Bhoe Tewarie

One of the big dis­cus­sions on the T&T econ­o­my over sev­er­al years and con­tin­u­ing, is for­eign ex­change avail­abil­i­ty and for­eign ex­change short­age and how to solve this per­sis­tent prob­lem. A lot of the dis­cus­sion has fo­cused on the un­fair­ness of dis­tri­b­u­tion and who gets the most US dol­lars and why? Why does PriceS­mart or Massy or ANSA McAL get a big share of forex, for in­stance, and not SMEs?

The for­mer min­is­ter of fi­nance has even cit­ed cred­it card us­age, sug­gest­ing abuse by in­di­vid­u­als. Cen­tral Bank pol­i­cy has been blamed. Bank­ing sec­tor prac­tice has been blamed. There have been ac­cu­sa­tions of com­plic­i­ty be­tween some banks and their favoured cus­tomers and even ac­cu­sa­tions of a func­tion­ing car­tel.

Some $100 mil­lion an­nu­al­ly is put aside to pro­tect the man­u­fac­tur­ing sec­tor through the Ex­im Bank. There might be a dis­tri­b­u­tion prob­lem, but is that the ma­jor prob­lem? The dis­tri­b­u­tion quar­rels are prompt­ed by scarci­ty.

In a sit­u­a­tion where ex­port earn­ings are not favourable, where there is a forex rev­enue short­age, where the avail­able pool is not large enough to meet all of our de­sires for im­ports, con­tin­u­ous de­mand with­out re­plen­ish­ment of forex will lead to de­ple­tion. There­fore, the re­al forex prob­lem here is not about dis­tri­b­u­tion. It is about sup­ply, de­mand and de­pend­able sources of re­plen­ish­ment.

No mat­ter what cri­te­ria one es­tab­lish­es for a fair­er sys­tem of dis­tri­b­u­tion, these will not solve the re­al prob­lem of the size of the forex pool. Forex in the pool can on­ly in­crease with more ex­ports of goods and ser­vices, re­duc­tion of im­ports, in­creas­es in tourist ar­rivals and in tourist spend­ing per capi­ta. The pool of forex can al­so shrink and even­tu­al­ly dis­ap­pear as de­mand be­gins to use it up with­out re­li­able sources of re­plen­ish­ment. This is not com­pli­cat­ed; it is ba­sic log­ic.

We are in this sit­u­a­tion be­cause pro­duc­tion of nat­ur­al gas is se­vere­ly down and forex rev­enue is nat­ur­al gas de­pen­dent. The prob­lem is struc­tur­al.

For some time now, we have not been able to sup­ply what At­lantic LNG needs. So, even with uni­ti­sa­tion of the trains and a ten per cent prof­it take by NGC, we are get­ting less forex rev­enue than be­fore from that source. Sev­er­al plants in our petro­chem­i­cal sec­tor are down, oth­ers are op­er­at­ing at re­duced ca­pac­i­ty. So, the sec­tor’s rev­enue and prof­its are small­er, which re­duces the rev­enue stream to the Gov­ern­ment. Man­a­tee may not be­gin to pro­duce for a year or per­haps two. Even a ded­i­cat­ed thrust in pro­duc­tion in lo­cal ju­ris­dic­tions may not yield much more. OFAC li­cences on Drag­on and Cocuina fields have been with­drawn. With the restora­tion of Chevron’s li­cence to drill in Venezuela, there is some hope now for pip­ing nat­ur­al gas from Venezuela to NGC through Shell and BP.

The con­text, giv­en cur­rent pres­sure on Iran, in­tend­ed sanc­tions on Rus­sia, and ramp­ing up of oil and nat­ur­al gas pro­duc­tion in Sau­di Ara­bia and the Mid­dle East, is favourable. But even with suc­cess, meet­ing nat­ur­al gas needs and clos­ing the rev­enue gap are some way off.

We can make up some of it over the medi­um and longer term in en­er­gy. But what hap­pens from now un­til then? Can we bud­get at the same lev­el of ex­pen­di­ture? The on­ly op­tions for im­me­di­ate re­lief are oth­er sources of forex rev­enue, re­duced forex ex­pen­di­ture, or bor­row­ing, which in­creas­es ex­pen­di­ture.

Tourism earn­ings can be a source; that is how Bar­ba­dos re­plen­ish­es its lim­it­ed re­serves. More ex­port earn­ings from the ex­ist­ing man­u­fac­tur­ing sec­tor, ser­vices ex­ports growth linked to the glob­al dig­i­tal val­ue chain, and new ex­port-ori­ent­ed in­vest­ments that cap­i­talise on our ter­tiary pool of grad­u­ates in a range of dis­ci­plines for a range of sec­tors, as we ramp up lo­cal pro­duc­tion and re­duce im­ports, are good op­tions. All of these things are doable. But, even if suc­cess­ful, these will be phased over time.

Now if we did both, side by side and si­mul­ta­ne­ous­ly, that is, ramp up nat­ur­al gas, petro­chem­i­cals and LNG pro­duc­tion, and speed up in­vest­ment and pro­duc­tion-yield­ing di­ver­si­fied ex­ports to a range of mar­kets, and in­crease tourist ar­rivals, we could end up in a good place and the pool of for­eign ex­change will be large enough to elim­i­nate any wor­ry.

How help­ful is look­ing at bet­ter forex dis­tri­b­u­tion from the ex­ist­ing dwin­dling pool as a so­lu­tion to the forex prob­lem?

What we have to do is known; they are chal­leng­ing, but doable.

An im­por­tant ques­tion is can we do it peace­ful­ly to­geth­er, or will we have to ask the IMF for help?