Why I will not support devaluation of TT dollar
by Surujrattan Rambachan
Once again certain renowned economists are calling for a devaluation of the TT dollar and are actually proposing up to ten TT dollars for a US dolllar.
Again, let me state that I do not support devaluation since the hardship it brings to an import oriented economy and a generally low income earning workforce will be socially disastrous.
For example, while the export sector may get an advantage and while government will have more TT dollars to pay local debts, the cost of living will increase and as well poverty levels will increase. There is also a real possibility of loss of jobs especially since households on fixed incomes may not be able to hire housekeepers and others in marginal jobs. Small Businesses may also release people. But what is more significant will be the ability of people to live the same quality of life after devaluation since the prospects for a wage increase commensurate with the cost of living occasioned by the devaluation appears remote.
Have the economists considered that with over 60 percent of the working people receiving less than 6000 TT per month that poverty will dramatically increase and that the propensity for crime will also increase.
Granted that our foreign exchange reserves are being depleted and that our ability to earn more in the short run is severely hampered due to the lower oil and gas prices as well as our failure to diversify, the govt must not necessarily assume that the only recourse open to it is to devalue.
The government can and should examine:
- The sources of capital flight
- Whether the value of goods being imported are being overvalued
- Goods and services which can and must be substituted
- The workings of the parallel market for US dollars and the leakage this is causing in terms of foreign exchange not being acquired by formal Financial institutions
- Implement serious programs in tourism and agriculture as part of the diversification thrust
- Alternative sources of materials as inputs into our manufacturing and retail sectors whist maintaining quality standards
- Encourage diaspora savings in TT in US dollars
- Funding for entrepreneurs who can be part of the import substitution strategy
- Encourage Caribbean holidays in EC currency thus saving on use of US dollars
- Restructure US dollar loans by renegotiating terms of repayment in terms of principal at least for the next five years thus reducing the outflow of US dollars
- Educate the population on the current foreign exchange reality
- Consider launching a citizen driven economic restraint strategy which will involve savings in US dollars.