Trinidadians and Tobagoians are really starting to feel the pinch of the country’s foreign exchange crisis. According to Caribbean Economist and Advisor Marla Dukharan, the situation will continue to worsen if the Government does not intervene in a meaningful way.
Speaking on Taking Stock with Kalilah Reynolds, Dukharan explained that Trinidad earns most of its US dollars from its energy sector.
“We earn roughly 75% to 80% of our foreign exchange from oil and gas, but we're earning a lot less now for a couple of reasons. One is the international price of these commodities but also because of our production being very weak,” she said.
“Our projections for production are never achieved. We are always falling short of what we expect to produce,” she added.
Dukharan said that as a “mature” oil producer, Trinidad’s oil supply has dropped over the years and what is left is getting increasingly harder and more expensive to extract. She added that without incentives to drill, gas companies have not put effort into the energy sector.
This means less money coming in from energy exports than in the past.
She revealed that Trinidad’s government has been borrowing US dollars and using money from the Heritage and Stabilization Fund—its “piggy bank” meant for future generations, to use as its FOREX reserves.
“If it wasn’t for the borrowing and drawdowns from the Sovereign Wealth Fund, we would have zero reserves right now.”
Adding to the problem, the government controls the exchange rate, which keeps the value of the Trinidad and Tobago dollar fixed. This encourages people to buy imported goods, creating more demand for US dollars than the country can supply.
According to Dukharan, the solution is simple, “reinstate the country’s forex auction mechanism”. She said that would allow the exchange rate to move freely and could help balance supply and demand.