THE revision of Trinidad and Tobago\u2019s economic outlook from stable to negative by international ratings agency Moody\u2019s has reflected \u201cheightened caution\u201d over the country\u2019s foreign exchange reserves, economist Dr Vaalmikki Arjoon said yesterday.<\/p>\n
On Friday, Moody\u2019s revised Trinidad and Tobago\u2019s outlook from stable to negative, citing short-term risks tied to falling official foreign exchange reserves.<\/p>\n
This marks the second time in three months that an international ratings agency has revised the country\u2019s outlook from stable to negative.<\/p>\n
However, Finance Minister Davendranath Tancoo pushed back on the timing of the move, saying that Moody\u2019s acted \u201ctoo prematurely\u201d before the Government\u2019s new fiscal and growth measures could take effect.<\/p>\n
Arjoon in a statement responding to Sunday Express enquiries, noted that \u201cour credit rating itself remains unchanged by both S&P and Moody\u2019s\u2014we have not been downgraded, but the outlook adjustment signals that both agencies have placed our rating under review, essentially putting us on watch as they assess whether future economic conditions warrant maintaining our current standing\u201d.<\/p>\n
He said the Government\u2019s new blueprint plan could further drive diversification and attract foreign direct investment (FDI) helping to generate new forex earnings.<\/p>\n
Arjoon said ratings tend to move with the energy cycle and improve when higher production and prices support export forex earnings and fiscal revenues, while coming under pressure when production declines or prices weaken.<\/p>\n
He said the new outlook by Moody\u2019s \u201creflects heightened caution regarding our forex reserves levels, falling from about US$11 billion in early 2015 to roughly US$4.6 billion by October\u201d.<\/p>\n
This was driven largely by a prolonged decline in natural gas output, he pointed out.<\/p>\n
Arjoon said gas production dropped from over four bscf\/d in January 2015 to around 2.7 bscf\/d now, as upstream activity relied mainly on mature fields amid insufficient new investment.<\/p>\n
He further stated that the absence of exploration block awards for seven consecutive years (2015\u20132022), combined with \u201cfiscal rigidity, policy uncertainty, investor caution, delayed commercial negotiations, and ageing infrastructure\u201d had weakened the pipeline of new gas projects.<\/p>\n
Given that energy commodities account for 80% of export earnings, sustained production declines had translated directly into lower export receipts, reduced forex inflows and declining reserve\u2014which were key factors underpinning the deterioration in the outlook, Arjoon pointed out.<\/p>\n
He noted that efforts were being made to partially arrest some gas declines by giving more priority to smaller, lower-cost, faster-to-market gas fields with shorter lead times, while projects such as Manatee, Ginger, and Coconut were expected to deliver first gas from 2027 onward.<\/p>\n
\u201cTogether, this sequencing will improve foreign exchange inflows and strengthen forex reserves over the medium term, hopefully supporting an improved rating by 2027, as higher and more sustainable gas production is realised,\u201d Arjoon said.<\/p>\n
T&T may also \u201cconsider using a liquidity swap line to temporarily access foreign exchange from an external central bank in exchange for TTD, helping to ease short-term pressure in the forex market without borrowing\u201d, he stated.<\/p>\n
\u201cThis mechanism boosts immediate USD liquidity easing pressure on our official reserves,\u201d he said.<\/p>\n
Arjoon went on to suggest, however, that a case should also be made for Moody\u2019s to give more weight to the Heritage and Stabilisation Fund (HSF) balance, as does Standard and Poor\u2019s (S&P).<\/p>\n
The HSF, which is currently around US$6.4 billion, is a key reason for T&T retaining an investment grade under S&P for several years, he said.<\/p>\n
\u201cThe HSF represents a large, sovereign-owned stock of foreign assets that is meant to support, and many times has supported fiscal financing and external stability during economic downturns,\u201d he stated.<\/p>\n
Arjoon suggested that Moody\u2019s should also give added focus to the overall Net International Investment Position (NIIP), which is currently US$7.5 billion, as it gives a truer picture of T&T\u2019s external solvency and shock-absorption capacity, not just short-term liquidity. He said a positive NIIP means the country is a net creditor to the rest of the world, owning more foreign assets than it owes in foreign liabilities.<\/p>\n
\u201cThis matters because it signals lower external vulnerability relative to countries with a negative NIIP\u2014we are less exposed to sudden reversals in capital flows, currency crises, or refinancing shocks, since we are not overly dependent on continuous foreign borrowing to meet external obligations,\u201d Arjoon said.<\/p>\n
He said in the case of T&T, a positive NIIP indicates that \u201ceven if short-term FX liquidity tightens, the country\u2019s overall external wealth exceeds its external debt, providing a strong cushion against balance-of-payments stress and supporting sovereign creditworthiness beyond what headline reserve levels alone would suggest\u201d.<\/p>\n
He said ultimately, lasting improvement in the rating will depend on continued structural adjustment, such as expanding non-energy export capacity and attracting FDI that generates sustainable foreign-exchange earnings.<\/p>\n
