GEISHA KOW­LESSAR ALON­ZO

In T&T’s on­go­ing de­bate over for­eign ex­change ac­cess, two com­pet­ing frame­works have emerged: Fi­nance Min­is­ter Dav­en­dranath Tan­coo’s five-point plan, aimed at re­form­ing and stream­lin­ing forex dis­tri­b­u­tion, and the Cen­tral Bank’s decades-old ho­n­our sys­tem, which re­lies on com­mer­cial banks to al­lo­cate for­eign cur­ren­cy with fair­ness and dis­cre­tion.

While the ho­n­our sys­tem has his­tor­i­cal­ly de­pend­ed on trust and in­for­mal pri­ori­ti­sa­tion—favour­ing trade, med­ical ex­pens­es and tu­ition—the five-point plan sig­nals a shift to­ward struc­tured ac­count­abil­i­ty, propos­ing tar­get­ed in­ter­ven­tions that in­clude ed­u­ca­tion, health­care and small busi­ness sup­port.

Tan­coo’s pro­pos­als were re­ceived with mea­sured op­ti­mism.

Sea­soned econ­o­mists like Pro­fes­sor Patrick Wat­son and Dr Ronald Ramkissoon cau­tion that the Gov­ern­ment's forex-fix suc­cess hinges on suc­cess­ful ex­e­cu­tion.

Both ex­perts em­pha­sised that any re­form must be firm­ly an­chored in the eco­nom­ic re­al­i­ties of T&T and un­der­pinned by ro­bust, en­force­able safe­guards to pro­mote trans­paren­cy and ac­count­abil­i­ty.

They al­so un­der­scored the im­por­tance of align­ing these re­forms to a broad­er strat­e­gy to di­ver­si­fy the econ­o­my, re­duc­ing over­re­liance on the en­er­gy sec­tor and fos­ter­ing sus­tain­able growth across oth­er in­dus­tries.

In an in­ter­view with the Busi­ness Guardian, Wat­son fur­ther cau­tioned that pro­posed changes to the coun­try’s for­eign ex­change sys­tem risk in­tro­duc­ing greater scope for dis­cre­tionary de­ci­sion-mak­ing, which could un­der­mine fair­ness.

“What I am fear­ful of,” he warned, “are those in charge im­pos­ing ex­cep­tions to the rule de­pend­ing on who is ask­ing for the mon­ey.”

His com­ments re­flect a broad­er anx­i­ety about trans­paren­cy and fair­ness in a sys­tem al­ready strained by scarci­ty.

Ramkissoon, on the oth­er hand, point­ed to a fun­da­men­tal is­sue fac­ing the coun­try: there sim­ply is not enough for­eign ex­change avail­able at the cur­rent ex­change rate to meet na­tion­al de­mand.

In such con­di­tions, eq­ui­table al­lo­ca­tion be­comes a mat­ter of sur­vival.

Banks, op­er­at­ing as pri­vate busi­ness­es, must weigh risk and re­pay­ment ca­pac­i­ty when de­cid­ing who re­ceives for­eign cur­ren­cy loans.

“You could ap­point com­mit­tees. You could do what you want. At the end of the day, if you de­cide as a Gov­ern­ment that you’re go­ing to force the com­mer­cial banks, who are the main play­ers, to say, lis­ten, I will pass a law that you have to give X dol­lars for this, Y for that and Z for the oth­er, there should be a con­sid­er­a­tion of whether the banks will be re­paid.

“If you want to en­cour­age peo­ple to bring back for­eign ex­change and you tell them, lis­ten, I show you that I’m do­ing a busi­ness here that is needs for­eign ex­change and I could pay you back in US dol­lars, but an­oth­er cus­tomer comes and says, lis­ten, I need an op­er­a­tion and I need US dol­lars, but I don’t have US dol­lars to pay you back. The bank has to go and find wher­ev­er they can get US dol­lars to then make this pos­si­ble,” Ramkissoon, a for­mer econ­o­mist at the Cen­tral Bank of T&T stat­ed.

Tan­coo’s Five-Point Plan seeks to in­ject struc­ture and con­fi­dence in­to the forex land­scape.

His pro­pos­als in­clude pro­to­cols for repa­tri­a­tion, in­vest­ment pro­tec­tion frame­works and div­i­dend safe­guards—all aimed at re­as­sur­ing in­vestors and en­cour­ag­ing in­flows.

Yet Wat­son ques­tioned whether these mea­sures would be enough to over­come the re­luc­tance of busi­ness­es and state en­ter­pris­es to repa­tri­ate funds.

“You have to go and fight for your own mon­ey,” he said. “Even the state en­ter­pris­es don’t bring all the mon­ey back be­cause they’re afraid they won’t be able to get it out again.”

Tan­coo al­so em­pha­sised the need to mod­ernise the coun­try’s tax treaties and har­monise re­gion­al tax poli­cies with Cari­com part­ners.

The goal is to re­duce ad­min­is­tra­tive bur­dens and pro­mote cross-bor­der in­vest­ment.

But Wat­son cau­tioned against over­ly op­ti­mistic re­forms that fal­ter in ex­e­cu­tion.

“What we do not want,” he said, “are things that sound nice and when it comes to im­ple­men­ta­tion we run in­to trou­ble.”

He point­ed to the failed Cari­com Mul­ti­lat­er­al Clear­ing Fa­cil­i­ty (CM­CF) as a cau­tion­ary tale. De­signed in the late 1970s to fa­cil­i­tate in­ter-re­gion­al trade us­ing lo­cal cur­ren­cies, the CM­CF col­lapsed by 1983 due to un­paid debts and sys­temic im­bal­ances.

