In a tweet on Tues­day, the Min­is­ter of Fi­nance, Colm Im­bert, wrote: “Mis­chie­vous com­men­ta­tors keep push­ing hard for de­val­u­a­tion. One com­men­ta­tor is in­sin­u­at­ing that the coun­try thrived af­ter we float­ed the dol­lar in 1993. In truth, in­fla­tion in 1993 jumped from six per cent to 11 per cent, the econ­o­my de­clined and un­em­ploy­ment was 20 per cent. We are NOT go­ing back there.”

I be­lieve Mr Im­bert was re­fer­ring to me be­cause on Mon­day af­ter­noon, at a vir­tu­al news con­fer­ence, I asked him whether there was sky­rock­et­ing in­fla­tion and a re­ces­sion fol­low­ing the April 1993 flota­tion of the TT dol­lar.

Mr Im­bert’s re­sponse was: “The sim­ple an­swer to that is yes. But that is not the point, we are now in 2023. I can’t look at what went on 30 years ago and con­struct a hy­po­thet­i­cal sce­nario.

“I am telling you, I am not ask­ing you, that if we were to de­val­ue the TT dol­lar to TT$10 to US$1, for ex­am­ple, which would be a 50 or 40 per cent de­val­u­a­tion, we would have an im­me­di­ate in­crease in the cost of im­port­ed goods and we would have im­me­di­ate de­mands from the labour unions, which would be very dif­fi­cult to chal­lenge, for in­creased wages. That would have a cycli­cal ef­fect and a domi­no ef­fect on in­fla­tion.

“So, I don’t think that is a se­ri­ous ques­tion. I think any se­ri­ous per­son would know that if we de­val­ue the dol­lar, there would be sig­nif­i­cant in­fla­tion and it would send many peo­ple in­to pover­ty. I don’t think you need to do the maths for that, but if you would like me to do a math­e­mat­i­cal cal­cu­la­tion as to what the es­ti­mat­ed in­fla­tion would be if we were to do a de­val­u­a­tion of the TT dol­lar by 40 to 50 per cent, I would ask the Cen­tral Bank to do that for me, and I will share it with you.”

The min­is­ter’s of­fer to ask the Cen­tral Bank to do an es­ti­mate of the im­pact of an ex­change rate of TT$10 to US$1 on in­fla­tion is both time­ly, wel­come and nec­es­sary.

But, in ad­di­tion to that, T&T’s Cen­tral Bank should look at ALL as­pects of the im­pact of the April 1993 flota­tion on the T&T econ­o­my, which took place 30 years ago next month.

If the Cen­tral Bank were to un­der­take an analy­sis of the im­pact of the flota­tion in April 1993, it would ex­am­ine da­ta BE­FORE as well as AF­TER the flota­tion.

As it stands, the Cen­tral Bank web­site has a Hand­book of Key Eco­nom­ic and Fi­nan­cial Sta­tis­tics, which is very help­ful.

In that hand­book, there is a sec­tion en­ti­tled, “Se­lect­ed macro-eco­nom­ic in­di­ca­tors,” which con­tains use­ful in­for­ma­tion.

In­fla­tion

The da­ta in that chart in­di­cates that the rate of in­fla­tion in the three years be­fore 1993 was 11 per cent (1990), 3.9 per cent (1991) and 6.5 per cent (1993).

In 1993, the year of the flota­tion, in­fla­tion was 10.9 per cent.

In the three years af­ter 1993, in­fla­tion dropped to 9.0 per cent in 1994, 5.3 per cent in 1995 and 3.3 per cent in 1996.

To be ab­solute­ly trans­par­ent, in the Prices data­base of the Cen­tral Bank’s Sta­tis­tics, there is a bet­ter in­di­ca­tion of the im­me­di­ate im­pact of the flota­tion of April 1993 on in­fla­tion.

The year-on-year per­cent­age change in the in­fla­tion rate for the three months be­fore the April 1993 flota­tion was 7.2 per cent in Jan­u­ary 1993, 6.8 per cent in Feb­ru­ary and 6.7 per cent in March. In April 1993, the rate of in­fla­tion was 7.6 per cent, it peaked at 15 per cent in Oc­to­ber 1993, but de­clined steadi­ly to 6.9 per cent in Au­gust 1994.

CON­CLU­SION: Based on the Cen­tral Bank da­ta, af­ter the flota­tion in­fla­tion rose, peak­ing six months lat­er and then it de­clined steadi­ly. I be­lieve the take­away here is that a coun­try that floats its cur­ren­cy ex­pe­ri­ences a TEM­PO­RARY in­crease in in­fla­tion. Al­so, I do not be­lieve that our his­to­ry sup­ports the no­tion that most of T&T’s trade unions were able to ne­go­ti­ate high­er wages in the wake of the flota­tion.

Econ­o­my

In the columns per­tain­ing to GDP, the fol­low­ing is out­lined by the Cen­tral Bank:

• In 1990, GDP cur­rent price was TT$21,539.3; the per­cent­age change in con­stant GDP was 1.5 per cent and the GDP per capi­ta was US$4,134.6;

• In 1991, the GDP cur­rent price was TT$22,558.6; the per­cent­age change in con­stant GDP was 2.7 per cent and the GDP per capi­ta was US$4,316.3;

• The GDP cur­rent price in 1992 was TT$23,118.1 , the per­cent­age change in con­stant GDP was -1.6 per cent and the GDP per capi­ta was US$4,370;

In 1993, the year of the flota­tion, the GDP cur­rent price was TT$24,986.9, which was a de­cline of 1.5 per cent in per­cent­age change in con­stant GDP, with GDP per capi­ta drop­ping to US$3,535.2

In the three years af­ter the year of flota­tion, GDP in cur­rent prices was TT$29,311.7 (1994), TT$31,697 (1995) and TT$34,568.6 (1996).

The per­cent­age change in con­stant GDP in the three years af­ter the flota­tion was 3.6 per cent (1994), 3.8 per cent (1995) and 7.1 per cent (1996).

The GDP per capi­ta in 1994 was US$3,994.2, in 1995 it was US$4,268.4 and in 1996 it was US$4,570.

CON­CLU­SION: Any or all of these three mea­sure­ments in­di­cat­ed that the T&T econ­o­my grew af­ter the year of flota­tion in 1993.

Un­em­ploy­ment

On the is­sue of un­em­ploy­ment, the Cen­tral Bank doc­u­ment in­di­cates that it was 20 per cent, 18.5 per cent and 19.6 per cent in the three years be­fore the flota­tion. It was 19.8 per cent in 1993, the year of the flota­tion.

In the three years af­ter the year of flota­tion, un­em­ploy­ment dropped to 18.4 per cent in 1994, 17.2 per cent in 1995 and 16.3 per cent in 1996.

CON­CLU­SION: It is fair to say, there­fore, that the un­em­ploy­ment rate in T&T de­clined fol­low­ing the flota­tion in 1993.

Next week, the flota­tion’s im­pact on T&T’s fis­cal sit­u­a­tion, for­eign debt and for­eign re­serves.