\u201cAt the same time, strengthening tax compliance, reducing revenue leakages, and improving fiscal efficiency will be critical to lowering reliance on the energy cycle and builds more economic resilience that rating agencies reward,\u201d Arjoon said.<\/p>\n
The revision by Moody\u2019s should spur a \u201creality check\u201d and urgent action to turn around the economy.<\/p>\n
This was the view of some business leaders yesterday, as they also called for State action to invigorate and expand domestic industries such as agriculture and light manufacturing.<\/p>\n
On the retail front, the Downtown Owners and Merchants Association (DOMA) expressed concern and called for a \u201ccourageous\u201d national conversation on the country\u2019s economic challenges.<\/p>\n
DOMA president Gregory Aboud said the change by Moody\u2019s was a \u201csignificant marker of judgement on the current state of the economy\u201d.<\/p>\n
FOREX continues on Page 5<\/p>\n
Aboud stressed that DOMA\u2019s members were not political or related to any political interest.<\/p>\n
He said Moody\u2019s statements on foreign exchange were significant.<\/p>\n
\u201cIt is somewhat worrisome as we move forward into 2026,\u201d Aboud stated.<\/p>\n
\u201cThe country has many serious realities to face and we need the courage to appreciate the truth of our situation.\u201d<\/p>\n
He said Moody\u2019s rating was based on analysis of T&T\u2019s current balance sheet. Aboud said pointing fingers and looking for a scapegoat at this time was not the answer.<\/p>\n
He called for recognition of the country\u2019s situation and said conversation was needed on all points of national interest.<\/p>\n
Aboud said there was a need to discuss the most appropriate and strategic changes that would alleviate the concerns of a highly-regarded agency such as Moody\u2019s.<\/p>\n
He said the discussion on foreign exchange was being dominated by emotion and the issue was seen as being based in consumption, usually with items such as vehicles and foreign goods being blamed.<\/p>\n
He recalled the words of a former United States president, who stated that \u201cgood economics is good politics\u201d.<\/p>\n
Aboud said no blame was being cast on the present Government or its predecessor. However, he asserted that there has been a failure to respond to the foreign exchange issue with the correct theoretical economic policies.<\/p>\n
Aboud also cited a lack of confidence in the TT dollar, which he said some economists have viewed as a depreciating asset. He said T&T must have the courage to decide whether lack of confidence in the TT dollar was contributing to a decline in balance reserves.<\/p>\n
The DOMA president expressed hope that courageous discussions will take place in 2026. Aboud said Finance Minister Davendranath Tancoo\u2019s response would have been fair and understandable, given that the Government has just delivered its first budget.<\/p>\n
SME investment<\/p>\n
The country must begin acting on the monetisation of its resources, especially through expansion and diversification of the Small and Medium Enterprises (SME) sector, chairman of the Confederation of Regional Business Chambers Vivek Charran said yesterday.<\/p>\n
He said the change in outlook by Moody\u2019s was no surprise, as the country has experienced forex challenges for some time.<\/p>\n
He said the past ten years have been difficult for the SME sector in particular, as larger conglomerates were better able to deal with challenges in access to forex.<\/p>\n
Charran said the Government has been in place for seven months but there has been no drastic change, and this was not expected to change overnight.<\/p>\n
Charran suggested that a stable SME sector was key to rebalancing the economy but stressed that foreign exchange was also needed in the setting up of businesses.<\/p>\n
He cited difficulty in setting up a business, and called for focus on \u201cease of investment\u201d.<\/p>\n
Charran suggested that the Government look at reducing the cost and lengthy processes of establishing a business. He said many small businesses were challenged in trying to access land and facilities to expand, recalling that the State-owned E-TecK Park was intended to also serve as an affordable industrial estate to encourage SMEs.<\/p>\n
Charran said difficulty in finding and being able to afford facilities to expand remained expensive and \u201ca barrier to entry\u201d.<\/p>\n
He underscored the value of local cottage industries as an economic stabiliser.<\/p>\n
He said controlling forex was difficult to do and questioned whether control was a proper solution.<\/p>\n
He said platforms for diversification had to be expanded, including through resources such as T&T\u2019s tourism product.<\/p>\n","protected":false},"excerpt":{"rendered":"THE revision of Trinidad and Tobago\u2019s economic outlook from stable to negative by international ratings agency Moody\u2019s has…\n","protected":false},"author":2,"featured_media":345146,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46,1337,44],"class_list":{"0":"post-345145","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-economy","12":"tag-local","13":"tag-news"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/345145","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=345145"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/345145\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/345146"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=345145"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=345145"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=345145"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}