Wat­son re­called how Bar­ba­dos, de­spite lim­it­ed trade with Guyana, end­ed up be­ing owed mon­ey be­cause of the pooled na­ture of the sys­tem.

This arrange­ment was de­signed to fa­cil­i­tate re­gion­al trade by al­low­ing mem­ber states to set­tle trans­ac­tions in their own cur­ren­cies.

Wat­son ex­plained that be­cause all trans­ac­tions were ag­gre­gat­ed in­to a cen­tral pool, de­faults by one coun­try—such as Guyana—had rip­ple ef­fects across the re­gion, im­pact­ing na­tions that had no di­rect trade ex­po­sure.

This his­tor­i­cal ex­am­ple serves as a cau­tion­ary tale for cur­rent pol­i­cy­mak­ers.

Both Wat­son and Ramkissoon stressed that any re­form to T&T’s for­eign ex­change sys­tem must be ground­ed in eco­nom­ic re­al­i­ty, not ide­al­ism.

The core is­sue re­mains un­changed: the coun­try is fac­ing a per­sis­tent short­age of for­eign ex­change, and with­out suf­fi­cient in­flows, no al­lo­ca­tion mech­a­nism—how­ev­er well-de­signed—could sat­is­fy the full spec­trum of de­mand.

Wat­son un­der­scored the im­por­tance of in­creas­ing for­eign ex­change in­flows by di­ver­si­fy­ing the econ­o­my be­yond its tra­di­tion­al re­liance on oil and gas.

“We are pro­duc­ing less and less. What you must do is en­sure that you’re adding flows that im­prove the stock,” he said.

While he ac­knowl­edged the con­tin­ued rel­e­vance of the hy­dro­car­bon sec­tor, Wat­son stressed the need to de­vel­op new in­dus­tries ca­pa­ble of gen­er­at­ing sus­tain­able for­eign ex­change earn­ings.

In ad­di­tion to boost­ing sup­ply, he un­der­scored that the man­age­ment of ex­ist­ing for­eign ex­change re­serves must be trans­par­ent and eq­ui­table. Al­lo­ca­tion de­ci­sions should be guid­ed by clear, con­sis­tent cri­te­ria to en­sure fair ac­cess across sec­tors and avoid the per­cep­tion—or re­al­i­ty—of favouritism.

Ramkissoon fur­ther not­ed that the cur­rent min­is­ter of fi­nance faces the same dilem­ma as his pre­de­ces­sor: how to al­lo­cate scarce for­eign ex­change in the short-term while si­mul­ta­ne­ous­ly lay­ing the ground­work for long-term di­ver­si­fi­ca­tion.

“How do you al­lo­cate the re­source in the short term, the scarce re­source of forex in the short term, and how quick­ly can you di­ver­si­fy the econ­o­my to earn for­eign ex­change in the medi­um to long run? It’s the same prob­lem,” he said.

To­geth­er, their in­sights point to a dual im­per­a­tive: re­form must be both prag­mat­ic and prin­ci­pled. With­out ad­e­quate in­flows, trans­par­ent gov­er­nance, and a clear roadmap for eco­nom­ic di­ver­si­fi­ca­tion, even the most am­bi­tious plans risk be­com­ing ex­er­cis­es in frus­tra­tion—re­peat­ing the mis­takes of the past rather than forg­ing a sus­tain­able fu­ture.

Forex fix­es

Tan­coo un­veiled his min­istry’s strate­gic plans dur­ing his pre­sen­ta­tion of the Fi­nance (Sup­ple­men­tary Ap­pro­pri­a­tion) Bill 2025 and the mid-year re­view on June 18, at the first ses­sion of the 13th Par­lia­ment, held at the Red House in Port-of-Spain.

His ad­dress came at a crit­i­cal junc­ture, as T&T grap­ples with eco­nom­ic head­winds, in­clud­ing a pro­ject­ed $9 bil­lion fis­cal deficit and per­sis­tent chal­lenges in for­eign ex­change avail­abil­i­ty.

Tan­coo’s pre­sen­ta­tion out­lined a five-point plan aimed at re­form­ing the for­eign ex­change sys­tem, restor­ing in­vestor con­fi­dence, and mod­ernising fis­cal in­fra­struc­ture.

Key pro­pos­als in­clud­ed:

*Es­tab­lish­ing a For­eign Ex­change Al­lo­ca­tion Com­mit­tee to en­sure trans­paren­cy and eq­ui­ty in dis­tri­b­u­tion;

*Re­quir­ing manda­to­ry re­port­ing from high-vol­ume im­porters to im­prove over­sight;

*In­tro­duc­ing in­vest­ment pro­tec­tion pro­to­cols and div­i­dend safe­guards to en­cour­age repa­tri­a­tion of funds;

*Ex­plor­ing tax in­cen­tives to re­tain for­eign cur­ren­cy earn­ings with­in the do­mes­tic econ­o­my; and

*Re­view­ing and har­mon­is­ing bi­lat­er­al tax treaties with CARI­COM part­ners to pro­mote re­gion­al in­vest­ment

The min­is­ter em­pha­sised that these re­forms are de­signed not on­ly to sta­bilise the cur­rent forex en­vi­ron­ment but al­so to lay the ground­work for long-term eco­nom­ic di­ver­si­fi­ca­tion.