Both Standard & Poor's and Moody's revised Trinidad and Tobago's credit outlook to negative within three months of each other. S&P moved first in September 2025, affirming the BBB- rating but flagging the direction. Moody's followed in December, maintaining Ba2 but making the same call. The common thread in both assessments was foreign exchange reserves - specifically, a 24 percent decline in liquid reserves over a single year, to US$3.2 billion by August 2025. That figure was well below Moody's own earlier projection that reserves would stabilise around US$4 billion.
The January 2026 figure recovered to US$5.58 billion. But that number includes a US$1 billion sovereign bond issued on international markets - a 10-year instrument that was 2.5 times oversubscribed, with an implied spread of about 241 basis points above the comparable US Treasury. Strip out the borrowed money and the underlying trend is clear: reserves are being consumed faster than they are being replenished. The IMF now projects gross official reserves will fall further to US$4.6 billion by the end of 2026, roughly 5.4 months of import cover.
The IMF, in its February 2026 Article IV concluding statement, recommended "a more flexible exchange rate" and a shift in monetary policy toward "a more neutral stance." This is diplomatic language for devaluation and monetary tightening - two measures the Central Bank and the government have explicitly resisted. The repo rate has been held at 3.5 percent since March 2020, even as the US Federal Reserve raised its benchmark rate sharply, creating a persistent and widening incentive for capital to leave Trinidad and Tobago for higher-yielding dollar assets. The IMF was direct: narrowing the negative US-TT interest rate differential "should help support the exchange rate regime and stem reserve losses." Six years of inaction on rates is not a policy. It is a choice to subsidise capital flight.
What Businesses Are Experiencing
The official exchange rate is approximately TT$6.80 to the US dollar. The parallel market rate - what you pay at cambios, informal dealers, or anyone willing to sell cash - ranges from TT$7.00 to TT$8.00. Caribbean economist Marla Dukharan has estimated the TT dollar is 24 to 50 percent overvalued, suggesting a market-clearing rate somewhere between TT$8.34 and TT$10.13. The gap between the official rate and the parallel rate is not a curiosity. It is a measure of how far the managed rate has drifted from reality.
The Trinidad and Tobago Chamber of Industry and Commerce published its "Challenges in Accessing Foreign Exchange" report in December 2025. The findings are stark. Of 111 businesses surveyed, 62.2 percent reported delays in paying foreign suppliers. Nearly 60 percent said profitability had declined specifically because of forex shortages. More than half reported that commercial banks were meeting 25 percent or less of their actual foreign exchange needs. The Chamber's conclusion was blunt: "Doing nothing is not an option."
Businesses report waits of three to nine months for foreign exchange through the banking system. This is not an inconvenience - it is a structural barrier to normal commercial activity. Companies that do not earn their own US dollars through exports are at the mercy of a rationing system they have no visibility into. Some have reduced operations. Others have restructured supply chains to minimise USD requirements, sourcing regionally or absorbing higher costs from parallel-market purchases. The European Chamber of Commerce in Trinidad and Tobago has separately documented the chilling effect on foreign direct investment, noting that the inability to repatriate profits in a timely fashion is a dealbreaker for prospective investors.
The US Department of Commerce, in its country commercial guide, identifies foreign exchange access as one of the primary market challenges facing businesses in Trinidad and Tobago. The scarcity of physical US dollar notes compounds the problem further. Wholesalers who import food, pharmaceuticals, manufactured goods, and machinery - the essential inputs of a small, import-dependent economy - are operating under conditions that would be considered abnormal anywhere else in the Caribbean.
The Banking Squeeze
Banks have responded to the structural shortage by rationing at the consumer level. The trajectory at Republic Bank tells the story. In March 2021, the bank reduced its US dollar credit card limit from US$12,000 to US$10,000 per billing cycle. In September 2023, it fell to US$5,000. In May 2025, the maximum limit on any newly issued credit card was set at US$500. By August 2025, the cap on existing cards came down to US$2,500.
Republic is not alone. In December 2024, Scotiabank reduced the monthly limit on personal credit cards to US$2,000 for most customers. In February 2025, CIBC FirstCaribbean cut its personal Visa debit card foreign exchange limit from US$1,000 to US$500.
