Trinidad and Tobago’s foreign exchange (forex) challenges have become increasingly obvious, as shown by recent actions taken by Scotiabank Trinidad and Tobago.
The bank has progressively increased restrictions on US dollar spending, first by reducing the spending limit on Visa debit cards just over six weeks ago, then eliminating overseas purchases and withdrawals altogether on these cards, and now they are planning to lower US dollar limits on credit cards as well. These measures reflect a larger issue with foreign currency availability in T&T and have a crippling effect on citizens who want to travel, but moreso on individuals who have to conduct business abroad.
Businesses and individuals are finding it increasingly difficult to access US dollars, affecting everything from imports to overseas education, purchasing goods, and travel expenses. The situation seems to show worrying similarities to the economic struggles faced by Venezuela in its early stages of economic crisis, where severe forex shortages, currency devaluation, and economic mismanagement under government policies caused inflation, reduced purchasing power, and reduced access to crucial goods and services.
Under the current PNM Government, T&T’s forex woes are already out of control where everyone is concerned about the country’s economic course. While the Government has made excuses, saying external pressures, such as oil and gas revenue volatility, are the major cause of the forex shortages, there is slamming condemnation that policy decisions have not stabilised the currency situation and this Government is incapable of finding alternative solutions for the forex shortage.
With forex access so difficult to attain, there is growing concern that T&T may face a deepening crisis where trade limitations, inflation, and a declining standard of living could be similar to the economic conditions seen in Venezuela.
The simple fact that no one wants to admit is that our currency is artificially overpriced. Artificially overpricing a currency against the US dollar often leads to reduced exports, increased imports, foreign exchange shortages, inflation, decreased foreign investment, and a likelihood of a debt crisis. In the long term, these pressures can cause economic instability and a loss of confidence in the country’s financial system.
Without steps to improve the forex shortage, the risk of a prolonged foreign exchange crisis and broader economic instability can lead us down a slippery slope similar to Venezuela, which no citizen wants to see.
Dr Neil Gosine
Port of Spain