“Take warning,
You better take warning,
Take warning,
You better do good…”
Opening stanza from 1971 hit by Guyanese singer Eddie Hooper
In the July 2024 edition of her Caribbean Monthly Economic Report, Trinidad and Toba-go (T&T) Economist Marla Dukharan observed, “ … 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?” She noted that the US$25 billion that has gone missing is about 77 per cent the size of the economy (2022, International Monetary Fund [IMF]) and over US$16,000 per person.
Dukharan’s essay, titled “T&T is the world’s largest loser (not user) of foreign exchange,” contends that this annual average of over US$2 billion ‘disappearing’ from the country’s coffers makes it, on a per capita basis, the world’s largest loser of foreign currency. She stated that while local businessmen continue to express concerns about the availability of foreign exchange, which has negatively impacted the sustainability of businesses, the authorities are likely to lay the blame on the extravagant tastes of Trinbagoni-ans. Dukharan noted that the population is accused of demanding too much foreign exchange, importing too many ‘luxury’ items, too much travel and online shopping, and excessive use of foreign credit cards.
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.” Commercial banks in T&T have placed limits on the amount of US dollars that can be spent in any credit cycle, in order to combat the forex problem, a hard blow to small and medium-sized businesses which are already finding difficulty in accessing hard currency to purchase goods. On 21st September, 2023, Republic Bank reduced the spending limit on its US credit cards by half from US$10,000 to US$5,000. RBC Royal Bank is following suit and has issued notice that 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 TT$41,000 (approximately US$6,000).
Utilising the global database of the IMF, Dukharan painted a dark picture of a country, once swimming in an ocean of oil money, now floundering in a rapidly depleting pond of reserves. The economist, drawing on the errors and omissions (E&O) data from 2011 (the earliest date available) to 2022, highlighted that T&T shows a net outflow of US$23 billion that “we can’t account for” and an additional US$2 billion according to data from the Central Bank. Dukharan noted that E&O 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, and foreign direct investment remittances.
However, the economist came to the depressing conclusion, “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 terms 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.”
According to Dukharan, this tale of woe doesn’t end there, as she pointed out that T&T’s national debt level is lower than 77 per cent of GDP, which means that the state 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,” Dukharan said.
In the article, under the subhead, “We lose the most US dollars per capita in the world via errors and omissions” Dukharan explained the haemorrhaging by examining the statistical infrastructure. The economist observed, “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.”
However, the E&O item has been consistently negative every year since 2011, which, according to Duhkaran, means that there is an undocumented net outflow of US dollars each year that “we can’t account for.” Furthermore, she stated that apart from 2012 and then 2020 to 2021 (Covid), the E&O item has consistently exceeded US$1 billion each year, with the highest being US$4.8 billion in 2013. This pattern in the data suggests that something else, “apart from statistical weakness, is at play,” Dukharan surmised.
Dukharan concluded that the nation’s US-dollar shortage was created not by any error or omission, but rather by successive governments’ deliberate and harmful policy choices. According to the economist the TT dollar is overvalued against the black market foreign exchange rate, which ranges from TT$7.50 to 10.00 to US$1, and by maintaining the exchange rate at roughly TT$6.76 to US$1, the government is effectively subsidising the sale of US dollars. Thus, it is artificially creating a level of speculative demand for US dollars which would otherwise not exist at “say TT$10.00/US$.”
Furthermore, Dukharan stated that the unavailability of US dollars creates a level of precautionary demand for US currency which drives a lack of confidence in the TT dollar and a preference for US dollars and capital flight. It’s a vicious cycle, which we here in Guyana are all too familiar with already. She noted 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.”
The barn door has been left open and the horse has fled. The decadence and opulence of the 1970s to 1990s decades have come home to roost. The days of the weekly one-day shopping trips to Miami to purchase groceries and the monthly weekend excursions to London for clothes shopping sprees are done. It is ironic that this wild and irresponsible squandering began and accelerated under the watch of the late Eric Williams, who led the twin island republic to independence on 31st August, 1962, and held the reins of power as prime minister until his death on 31st March, 1981. As a world-renowned historian, and author of such notable works as “Capitalism and Slavery”, and “From Columbus to Castro”, he would have known that the current state of affairs was inevitable. Then again, we must not forget his infamous “oil don’t spoil” quote. Unfortunately, it runs dry, and then what?
We have been warned. The blueprint has been laid bare for all of us to witness. No searchlight is required. We have two choices; we can emulate the conservative Norwegian approach to managing our oil resources, or we can follow our neighbour’s path.