For a country whose economy depends on imports - food, consumer goods, medical supplies, industrial inputs - these limits are not minor adjustments. They amount to a progressive disconnection of ordinary Trinbagonians from the global economy. A US$500 monthly credit card limit makes routine online purchases, medical payments abroad, university fees, and even travel bookings extraordinarily difficult. The rationing has been implemented bank by bank, without coordinated policy guidance, without public consultation, and without any articulated plan for when - or whether - the restrictions will be reversed.
The IMF's Warning
The IMF's language deserves careful reading. It said that maintaining the fixed exchange rate arrangement requires "sizeable and front-loaded fiscal consolidation" - meaning deep spending cuts, implemented soon, not gradually. The Fund estimated the government's deficit at 5.0 percent of GDP for fiscal year 2026 and calculated that meeting the authorities' own target of 2.2 percent of GDP would require additional fiscal measures amounting to 2.8 percent of GDP. As a compromise, staff suggested targeting a 3.5 percent deficit through 1.5 percent of GDP in additional measures, including broadening the tax base by phasing out VAT zero-ratings and exemptions.
The alternative the IMF offered was "a more flexible exchange rate" - a managed depreciation that would let the TT dollar find a level closer to where it actually trades in the parallel market. The Fund acknowledged this would "support external rebalancing" but "could weigh on growth" in the short term.
Neither option is politically attractive. Spending cuts would affect the public sector wage negotiations already underway - the government has committed to a 10 percent increase - along with infrastructure programmes, social transfers, and the recruitment drive that absorbed 110,000 applications. Devaluation would immediately raise the cost of imports, hitting food, fuel, and consumer goods. Lower-income Trinbagonians would absorb the worst of that impact.
The government's response has been unequivocal. Finance Minister Davendranath Tancoo has refused to move on the exchange rate until the final 2026 Article IV report is published and scrutinised, calling devaluation "PNM policy." But the PNM also rejected devaluation during its tenure, when net official reserves fell from US$11.5 billion in 2014 to roughly US$5.3 billion by March 2025 - a 54 percent decline. Both parties treat the fixed rate as untouchable. Devaluation is electoral poison regardless of which party governs. The Persad-Bissessar administration has framed the IMF's recommendations as a clash between "the cold logic of international balance sheets" and "the domestic mandate to protect the citizenry." This is a politically coherent position. It is not an economically sustainable one if the underlying reserve drain continues.
The IMF projects GDP growth of just 0.7 percent for 2026. This is not an economy with the momentum to grow its way out of a reserves crisis.
The Bond That Bought Time
The US$1 billion sovereign bond issued in late 2025 served a specific purpose: it refilled the reserves tank. Reserves jumped from US$3.2 billion to US$5.58 billion partly on the strength of this injection. But borrowed reserves are not earned reserves. The bond must be serviced - interest paid at a spread of 241 basis points above Treasuries, principal eventually repaid - adding to the country's debt obligations without generating any productive return.
The question is what happens when the bond money is consumed. The underlying drain on reserves is driven by four forces operating simultaneously: declining energy production (gas output at 2.5 billion cubic feet per day, down from a peak of 4.0 bcf/d in 2010, with Atlantic LNG Train 1 permanently decommissioned), persistent import demand in an economy that manufactures relatively little, capital outflows incentivised by the interest rate differential, and the official-to-parallel rate gap that encourages demand for dollars at the artificially cheap official price. If these forces continue unchecked, the US$1 billion will be absorbed and the country will be back to the pre-bond position, except now carrying additional debt.
The Three-Month Import Cover Threshold
Credit rating agencies use a benchmark of three months of import cover as a critical threshold. Below that level, a country's ability to meet import obligations and service external debt comes into serious question, and multi-notch downgrades follow. Moody's was explicit: while not their baseline scenario, they warned that if the pace of drawdown accelerates and reserves fall below three months of imports, a multi-notch downgrade "could materialize over time."
