Jan­nelle Bernard

Se­nior re­porter

jan­nelle.bernard@cnc3.co.tt

Econ­o­mist Dr Vaalmik­ki Ar­joon is not en­tire­ly con­vinced that the 50 per cent in­crease in the use of cred­it cards in the last five years is the main cause of the for­eign ex­change short­ages that T&T is en­dur­ing at this time.

Ar­joon was re­act­ing to com­ments made by Min­is­ter of Fi­nance, Colm Im­bert, on Thurs­day night in an ad­dress at the Uni­ver­si­ty of the West In­dies' Prin­ci­pal's Re­search Award cer­e­mo­ny.

Im­bert said in a meet­ing with the main com­mer­cial banks this week, he raised the is­sue of T&T's cur­rent for­eign ex­change is­sues be­ing linked to in­creased cred­it card us­age in the last five years.

"Be­lieve it or not, there was a 50 per cent in­crease in the num­ber of cards and 50 per cent in­crease in spend by cred­it card users over the last five years," said Im­bert.

Ar­joon says while cred­it card us­age is a fac­tor, it is not the ma­jor con­cern. He added that cred­it cards play a sup­port­ive role in the lo­cal econ­o­my par­tic­u­lar­ly in the mi­cro and small busi­ness sec­tor where they have have been a life­line for en­tre­pre­neurs,

"It is true that cred­it card us­age con­tributes sig­nif­i­cant­ly to for­eign ex­change out­flows, but it is still not the ma­jor dri­ver. There are oth­ers that utilise more forex in­clud­ing the dis­tri­b­u­tion sec­tor, com­pa­nies that im­port mo­tor ve­hi­cles, large re­tail­ers etc."

He said the re­al is­sue be­hind T&T's for­eign ex­change woes lies else­where.

"Our earn­ings from the gas sec­tor, the cor­ner­stone of our econ­o­my, have sig­nif­i­cant­ly de­clined. As a ma­ture pro­duc­tion province, out­put has fall­en by well over 30 per cent in the last decade. At the same time, our econ­o­my re­mains high­ly im­port in­ten­sive.

"Over 90 per cent of the items we re­ly on dai­ly, from tech­nol­o­gy to cloth­ing, med­ica­tion and much of the raw ma­te­ri­als as well as the equip­ment used by man­u­fac­tur­ers is im­port­ed be­cause we lack a di­verse pro­duc­tion struc­ture or the ca­pac­i­ty to pro­duce these items lo­cal­ly," said Ar­joon.

He said the de­pen­dence on im­ports in tan­dem with de­clin­ing ex­port rev­enues cre­ates a sim­ple but stark im­bal­ance.

"When for­eign ex­change sup­ply shrinks while de­mand re­mains high dri­ven large­ly by the need for es­sen­tial im­ports, we in­evitably ex­pe­ri­ence a forex drain."

Fur­ther to these is­sues, Ar­joon said there is a risk that comes with sig­nif­i­cant re­duc­tions in cred­it card lim­its be­ing im­ple­ment­ed by com­mer­cial banks,

"Many may be forced to turn to the black mar­ket to ac­quire for­eign ex­change, es­pe­cial­ly dur­ing the Christ­mas sea­son when de­mand for im­port­ed goods in malls, flea mar­kets and re­tail out­lets is at its peak. This will un­doubt­ed­ly strain small busi­ness­es fur­ther, re­duc­ing their prof­itabil­i­ty and weak­en­ing their con­tri­bu­tions to the econ­o­my."

He says there must be a con­cen­trat­ed ef­fort to gen­er­ate for­eign ex­change in­de­pen­dent of the en­er­gy sec­tor.

"The chal­lenge be­fore us is not just about man­ag­ing forex but about ad­dress­ing the deep­er struc­tur­al is­sues that have made us so re­liant on im­ports and vul­ner­a­ble to sup­ply shocks. This is the con­ver­sa­tion we must have if we are to build a more re­silient econ­o­my. The task be­fore us is clear: we must cre­ate the con­di­tions for busi­ness­es to thrive, grow, and ex­port.

"On­ly by ad­dress­ing these struc­tur­al bar­ri­ers can we achieve a health­i­er econ­o­my and en­sure the for­eign ex­change sta­bil­i­ty we so des­per­ate­ly need.

Im­bert urged the uni­ver­si­ty's ad­min­is­tra­tion to work along­side the Gov­ern­ment, so that prac­ti­cal re­search could be used to solve the coun­try's prob­lems. He al­so an­nounced that he would find $10 mil­lion to re­plen­ish the cam­pus' re­search fund.