Raphael John-Lall
Former Central Bank Governor and minister of finance, Winston Dookeran, who is an economist, is warning that halfway through 2026, commodity-based export economies like T&T remain in a “dangerous” position because of the overwhelming challenges posed by the region and the international order.
In his latest academic paper, as he has done in the past, he argued that the country and region are in a “permanent disequilibrium” meaning this situation arises when the combined forces of the market and the state persistently produce mismatches between supply and demand, preventing the system from reaching stability.
He highlighted the threats that T&T and the region face like food insecurity, higher inflation and climate change.
“What we are witnessing is not merely another economic cycle. We are confronting a condition of permanent disequilibrium. This is particularly dangerous for small economies dependent on commodity exports and imported consumption. Across the Caribbean, structural weaknesses have been magnified by global instability. Higher interest rates increase debt-servicing costs. Supply-chain disruptions intensify food insecurity. Imported inflation weakens household purchasing power. Climate shocks raise infrastructure costs while threatening tourism and agriculture,” he said.
In an interview with the Business Guardian, Dookeran shared the paper he recently wrote entitled “T&T Must escape the Disequilibrium Trap.”
He informed readers that he submitted the paper to UWI for publication and also to the Economic Commission for Latin America (ECLAC) in Washington DC for a review. The paper was completed in May 23, 2026.
Dookeran said, “The analysis is much deeper than what was done by the International Monetary Fund (IMF) in their recent report. Their analysis is ‘static’ while mine is ‘dynamic’.”
He gave the view that the global economy is entering a “new and uncertain phase.”
“The age of stable globalisation has given way to an era marked by fragmentation, geopolitical rivalry, technological disruption, climate insecurity and widening global imbalances. These shifts are not temporary disturbances; they are structural transformations reshaping the architecture of the world economy itself.”
He added that for small open economies such as T&T, the implications are profound.
“Today’s global economy is increasingly characterised by persistent asymmetries between surplus and deficit countries, volatile commodity prices, rising debt burdens, unstable capital flows, and diverging monetary conditions among the world’s major powers. The tightening of monetary policy in advanced economies transmits immediate pressures onto developing states through higher borrowing costs, exchange-rate instability and weakened investment flows.”
At the same time, he said many Caribbean economies have become increasingly consumption-driven rather than investment-driven and growth has too often depended on imports, government expenditure, remittances, and debt-financed consumption rather than productivity-enhancing investment in tradable sectors.
“The result is familiar: stagnant productivity, weak export diversification, persistent balance-of-payments pressures and growing economic vulnerability.”
The end result of all of this is that T&T now finds itself at the centre of this dilemma, he said.
“Despite its energy resources, the country continues to experience foreign exchange shortages, declining productivity growth, widening fiscal pressures, and increasing structural imbalance between the tradable and non-tradable sectors. Traditional policy responses; deficit financing, episodic diversification initiatives, and isolated fiscal adjustments are proving increasingly inadequate.”
Long-term problem
Dookeran argued that the challenge that T&T faces is therefore larger than short-term stabilisation as T&T must escape what may now be described as the disequilibrium trap.
He said there are three dimensions to this trap and these forces are now operating simultaneously
First, there is cyclical disequilibrium arising from fluctuations in energy prices, trade flows and external financing conditions.
Secondly, there is secular disequilibrium driven by deeper transformations in technology, demographics, climate risks, and changing patterns of global production and consumption.
Thirdly, there is structural disequilibrium rooted in long-standing weaknesses in productivity, competitiveness, institutional coordination, and foreign exchange generation.
He said the consequence is an economy where markets no longer clear efficiently, where fiscal and monetary policies frequently collide rather than synchronise, and where growth itself becomes unstable and fragile.
He added that what is required now is not another isolated policy adjustment, but a coherent macro plan of action for 2026 and beyond.
“At the center of this strategy must be the restoration of balance-of-payments stability. For a small open economy, external balance is fundamental. Persistent deficits weaken reserves, undermine investor confidence, intensify exchange-rate pressures and increase dependence on external borrowing.”
Equally important, he said is the need to rebalance the economy away from excessive consumption growth toward productive investment.
“Recent global analysis, including the work of American economist Gita Gopinath, highlights the widening divergence between consumption-led expansion and investment-led growth. Economies that prioritise productive investment in infrastructure, technology, innovation, and human capital are better positioned to achieve resilient long-term growth.”
This lesson is directly relevant to T&T, he said.
“The country must now focus strategically on sectors capable of strengthening productivity and foreign exchange earnings, including renewable energy, downstream manufacturing, digital transformation, logistics, agro-processing, and technological innovation.”
At the same time, he said the national savings rate must increase as he said sustainable development cannot continue to depend excessively on external financing and debt accumulation. Incentives for household savings, corporate reinvestment, diaspora engagement and long-term productive capital formation must become central pillars of national policy.
He then said institutional restructuring is equally indispensable.
“No macroeconomic framework can succeed without institutions capable of transparency, accountability, measurable performance and effective implementation. Policy continuity and institutional credibility are now essential requirements for economic resilience.”
Yet growth alone will not be sufficient, he said.
“Equity must become an internal objective of development policy itself. Economic transformation that excludes large sections of the population cannot remain sustainable. Development must therefore combine productivity enhancement with broader economic participation, stronger social protection systems, and expanded access to opportunity.”
Small states
Dookeran said that the experience of successful small states demonstrates that transformation is possible.
He used examples like economies such as Singapore, South Korea, and United Arab Emirates that successfully converted periods of vulnerability into long-term national resilience through strategic investment, institutional reform, and disciplined economic planning.
“T&T possesses the human capacity, institutional experience, and resource base to undertake a similar transition. But the policy framework must now shift from short-term transactional responses toward a unified strategic vision.”
He added, “The arithmetic of economic policy must add up, but so too must the geometry and the algebra. Arithmetic reflects the empirical realities of the economy; geometry reflects its structural configuration; algebra reflects the policy choices that connect them.”
Only by aligning these dimensions, he argued that T&T can rise above the disequilibrium trap and reposition itself within a rapidly changing global order.
“Ultimately, as Indian economist Amartya Sen argued in ‘Development as Freedom’, development should be measured not merely by the expansion of wealth, but by the expansion of freedom, opportunity, resilience and human capability.”
