The case for floating the Trinidad and Tobago dollar.

Floating the Trinidad and Tobago dollar: Can currency reform fix the economy?

For decades, Trinidad and Tobago has managed its exchange rate through a fixed regime, keeping the Trinidad and Tobago dollar (TTD) pegged at around 6.78 to the US dollar. While this system offered stability, it also encouraged distortions in the market, leading to persistent foreign exchange shortages, import bottlenecks, and an economy that increasingly relies on state interventions to survive.

The idea of floating the TTD has resurfaced as the country faces pressing economic challenges ranging from inflation and limited growth to falling competitiveness. When compared to Singapore a country that once lagged behind T&T economically in the 1960s but now boasts one of the world’s strongest currencies the question arises: What did Singapore do right, and can T&T adopt a similar path?

This article draws from over six decades of exchange rate data to explore what a managed float or even full dollarisation could mean for Trinidad and Tobago, while offering realistic advice for everyday citizens.

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A comparative currency history: TTD vs SGD

In 1960, the TTD traded at 1.71 to 1 USD while Singapore’s dollar (SGD) was weaker, at 3.06 to 1 USD. Over the following decades, their trajectories diverged dramatically. By 2025, the TTD stands at an average of 6.79 per USD, while the SGD has strengthened to 1.32 per USD.

Singapore’s currency appreciated due to prudent economic policy, investment in technology, strategic trade partnerships, and a highly diversified economy. Meanwhile, T&T’s exchange rate steadily depreciated, particularly in the 1980s and 1990s, due to oil shocks, mismanaged fiscal policy, and limited diversification outside of hydrocarbons.

From 1986 onward, the TTD underwent a rapid devaluation, rising from 3.25 to over 6.90 by 1997, and has remained roughly fixed since 2001. Conversely, Singapore maintained a managed float that allowed the SGD to appreciate based on economic fundamentals.

USD/TTD vs USD/SGD Exchange Rate Comparison

Comparative USD Exchange Rates: TTD vs SGD (1960-2025)

What Singapore did right: Learning from the Lion City

Singapore’s currency strategy relied heavily on sound macroeconomic management. The Monetary Authority of Singapore (MAS) maintained low inflation through a controlled float, intervening in the foreign exchange market only when necessary. It kept a long-term goal of currency appreciation to counter imported inflation and encourage productivity.

The Singaporean government did not rely on subsidies or artificially cheap imports. Instead, it allowed market mechanisms to set prices while creating a business-friendly environment that attracted foreign direct investment (FDI). The result? High savings, consistent GDP growth, and a currency that gradually strengthened over time.

Trinidad and Tobago, on the other hand, pegged its currency to prevent shocks but failed to fix structural weaknesses. The country remains reliant on energy exports, with limited incentives for non-energy sectors. The fixed exchange rate encouraged consumption of imports and suppressed domestic production.

The case for floating the TTD: Pros and cons

A managed float could align the exchange rate with market fundamentals, improving transparency and curbing black market activity. Exporters would benefit from more competitive pricing, and local producers could gain traction as imports become more expensive.

A managed float offers several advantages that could benefit Trinidad and Tobago’s economy. It would reduce the artificial demand for US dollars by allowing the exchange rate to reflect actual market conditions. This would improve the allocation of foreign exchange, ensuring that it is directed where it is most needed rather than through administrative controls. Additionally, a more flexible exchange rate would create stronger incentives for local production and import substitution, as imported goods become relatively more expensive. It would also provide a more accurate signal to investors and businesses, allowing capital to flow more efficiently based on real economic fundamentals.

However, these benefits come with notable risks. One immediate concern is the potential for inflationary shocks, particularly as the cost of imported goods rises. This could lead to a decline in purchasing power, especially for working-class households already under financial pressure. Furthermore, without strong institutional buffers and a clear, credible policy framework, the economy may face increased volatility, which could deter investment and cause uncertainty in both the public and private sectors.

What to expect from a managed float in T&T

If the Central Bank of Trinidad and Tobago (CBTT) opts for a managed float, it would start by relaxing exchange controls and allowing the TTD to fluctuate within a band determined by supply and demand. Intervention would only occur to avoid extreme volatility.

The TTD would likely depreciate in the short term possibly reaching rates between 8.50 to 10.00 per USD until it finds an equilibrium. This depreciation would increase the cost of living, particularly for imported goods, fuel, medicine, and education abroad.

However, this pressure could nudge consumers and businesses toward local alternatives. Exporters and the tourism sector may benefit from a weaker TTD, making Trinidad and Tobago more attractive to foreign visitors and investors.

