Dollar value makes Trinidad and Tobago less competitive
A senior executive from a leading accounting firm has suggested that the current value of the Trinidad and Tobago dollar could negatively impact the country’s ability to trade and attract foreign investment outside of the sector. energy.
Speaking at the TT Chamber of Industry and Commerce Business Outlook Meeting Navigating the Way Forward on Thursday, Ernst & Young Caribbean Executive Chairman Wade George said that with the dollar American at its highest level in 20 years, TT was losing ground to its natural commercial competitors.
“I think it’s important, I’ve seen a lot with foreign investors, and I think I understand the logical reasons why the government wants to maintain the current exchange rate. I think the trade-off is very simple. We subsidize imports while penalizing exports. The US dollar is at its highest for 20 years, so we are less and less competitive against our natural competitors.
“You create a system where you have a lot of haves and have-nots in the trading realm. Some have better access than others. And of course, when you think of a foreign investor bringing hard currency into TT, outside of the energy sector, they have to ask themselves the most basic questions, how do I get my money back? »
George explained that the global economic situation was quite troubling and in response to the covid19 pandemic, unprecedented monetary and fiscal policies were unleashed on a scale never seen in history.
He said global commodity markets were experiencing a severe downturn and with oil prices falling over the past month, TT needed to consider long-term structural concerns that remained deeply rooted in the oil and gas sector.
“I think it’s no surprise that our economy remains heavily dependent on the oil sector, and that’s not necessarily a bad thing. It’s like that. Production volumes decreased and they did not perform as expected. We constantly spend more than we earn. And we are depleting our foreign currency reserves.
George said there were many areas for government-led transformations, among them repairing the energy sector for increased production, investments in renewable energy and current currency trading.
In March, an IMF report indicated that the TT dollar was overvalued by 20%, suggesting that a floating dollar could be a good option.
He said: “Looking ahead, exchange rate flexibility, if properly used, would reduce the need for fiscal tightening to achieve external balance and create room for countercyclical monetary policy. .”
He also urged the Exim Bank to replace its hybrid exchange rate system and special windows by “upgrading foreign exchange and money market infrastructure”.
Finance Minister Colm Imbert said the IMF recommendation was not something the government was considering because there was no reason to.
“We intend to maintain the status quo with regard to our exchange rate regime. We do not intend to devalue the currency. There is absolutely no reason to do so.