ewart s williams : the paradoxes inherent in the role of central banks – the case of the central bank of trinidad and tobago address by mr ewart s williams, governor of the central bank of trinidad and tobago, to the british - caribbean chamber of commerce, port - of - spain, 11 march 2009. * * * thanks to the british caribbean chamber of commerce for inviting me to address your forum this morning. my invitation listed a number of topics and the one that caught my eye was entitled, the paradoxes inherent in the role of central banks ; i would therefore wish to take this opportunity to discuss the kinds of challenges that the bank has been facing in the pursuit of its mandate. i will couch the discussion in the context of two current macro - economic challenges : • the current economic slowdown • the clico / cib crisis over the last few years, we have achieved rapid economic growth. however, as you know, the central bank has had to face the specter of unacceptably high inflation. since 2008, the international economy has been in the grip of an unprecedented financial crisis which has led to a pronounced global recession. initially, like most developing and emerging market countries, the region faced only limited contagion from the international turmoil. however, as the international credit crisis persists, as commodity prices continue to sag, and as the global recession gets deeper, the region is finding itself on the cusp of a major economic slowdown with all its attendant consequences. several indicators point to a pronounced slowdown in the trinidad and tobago economy. • activity in the energy sector has declined sharply, with several firms forced to advance scheduled maintenance to contain layoffs. • all the main construction indicators are down – local sales of construction materials, employment in construction : mortgage loans on the demand side : • the index of retail sales is trending downwards. • christmas and carnival sales were much lower than last year. • automobile sales and purchases of consumer durables are sharply down. • several large firms ( mittal steel, digicel, hilton hotel ) have announced layoffs. • while reliable data are not available, the decline in regional and local demand could be affecting manufacturing output and exports. of course, there is some encouraging news on the inflation front as : • headline inflation has declined from a high of close to 15 per cent to 11. 7 per cent ; and • food prices seem to be coming down because of both external and domestic influences ; and • we

ewart s williams : the heritage and stabilization fund of trinidad and tobago address by mr ewart s williams, governor of the central bank of trinidad and tobago, at the heritage and stabilization fund forum, port - of - spain, 2 may 2007. * * * why the forum? the hsf is a most important national asset. it is a sizable sum which, in principle, could become a very significant sum of money over time. these sums are to be held in trust for future generations. accordingly, it requires constant oversight of all stakeholders, starting with the parliament but including civil society, business and all those who have an interest in the country ’ s economic development. viewed from this perspective, the main objectives of this public information programme are : 1. to create a better understanding of the workings of the fund and ensure transparency of the process ; 2. to foster compliance with the new laws, procedures and policies ; 3. to create social ownership ; and 4. to avoid misinformation and to create realistic expectations. what are the objectives of the fund? the fund has two primary objectives. firstly, to insulate fiscal policy and the economy from swings in international oil and gas prices ( let ’ s call this the stabilization objective ). secondly, to accumulate savings from the country ’ s exhaustible assets of oil and gas for future generations. the future generation will not benefit from these savings through annual cheques as was done by alaska but through government ’ s ability to maintain expenditures over the long term when oil and gas revenues are gone. while not a specific objective, the fund, by holding resources abroad, could provide a cushion to monetary policy in the face of volatile external flows. why should the fund cover stabilization? as you know, we ended up with a hybrid fund to cover stabilization and savings for future generations. the simple answer is because of our heavy dependence on the energy sector. while the sector accounts for a mere 3 per cent of total employment, as is shown in the slide, the sector accounts for 45 per cent of gdp ; 91 per cent of merchandise exports and 62 per cent of fiscal revenues. specifically, in respect of the budget, 43 per cent of every dollar of expenditure is financed by energy sector revenues. thus, let ’ s say oil and gas revenues decline by one - half, in the absence of a stabilization fund, expenditures would need to be reduced by 21 per cent. sudden sharp reductions in government expenditures ( of this magnitude ) could have serious adverse effects on