GEISHA KOW­LESSAR-ALON­ZO

Se­nior Re­portert

geisha.kow­lessar@guardian.co.tt

Econ­o­mists Dr Mar­lene Attzs and Dr Vaalmik­ki Ar­joon have said that T&T’s cur­rent forex sit­u­a­tion is un­sus­tain­able and there is need for ex­am­i­na­tion of long-term ef­fects and im­ple­men­ta­tion of more sus­tain­able so­lu­tions.

Not­ing that the 22-page sur­vey and re­port by the T&T Cham­ber, which was re­leased yes­ter­day, pro­vid­ed a use­ful sum­ma­ry of the dif­fi­cul­ties in ac­cess­ing forex that have far-reach­ing im­pli­ca­tions for the busi­ness com­mu­ni­ty and the broad­er econ­o­my, Attzs said: “I think ad­dress­ing the forex chal­lenges we cur­rent­ly face re­quires deep­er analy­sis, in­clud­ing a con­ver­sa­tion around the struc­ture of the econ­o­my, broad­er stake­hold­er in­clu­sion and a more ro­bust method­olog­i­cal frame­work. For in­stance, the doc­u­ment iden­ti­fies “dip­stick test­ing” as the pri­ma­ry re­search method but of­fers few de­tails about the sam­ple size, se­lec­tion cri­te­ria, or lim­i­ta­tions of this ap­proach.”

Ad­di­tion­al­ly, she said ex­plor­ing the be­hav­iour­al as­pects of the is­sue, such as how con­sump­tion pat­terns can adapt to forex con­straints, would add valu­able depth.

She said fo­cus groups on con­sumer be­hav­iour could be par­tic­u­lar­ly in­sight­ful, es­pe­cial­ly giv­en the doc­u­ment’s ob­ser­va­tion that “re­cent re­ports in­di­cate that while the de­mand for forex has risen, the sup­ply from do­mes­tic sources has failed to keep pace, cre­at­ing a short­age.”

Attzs added that it would be ben­e­fi­cial to ex­am­ine the long-term im­pli­ca­tions of forex short­ages on crit­i­cal ar­eas such as in­vest­ment, em­ploy­ment, and eco­nom­ic sta­bil­i­ty. Such an analy­sis would not on­ly en­hance the study’s com­pre­hen­sive­ness but im­prove the Cham­ber’s abil­i­ty to craft ac­tion­able and for­ward-look­ing so­lu­tions.

Ar­joon said the cur­rent forex cli­mate spawns un­cer­tain­ty that hurts in­vest­ment and sti­fles eco­nom­ic growth. He not­ed that many sur­vey par­tic­i­pants cit­ed chal­lenges with com­pli­ance re­quire­ments and doc­u­men­ta­tion, sug­gest­ing that bu­reau­crat­ic hur­dles ex­ac­er­bate wait­ing times.

This en­vi­ron­ment, Ar­joon said, par­tic­u­lar­ly ham­pers small and medi­um-sized en­ter­pris­es that lack the cap­i­tal buffers of larg­er firms. He em­pha­sised that with­out ur­gent re­forms, the scarci­ty of forex and in­equitable dis­tri­b­u­tion will con­tin­ue to un­der­mine pro­duc­tiv­i­ty, widen so­cioe­co­nom­ic dis­par­i­ties, and con­strain na­tion­al de­vel­op­ment prospects.

He said one note­wor­thy find­ing is the per­ceived in­equity in forex al­lo­ca­tion.

“While 58.6 per cent of par­tic­i­pants re­ceive just ze­ro to 25 per cent of their forex needs from banks, 10.8 per cent man­age to se­cure over 90 per cent. It is pos­si­ble that some of those who ac­cess healthy amounts may be high-val­ue clients to the banks will­ing to take high in­ter­est US$ loans or hold sev­er­al mort­gages etc.

“More than one-third wait a month to ac­cess forex, which de­lays sup­pli­er pay­ments. These chal­lenges are com­pound­ed by port and ship­ping ob­sta­cles, fur­ther in­creas­ing costs,” Ar­joon said.

Many busi­ness­es, he said, must re­sort to the black mar­ket for the re­main­ing funds, dri­ving up ex­pens­es and re­duc­ing their abil­i­ty to pay work­ers, main­tain prof­itabil­i­ty, or rein­vest in their op­er­a­tions as he fur­ther not­ed that 59 per cent of re­spon­dents re­port­ed a de­cline in prof­its.

At first glance, Ar­joon said al­low­ing the cur­ren­cy to float freely might seem like a straight­for­ward so­lu­tion but it will do more harm than good.

“In the­o­ry, a free float would align the ex­change rate more close­ly with mar­ket forces. How­ev­er, in an econ­o­my that lacks sub­stan­tial non-en­er­gy ex­port sec­tors and di­ver­si­fied pro­duc­tion for mean­ing­ful im­port sub­sti­tu­tion, a full float would trig­ger a steep rise in the ex­change rate—far ex­ceed­ing the black-mar­ket rate, which is it­self pegged at a pre­mi­um above the of­fi­cial rate,” Ar­joon ex­plained.

How­ev­er, he said a less tight­ly man­aged flex­i­ble cur­ren­cy regime holds some mer­its as it can trim de­mand for non-es­sen­tial im­ports, lux­u­ry goods and over­seas trav­el

Ar­joon said this un­der­scored the ur­gent need for a mul­ti-pronged strat­e­gy. He rec­om­mend­ed that the coun­try em­bark on a gen­uine and sus­tained di­ver­si­fi­ca­tion dri­ve.