Caption: Minister of Finance Davendranath Tancoo
By Prior Beharry
FINANCE Minister Davendranath Tancoo says there will be no devaluation of the Trinidad and Tobago Dollar (TTD).
In a response to AZP News on Monday, he said, “Regarding devaluation of the Trinidad and Tobago dollar, the fundamental question is whether such a move would truly benefit our country.
“It is my view that devaluation cannot work to stimulate the TT economy in its current structure. The standard argument is that a weaker currency makes exports cheaper and imports more expensive, thereby improving the trade balance. However, this only holds if our exports are sufficiently price-elastic.”
His comment comes in the wake of a statement by the Executive Chairman of NH International (Caribbean) Ltd Emile Elias who called on Prime Minister Kamla Persad-Bissessar to devalue the TTD to $9 to one United States Dollar (USD). Currently, a US$1 is equivalent to TT$6.80.
Tancoo said, “In our case, the export portfolio is dominated by energy products, which are largely bound by production capacity and long-term contractual arrangements. Non-energy exports remain relatively small and are themselves import-intensive. A devaluation, therefore, would primarily raise the cost of imported inputs, driving up the cost structure of non-energy exports.
“This means they would not become more competitive internationally. This has the potential to decimate a large number of small and medium-sized businesses at a time when we need more productive activity from them. At the same time, our citizens would face higher import costs, which would feed directly into domestic inflation.
“Of course, some big businesses, which have used preferential access to foreign exchange over the years to spread their business abroad, and with familial connections operating in the SME sector, will easily be able to take advantage of the financial benefit of foreign exchange stored abroad which will now be worth more. But for the average SME, a devaluation in today’s conditions will be a difficult to survive.
“Given these realities, our responsibility is not to focus on devaluation, but on enhancing productive efficiency across sectors. To address foreign exchange challenges, we are pursuing a dual strategy: increasing exports while also reducing imports through stronger domestic production.
“For example, increased domestic production of food can reduce the consumption of foreign exchange via import substitution, but can also generate surplus for export. Similarly, in manufacturing, targeted credit should be directed toward infrastructure development and export promotion. These measures would help firms move up the value chain, access new markets, and strengthen non-energy export capacity.”
He said, “The services sector also holds significant potential. Tourism, logistics, and niche business process outsourcing can all generate valuable foreign exchange inflows if supported by appropriate investment and policy frameworks.
“Ultimately, devaluation would do little more than trigger inflation in the local economy. Our approach is to build resilience: improving productive efficiency, stimulating domestic activity to substitute imports, and expanding export capacity. This is how we will generate not only foreign exchange earnings, but also the broader multiplier effects needed for sustainable economic growth.”
Several economists commenting on the matter agreed that a devaluation would not have a positive effect on T&T’s economy.
