Prime Minister Keith Rowley says the country will have to take "tough" and "commonsense" decisions to address the foreign exchange supply problem as the situation requires making the correct decisions at the right time.
Rowley was responding to questions on Friday at the official handing over of the letters of appointment to the members of the Economic Advisory Board (EAB) at his offices in St Clair.
Questioned on whether he saw any connection between the flotation of the TT dollar in April 1993–when he was in the Cabinet chaired by former prime minister Patrick Manning–and today, given that the demand for foreign exchange exceeds the supply of it, Rowley noted that "issues of demand and supply of foreign exchange are not periodic issues.
"We were always resolved and continue to be resolved to do what's best for Trinidad and Tobago. Sometimes if tough, sensible decisions have to be made, then you know what quality of leadership you have."
The Prime Minister said he distinctly remembered when the currency was floated in 1993, that there were those outside of the political arena who were "absolutely convinced that the sky was going to fall in." He recalled an advertisement 22 years ago with a saucepan with water drying up and the comment that was made in 1993 that T&T would have become like Jamaica.
He said discussions on the appropriate exchange rate regime will take place as the administration goes forward, adding: "At the end of the day, the country–not just me, as Prime Minister, or the Government–will have to take certain decisions that may be commonsense decisions. The question is whether we have the resolve to do what needs to be done, or watch things happen to us.
"As a matter of fact, I think we might be in a worse position now compared with 1993, in terms of what can happen to us if we do not make the correct decisions at the correct time."
In his address to the members of the newly-constituted EAB, the Prime Minister said: "If we make the correct decisions or the best decisions are given to us, we give ourselves the best chance of overcoming the challenges we face."
Among the economic challenges T&T faces were the outcomes from the public sector and state enterprises and from the amount of money that was spent on education.
But Prime Minister Rowley made the additional point: "We are not without foreign exchange coming into this country, but are we handling and managing it properly, to the best? No, because if you ask anybody that one of the problems in the country is that they cannot get US dollars."
Based on some advice he received from his father, the prime minister said that it is not what the country earns, but what it does with its earnings.
The Prime Minister was speaking in the context of new complaints of tightness in the supply of foreign exchange, after the Central Bank intervened in the foreign exchange market at the end of October by supplying US$500 million to the country's authorised dealers to clear a backlog that had developed.
The Central Bank's intervention followed special directives that Finance Minister Colm Imbert had issued to the Central Bank Governor on the domestic foreign exchange market to re-establish the foreign exchange distribution system that was in operation as at March 31, 2014.
Following receipt of the special directives, the Central Bank also requested that commercial banks ensure that all legitimate demands for foreign exchange were met, within a reasonable time, with priority to be accorded to trade-related transactions.
Since the US$500 million intervention that cleared the backlog, the Central Bank has not sold any additional foreign exchange to the authorised dealers, which is contributing to a new backlog in foreign exchange demand and fresh uncertainty about when the next intervention will take place.
At the end of October, T&T had US$10.1 billion in net official foreign reserves, equivalent to almost one year's worth of imports.
In presenting the 2016 budget, Finance Minister Colm Imbert projected that the Government would receive US$845 million ($5.449 billion) in energy revenues during the 2016 fiscal year, sharply down from the US$2 billion in energy revenues received in the 2015 fiscal year.
For the last few years, the Central Bank has provided authorised dealers–which are commercial banks and some non-bank financial institutions–with between 20 and 30 per cent of the country's total demand for foreign exchange. Most of the remaining demand is provided to the authorised dealers by energy company's operating in T&T, which sell US dollars into the local system and use the TT dollars to pay their employees and other local bills.
The Economy Advisory Board is meant to advise the Prime Minister on matters of economic policy and spearhead the development of strategies, plans, programmes and policies towards the implementation of an economic development framework.
The board will be chaired by economist Terrence Farrell. It includes Alison Lewis, Rolph Balgobin, Ronald Ramkissoon, Selvon Hazel and Trevor Lynch, who all attended the function. Karl Theodore, Marlene Attz and David Abdullah, who are members of the board, did not attend.
In his address, Farrell–who was the deputy Central Bank Governor–during the period in which the flotation took place–said the board would serve as a think tank for the Government and a promoter of diversification projects. He said the goal of the board would be to promote evidence-based policymaking.
He said the board intended to approach the Inter-American Development Bank for funding to undertake the research needed for the evidence-based policymaking.
Farrell said: "What I envisage is that any issue or problem that any ministry has that they feel the board can be helpful in giving research, advice and input and coming up with good policy, we would be willing and open to receiving those requests.
"In addition to that, we will map out a programme of work for ongoing."
The Prime Minister identified two things that the Economic Advisory Board might wish to look at: the issues surrounding the ownership of TSTT and the competition it faces and the matter of the future of T&T's distribution of natural gas.
ROWLEY ON CL FINANCIAL
"On the matter of CL Financial, when we set about to deal with the group, I was on the backbenches of the government at the time (in early 2009). I was a hold out against the bailout because I wanted to know what kind of figure we were talking about, and at that time we were talking about $5 billion. The Parliament, not just the government, understood it to be about $5 billion because you must remember that the bailout was a parliamentary action and it was passed without objection.
"We thought it was $5 billion but I am seeing documents now since we have come into office that the bailout is of the order of $20 billion.
"One thing I can tell you this morning is that we have no secrets and there will be no secrets on this matter. So whatever happened with taxpayers' money–where there are reports and so on–we intend to make them known to those who pay the bills. As we move forward as a Government, you are going to see more and more of the information that you seek.
"However, there are taxpayers' interests in this bailout. It must be viewed against the background of the monies that went in, the collateral that was put on the table, the management of that collateral and the public interest."