Economist warns of falling T&T $$, possible devaluation

Economist Dr Patrick Watson told a post-budget meeting in San Fernando over the weekend there is an urgent need for financial authorities in Trinidad and Tobago to take measures to protect the national currency.

He warned that unless certain measures are taken urgently there is the likelihood that the nation's foreign reserves will dry up, leading to a devaluation of the currency.

One of the measures he would like to see is a complete diversification of the local manufacturing sector, which today relies heavily of massive amounts of foreign exchange.

Specially addressing the budget, Watson said the fiscal blueprint does not have a stabilisation policy that puts the country on a path towards growth.

He cited the manufacturing sector, which was a net earner of foreign exchange in the late 90s and early 2000, noting that its position is now reversed where it is a net user of foreign exchange.

"If I am a manufacturer and I do not sell goods abroad in sufficient quantity to re-earn foreign exchange, the next time I want to replenish my stocks of inputs I have to go and get foreign exchange.

"And whom am I looking forward to generating that foreign exchange—the oil sector or the energy sector which is in decline because I am not contributing to it.

"It will soon result in a depletion of the foreign exchange with consequent pressure on the rate of exchange," Watson said.

He warned that the depreciation of the US dollar is a real possibility. “This can happen if the manufacturing sector is unable to put more foreign exchange in the system. My prediction is in the short run it will not be able to do so,” he said.

Watson said until that sector is "completely reorganised, completely revamped, completely diversified and other sectors are introduced, we are going to have a problem where the foreign exchange is going to be controlled by the Central Bank which will intervene to protect its reserves.”

Watson is currently Director of Sir Arthur Lewis Institute of Social & Economic Studies, and Coordinator of Economic Measurement Unit, Faculty of Social Sciences, University of the West Indies and former Dean of the Faculty of Social Sciences (1995-2003).