UWI economic researcher: TT-US dollar rate must depreciate

A customer service representative at a local bank counts US 20-dollar notes.  - Photo by Jeff Mayers
A customer service representative at a local bank counts US 20-dollar notes. - Photo by Jeff Mayers

There is no question that the country's exchange rate needs to be depreciated. How it will be done is the question the country's leaders must ask themselves.

This was the view of UWI research fellow Dr Dave Seerattan at the University of the West Indies' (UWI) Department of Economics' Demas-Rampersad Seminar Series called Foreign Exchange Challenges in TT: What are the real implications?

"You want the rate to descend very slowly and imperceptibly...It allows the economic agents to the country to adjust without the country falling off the face of the cliff."

Seerattan said he remembered a time when the country's exchange rate dropped from $6.33 to $6.45 to one US dollar for almost five years.

"Nobody recognised really that the rate had moved from $6.33 to $6.45, and to me that is the most effective thing, you don't have this grand drama about the reason why we are moving from here to there immediately because that is going to do all kind of damage. That is a recipe for disaster."

He said by incrementally dropping the rate people become accustomed to the adjustment and are able to effectively plan how they spend money on their children, what they can buy, the amount of money they invest in and other planning.

He said judging by black market forex rates, the exchange rate should be between $8 to $10 to one US dollar. In 2017 the International Monetary Fund said the TT dollar was 43 per cent over-valued.
"If you do that in the metrics you might have to go close to ten," Seerattan said.

Former deputy governor of Central Bank Dr Terrence Farrell said TT's forex earnings by exports have dropped. Since the country still depends on oil and natural gas as a primary revenue earner, the country is experiencing the decrease in forex because of its refusal to adapt, particularly to green energy.

"The Netherlands is doing it. Scotland is doing it. Arab countries like Saudi Arabia are doing it because they understand that fossil fuels are terminal, but we continue to hold on to this idea that the price of gas is going to rebound," he said.

Editor's note: This story previously quoted figures that have since been corrected.


"UWI economic researcher: TT-US dollar rate must depreciate"

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