Trinidad and Tobago is not at that threshold yet. The IMF's projection of 5.4 months of import cover by end-2026 provides some buffer. But the trajectory matters more than the snapshot, and the trajectory - before the bond intervention - was pointed downward at 24 percent per year. If that rate of decline resumes once the bond proceeds are drawn down, the buffer will be exhausted within two to three years. A multi-notch downgrade would raise borrowing costs across the board - for the government, for state enterprises, and for the private sector.
What Nobody Is Tracking
Weekly and monthly forex reserve data, with the effect of the bond isolated, would allow Trinbagonians to see whether the underlying position is stabilising or continuing to deteriorate. This data exists within the Central Bank. It is not published in a form that separates borrowed reserves from earned reserves.
The manufacturing sector's actual forex access delays - how long firms wait, how much they receive versus what they request, and which sectors are prioritised in allocation decisions - would reveal the real rationing choices being made inside the banking system. The Chamber's survey captured a snapshot, but systematic, recurring data does not exist in the public domain. The Central Bank publishes aggregate sales and purchases by authorised dealers. It does not publish the gap between what is requested and what is fulfilled.
Without this data, the public is left with two headline numbers - the official rate and the total reserves figure - neither of which tells the full story. One is a managed fiction that the IMF, the Chamber, and independent economists have all identified as unsustainable. The other includes borrowed money that masks the speed of the underlying decline.
The IMF's recommendation for a "more flexible" rate is a polite way of saying the fiction has an expiry date. The government's rejection of that recommendation is a political calculation, not an economic refutation. The question is whether the adjustment happens by policy choice - managed, gradual, with protections for vulnerable households - or by market force, abruptly, when reserves hit a threshold that leaves no room for negotiation. History in the Caribbean, and in Trinidad and Tobago specifically - which devalued in 1985 and 1993 - suggests that waiting for the market to force the issue produces worse outcomes than adjusting proactively.
The 0.7 percent growth projection means there is no growth engine coming to the rescue. The decision cannot be deferred indefinitely. It can only be deferred until the next bond runs out.
Sources
- IMF: Staff Concluding Statement of the 2026 Article IV Mission (February 10, 2026)
- Jamaica Observer: "IMF warns pressure mounting on Trinidad to loosen grip on currency" (February 22, 2026)
- St. Vincent Times: "Trinidad Govt Rejects IMF Austerity Playbook" (February 2026)
- Trinidad Express: "No going to IMF, no devaluation" (February 2026)
- Caribbean Life: "IMF pressing T&T to devalue currency, cabinet says no way" (February 2026)
- Moody's: Outlook revision to negative, Ba2 affirmed (December 2025)
- Standard & Poor's: Outlook revision to negative, BBB- affirmed (September 2025)
- Trinidad and Tobago Chamber of Industry and Commerce: "Challenges in Accessing Foreign Exchange" (December 2025)
- European Chamber of Commerce TT: "Foreign Exchange Challenges and Impact on Foreign Investors"
- Marla Dukharan: "Why it is harder to get USD in Trinidad & Tobago than anywhere else in the Caribbean"
- Trinidad Express: "Republic cuts US$ card limit by 75% in two years" (2025)
- Stabroek News: "Republic Bank reduces foreign credit card transactions in Trinidad to US$2,500 monthly" (August 2025)
- CNC3: "Republic Bank reduces foreign credit card transactions to US$2,500 monthly" (August 2025)
- Stabroek News: "US$ imbalance led to cut in Republic's forex credit card limit - central bank official" (August 2025)
- Trinidad Express: "Rethinking forex priorities" (2025)
- Trinidad Guardian: "What has this Government done for local investors?" (March 2026)
- US Department of Commerce: "Trinidad and Tobago - Market Challenges" (International Trade Administration)
- Central Bank of Trinidad and Tobago: Monetary Policy Announcement (March 2026)
- Central Bank of Trinidad and Tobago: Economic DataPack (December 2025)
- FocusEconomics: Trinidad and Tobago economic data
- CNC3: "The key challenges for 2026 and beyond"
- Trading Economics: Trinidad and Tobago Foreign Exchange Reserves
- SouthTrini.com: "Fiscal Summary: Trinidad & Tobago Foreign Reserves (Oct 2023 - Aug 2025)"