……….Not a Shortage
Trinidad and Tobago’s foreign exchange challenges are often framed as a problem of scarcity, as if the country has simply run out of US dollars. That diagnosis is incomplete.
By PETER GREEN
The more uncomfortable truth is that the forex strain is largely self-inflicted, driven by how foreign exchange is spent, who gets access to it, and how little of it is recycled into productive activity.
For decades, energy revenues masked the cost of an import-dependent, consumption-heavy economy. As long as oil and gas inflows were strong, the country could afford to spend freely on consumer goods and overseas services without consequence.
That era has passed. Energy inflows are now more volatile, production has matured, and global conditions are less forgiving. Yet spending patterns, both within the private and public sectors, remain largely unchanged.
A disproportionate share of available foreign exchange now goes toward consumer imports and lifestyle services that generate no return.
Food items that can be locally substituted, vehicles and vehicle parts, appliances, luxury retail, entertainment subscriptions, and outbound travel steadily drain dollars from the system. Individually, these purchases seem harmless.
Collectively, they exert sustained pressure on a small economy with limited forex-earning capacity.
The cost of this imbalance is felt most acutely by productive firms. Manufacturers, agro-processors, exporters, and service providers that rely on imported inputs face delays and rationing, while consumer demand, spread thinly across thousands of transactions, flows more easily.
The system inadvertently prioritises consumption over production, weakening the very sectors that could stabilise forex supply over time.
This distortion is compounded by credit card usage, which has become an unmonitored forex pipeline. Every online purchase, foreign subscription, travel booking, or overseas payment made on a local card draws directly on national reserves.
These transactions bypass traditional allocation channels and are difficult to prioritise or align with economic objectives. The result is a paradox: firms that create jobs and export value struggle for access, while non-essential consumer spending continues almost automatically.
When formal access becomes uncertain, underground and black-market forex activity inevitably expands. Parallel markets emerge to meet unmet demand, pricing dollars at a premium and rewarding speculation.
Once foreign exchange moves outside the banking system, it no longer supports investment, trade finance, or economic growth. Instead, it fuels hoarding, arbitrage, and capital flight, activities that deepen scarcity and erode confidence.
From a macroeconomic perspective, these underground channels are not just illegal; they are corrosive. They distort price signals, undermine monetary policy, and fragment the economy into parallel systems.
Businesses begin planning around unofficial rates, households lose trust in formal mechanisms, and the credibility of institutions weakens. History shows that once this cycle takes hold, reversing it becomes far more difficult.
Fixing Trinidad and Tobago’s forex problem does not require bans or blunt controls. It requires discipline, transparency, and better incentives. Forex allocation must clearly favour productive and export-linked activity.
Consumer outflows, especially via credit cards, must be better monitored and aligned with national priorities. Local substitution should be rewarded through tax policy and procurement rules, not left to patriotic appeals.
Equally important is restoring confidence. People hoard dollars and turn to informal markets when systems feel opaque or unfair.
Clear communication from monetary and fiscal authorities about priorities, constraints, and timelines can release trapped liquidity back into circulation.
Ultimately, Trinidad and Tobago does not lack foreign exchange. It lacks a coherent strategy to use it productively, recycle it locally, and prevent unnecessary leakage.
Until forex is treated as a strategic national resource, earned deliberately, allocated intelligently, and spent with discipline, the cycle of shortages, queues, and frustration will persist.
The crisis is not about how many dollars enter the system, but how easily they leave without building the economy in return.
