Sacha Wil­son

Econ­o­mist Dr Patrick Wat­son is warn­ing of for­eign ex­change de­ple­tion and de­pre­ci­a­tion of the dol­lar if cer­tain mea­sures are not tak­en now.

Speak­ing at a post-bud­get fo­rum at Pre­sen­ta­tion Col­lege, San Fer­nan­do, on Thurs­day night, Wat­son said if the lo­cal man­u­fac­tur­ing sec­tor was not com­plete­ly di­ver­si­fied there would be de­ple­tion in for­eign ex­change, re­sult­ing in the Cen­tral Bank in­ter­ven­ing to pro­tect its re­serves.

Wat­son, di­rec­tor of Sir Arthur Lewis In­sti­tute of So­cial and Eco­nom­ic Stud­ies, said he was sat­is­fied that nei­ther a short run is­sue of sta­bil­i­sa­tion nor the long run of putting the coun­try on a path of re­turn to growth had been done in the bud­get. He said the growth in the en­er­gy sec­tor had re­sult­ed in the non-per­for­mance of the non-en­er­gy sec­tor.

"For in­stance, the man­u­fac­tur­ing sec­tor which was a net earn­er of for­eign ex­change in the late 90s and ear­ly 2000 is now a net user of for­eign ex­change," Wat­son said. "If I am a man­u­fac­tur­er and I do not sell goods abroad in suf­fi­cient quan­ti­ty to re-earn for­eign ex­change, the next time I want to re­plen­ish my stocks of in­puts I have to go and get for­eign ex­change. "And whom am I look­ing for­ward to gen­er­at­ing that for­eign ex­change–the oil sec­tor or the en­er­gy sec­tor which is in de­cline be­cause I am not con­tribut­ing to it. "It will re­sult in a de­ple­tion of the for­eign ex­change with con­se­quent pres­sure on the rate of ex­change." Wat­son said the Cen­tral Bank would have to take cer­tain mea­sures which might lead to the de­pre­ci­a­tion of the US dol­lar.

"If the man­u­fac­tur­ing sec­tor is un­able to put more for­eign ex­change in the sys­tem, and my pre­dic­tion is in the short run it will not be able to do so," he said. "That is why the mea­sures that are tak­en will sim­ply be to stop the pos­si­ble re­trench­ing of some of its work­ers and they may not even take that bait...They may take the mon­ey and still re­trench." He said the end re­sult was that by the end of next year that sec­tor would re­turn for more in­cen­tives. "And un­til that sec­tor is com­plete­ly re­or­gan­ised, com­plete­ly re­vamped, com­plete­ly di­ver­si­fied and oth­er sec­tors are in­tro­duced, we are go­ing to have a prob­lem where the for­eign ex­change is go­ing to be un­der and the Cen­tral Bank is go­ing to in­ter­vene in a way to pro­tect its re­serves," Wat­son said. "It can­not al­low the on­go­ing de­ple­tion...We are de­plet­ing much more than adding to stock."