PORT-OF-SPAIN: The Government of Trinidad & Tobago has announced there are no plans to devalue the local currency, despite calls by the main opposition People’s National Movement (PNM) for an end to the new system of foreign currency allocation.
The PNM believes that the new system of foreign currency allocation could lead to a black market that would eventually lead to a devaluation of the local currency.
However, Finance Minister Larry Howai says that there are more than sufficient foreign reserves to deal with the needs of the country and that the foreign exchange reserves have continued to increase and was estimated at TT$10.3 billion (One TT dollar=US$0.16 cents), which was more than one year of import cover.
He said the issue was the new system put in place by the Central Bank.
“As with all newly-established systems, there has been some negative reaction and some initial administrative problems. I know that the Central Bank Governor (Jwala Rambarran) is now considering what are the things he needs to do in order to ensure that the market has the foreign exchange it needs at the time that it needs it.
“Because it is a new system, it requires some behaviour change on the part of individuals. The Central Bank indicated to me that the system had a surplus of foreign exchange, but that is not what the business people are saying. I think it is the way in which the foreign exchange is now being shared up and divided up. And it is just a question of the Governor doing what is required to adjust the system. But from the point of view of additional foreign exchange, if he needed to put in additional sums, he can, because there is more than sufficient to meet the needs that exist in the market right now,” said Howai.
During a news conference last week, the PNM said the Central Bank was attempting to fix a situation that had not been broken.
“And the Governor of the Central Bank stands in his shoes and wonders,” said Opposition Leader Dr. Keith Rowley.
Dr. Rowley’s colleagues, Colm Imbert said Dr. Lester Henry, labeled Howai ‘as a square peg in a round hole’.
“The Central Bank is now auctioning foreign exchange and in any auction obviously the highest bidder wins,” said Imbert. “It is a crazy system. The last time there was a black market for foreign exchange was the late 1980s.”
Dr. Henry said the Central Bank implemented a new system on April 1, expanding the pool of authorized dealers forU.S.currency from the six commercial banks to 12 entities.
He also said the Central Bank has allowed the big foreign exchange earners such as the oil companies that earn approximately US$5 billion a year, to allocate a 25 per cent portion of their foreign exchange earnings to any one of the 12 players.
Rowley said allowing the big earners to “cherry-pick” who gets foreign exchange was not helping the situation.
He said the Opposition office was being flooded with reports from users who have suddenly found that they don’t have a ready supply of foreign exchange.
“Once there is a conversation in the national community that U.S. dollars are short, hoarding will follow and people will also attempt to take it (their foreign exchange) out of the country,” he said.
Earlier this month, the Central Bank of Trinidad & Tobago reiterated that it is taking “aggressive steps” to deal with the “unusual degree of tightness” being experienced in the local foreign exchange market.
The Trinidad & Tobago Manufacturers Association (TTMA) said it is dissatisfied with the continued struggle faced by member companies in accessing foreign exchange for business operations.
“The situation is further exacerbated, as the association and the general public were advised that this anomaly would have been regularized by the end of February 2014,” the TTMA said in a statement. “TTMA is informed by its members that the situation continues unabated, with commercial banks maintaining a queuing system and, even then, banks are only able to supply a small percentage of the requirements of local manufacturers’ needs.”
The TTMA said that the unavailability of foreign exchange has resulted in the inability of manufacturers to meet their financial obligations to foreign suppliers, noting that if the situation continues it will adversely impact manufacturers’ credit ratings with suppliers, as well as overall competitiveness, and, ultimately, business employment levels, since not being able to secure foreign exchange to procure raw material will negatively impact production.