Trinidad government denies there is a “foreign exchange crisis”
Finance Minister Larry Howai has reiterated that there is no foreign exchange shortage in Trinidad and Tobago even as opposition legislators accuse the government of failing “to deal effectively with the current foreign exchange crisis”.
Howai, a former banker, told the Parliament late Friday that there is “no foreign exchange crisis.
“Let me repeat that, there is no foreign exchange crisis and I’m not just talking about US dollars … I’m talking about Euro, Yen, Sterling, whatever currency you are looking to acquire. There is no foreign exchange crisis.
“There are some issues around the timing of getting funds which is something that has been ongoing over the past 20 years. It is not something that is new that didn’t exist that suddenly is appearing on the horizon,” Howai told legislators.
The opposition had filed a motion on the “government’s failure to deal effectively with the current foreign exchange crisis” and former minister Colm Imbert called for an explanation as to why persons were unable to acquire United States dollars at commercial banks despite ongoing injections by the Central Bank of Trinidad and Tobago.
“I am speaking the truth and going to take full responsibility for that. The Governor of the Central Bank has introduced a system where 90 per cent of the available foreign exchange is auctioned to 12 foreign exchange dealers including foreign exchange dealers who have a very small customer base … giving large sums of foreign exchange to financial institutions that don’t need it,” said Imbert, referring to the Governor, Jwala Rambarran, as an on-the-job trainee with no experience managing a large organisation.
In an interview published in the Sunday Guardian newspaper, Rambarran defended the new policy saying “the foreign exchange auction system for US dollars has not been changed. It operates under the same mechanism since its inception in May 2012, prior to my appointment in July 2012. Improvements were made to the Central Bank’s foreign exchange allocation system, not the auction system.
“The improvements were introduced to realign the Central Bank’s foreign exchange allocation system to match expanding imbalances in the domestic foreign exchange market. In 1993 when the market was liberalised, the shortfall stood at US$44 million. By 2003 this shortfall had widened to US$600 million.”
He said 10 years later, the gap had further widened to US$1,200 million in 2013.
“Given the economic recovery underway and the anticipated acceleration of economic growth in the next few years, we expect the imbalance in the foreign exchange market to further increase,” he said, adding that based on these trends, the Central Bank made changes to its foreign exchange allocation system.
“Only eight of the 12 licenced authorised dealers were part of the 20-year old system that was being used when I came into office. Now, based on the improvements implemented, all 12 authorised dealers are included and can access the allocation system.
“Two of the newly included authorised dealers form part of the country’s two largest conglomerates. This means the combined foreign exchange demand of these two conglomerates can now be met by the authorised dealers within their group” he added.
Rambarran insisted that the improvements made to the 20-year old foreign exchange allocation system have not failed, noting “if these improvements were not made there would have been insufficient supplies to meet growing demands in the US dollar market. This is presently not the case.
“The US dollar market is currently in excess supply and can meet demand. The factors contributing to rising demand for foreign exchange will only continue to increase exponentially. Pair this with a 20-year old system and what do you think would have been the natural outcome?
“In addition, the Central Bank’s recent interventions have targeted meeting immediate trade-related demand, which benefits the business community.”
Rambarran said that an examination of the US$200 million intervention made on May 27 shows that 231 companies in the retail and distribution sector obtained 38 per cent of the funds, while 79 companies in the manufacturing sector obtained 25 per cent of the funds. He said 14 automobile companies got 11 per cent of the funds.