco­nom­ic fu­ture.

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al School of Busi­ness.