Central Bank Governor sends out war warning

CENTRAL BANK governor Ewart Williams said possible war by the United States and its coalition forces against Iraq will seriously affect Caribbean economies, many of which are still recovering from the fall out of the 9/11 terrorist attacks in the US in 2001.

He also said while energy-rich Trinidad and Tobago is in a position to collect increased revenues from the spike in oil prices, decline in tourism in Caribbean countries will hurt exporters in the twin-island state. “It is seriously going to affect the economies of the region. One cannot simply assume that because we’re an oil producer, we will benefit..certainly, there’s going to be an increase in oil prices and it redounds to a healthy revenue position,” said Williams, a former Deputy Director and Senior Manager of the Western Hemisphere at the Washington-based International Monetary Fund (IMF).

“But war is going to be disruptive; affect all the economies; affect the way markets operate and that must affect us. “I’m not sure that investors can continue making investment decisions in a condition in which there’s war. I’m not sure that trade relations would be the same if there’s a prolonged war.” Williams said industries in Trinidad that export products to the regional markets will be affected depending on the extent to which the tourism sector of the Caribbean countries is facing declines. Companies that export to North America and other industrial countries will also be affected. Williams said any war at this time will leave the Caribbean tourism sector — which has been trying to recover from 9/11 — hard hit. “A war will bring them back to square one,” he asserted. The Central Bank governor said all the economies in the Organisation of Eastern Caribbean States (OECS) are in economic trouble. “A war to the extent that it will affect tourist arrivals and further affect the economic situation in general will put additional pressure on employment and on survival in those countries,” he added.

Williams said when the external environment gets difficult, the first responsibility of any country is making adjustments. “Unfortunately, adjustment alone cannot take care of some of the dislocations. “There is an on-going discussion now that Trinidad and Tobago — which is I guess, arguably the most  powerful country in the region — can provide assistance and there has been some discussion on the price of oil.” There is also continuing discussions among regional leaders about a Stablisation Fund to help prop up fragile economies. It is envisaged that the stabilisation fund will have an initial capital of US$50 million in the first year rising to US$180 million within five years. “But in the final analysis the issue is who is going to put up the money. Trinidad and Tobago is in a position to put some assistance but the other economies of the region, Barbados, Jamaica, there’s need for some burden sharing and the details of that burden sharing still needs to be worked out at the political level.”

Williams said countries that are facing major economic disruptions as a result of a war could approach the International Monetary Fund (IMF), the Inter-American Development Bank (IDB) and other multilateral organisations which have facilities for emergency assistance. “ (But) in the final analysis, these multilateral agencies will insist that these countries take measures to deal with the new realities and sometimes these new measures are not always politically palpable.”