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How the working class can survive a float

A currency float without preparation can have a harsh impact on low-income earners. To mitigate this, citizens must take strategic steps now:

1. Build a USD buffer

Open a multi-currency savings account and convert some savings into USD or other stable currencies, particularly if you regularly purchase imported goods or have children studying abroad.

2. Shift spending habits

Support local agriculture, manufacturing, and services. Buy local wherever possible. Reduce consumption of luxury imports and imported processed foods.

3. Learn marketable digital skills

If inflation rises and job markets shift, those with digital or exportable services (e.g., programming, design, remote admin) will be more resilient. Seek skills that allow you to earn in foreign currency.

4. Invest in hard assets

Land, property, and even durable tools or machinery can hold value better than cash during a float. Avoid taking on large USD-denominated debts.

5. Participate in co-operatives

Community savings and credit groups offer some buffer against high interest rates and can help members pool resources in uncertain times.

Is dollarisation an option?

Another proposal is dollarisation adopting the US dollar as legal tender either fully or in parallel with the TTD. This has been done in countries like Panama and Ecuador.

Dollarisation offers several potential benefits for Trinidad and Tobago. By adopting the US dollar, the country would achieve immediate exchange rate stability, which could restore investor confidence and eliminate the parallel or black market for foreign currency. It would also simplify international transactions, making it easier for local businesses and the government to access foreign credit and engage in global trade on more predictable terms.

However, the costs of dollarisation are substantial. The most critical trade-off is the loss of monetary policy independence. The Central Bank of Trinidad and Tobago would no longer be able to set interest rates or use traditional tools to manage inflation or stimulate the economy.

Additionally, since the country would give up the ability to issue its own currency, the government would be forced to maintain strict fiscal discipline, relying solely on revenues and borrowing without the option of financing deficits by printing money. This constraint could severely limit the state’s flexibility in responding to future economic shocks or social demands.

Dollarisation would eliminate exchange rate risk but could also tie T&T’s fate to the US Federal Reserve, which sets rates based on American not Caribbean economic conditions. It would also require immense reserves to replace TTD in circulation and may worsen inequality without structural reforms in place.

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Why currency policy alone is not enough

Singapore’s success was not because of its floating currency alone. It was also the product of strong institutions, stable politics, education reform, a culture of meritocracy, and strategic infrastructure spending. A float without addressing T&T’s dependence on energy, weak productivity, and governance issues will likely result in pain without progress.

Whether Trinidad and Tobago pursues a managed float or full dollarisation, such a policy shift must be supported by broader structural reforms to ensure long-term success. Fiscal discipline and comprehensive tax reform are essential to stabilise public finances and reduce dependency on volatile energy revenues.

At the same time, the government must actively support small and medium-sized enterprises (SMEs) and foster a culture of entrepreneurship to diversify the economic base. Improving efficiency within the public sector is equally important to reduce waste and enhance service delivery.

In addition, sustained investment in logistics, port facilities, and digital infrastructure will be crucial to improve productivity, facilitate trade, and attract both local and foreign investment. Without these complementary measures, any changes to the exchange rate regime are unlikely to deliver meaningful or lasting improvements.

What the Central Bank must do

The Central Bank of Trinidad and Tobago would need to take several key steps to manage a successful transition to a managed float or dollarisation. First, it must announce a clear and credible policy framework to prevent panic and maintain public confidence. Interventions in the foreign exchange market should be limited to smoothing excessive volatility rather than attempting to fix the exchange rate at a specific level. Transparency around the status and use of foreign reserves must also be improved to strengthen trust and accountability. Close coordination with the Ministry of Finance will be vital to ensure that fiscal and monetary policies work in tandem, reinforcing each other rather than working at cross-purposes.

Additionally, the development of hedging instruments would provide businesses with tools to manage currency risk. Crucially, all of these measures must be communicated effectively, with a gradual, carefully managed phase-in strategy to help minimise social backlash and economic disruption.

Floating the Trinidad and Tobago dollar: Can currency reform fix the economy? 8

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A fork in the road

Trinidad and Tobago now stands at a crucial crossroads. The fixed exchange rate that once offered stability has become a crutch. Floating the Trinidad and Tobago dollar is no silver bullet, but it may be a necessary step to restore competitiveness and reduce distortions in the economy.

However, any move toward a managed float or dollarisation must be executed with transparency, discipline, and a commitment to reform beyond currency policy. Singapore’s story shows what is possible, but T&T must tailor its own path with eyes wide open.

The everyday citizen will need to adapt spending smarter, saving strategically, and seeking skills and assets that can withstand monetary shifts. The Central Bank must lead responsibly, or else risk turning what should be a tool for reform into a source of greater hardship.

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