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Central Bank denies IMF forex rule violation

Friday, March 7, 2014

The Central Bank of T&T yesterday denied violation of the foreign exchange (forex) rules of the International Monetary Fund (IMF) of which it is a member. Under IMF Article VIII, General Obligations of Members, as a free market economy with no forex controls, T&T is obliged to avoid the “restrictions on the making of payments and transfers for current international transactions” and “discriminatory currency practices.” In a release on February 27, the Central Bank announced that it will sell “US$50 million to facilitate some of the outstanding trade related demand for US currency” but added that “the maximum amount that will be sold to any one client is US$250,000” and that “all eligible buyers must present valid and current supporting documentation, such as invoices or payment orders etc.”


Section 2 of the IMF Article, entitled “avoidance of restrictions on current payments,” states: “Subject to the provisions of Article VII, Section 3 (b) and Article XIV, Section 2, no member shall, without the approval of the IMF, impose restrictions on the making of payments and transfers for current international transactions. “Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member. In addition, members may, by mutual accord, co-operate in measures for the purpose of making the exchange control regulations of either member more effective, provided that such measures and regulations are consistent with this Agreement.”

Section 3 of the IMF Article entitled “avoidance of discriminatory currency practices,” states that: “No member shall engage in, or permit any of its fiscal agencies referred to in Article V, Section 1 to engage in, any discriminatory currency arrangements or multiple currency practices, whether within or outside margins under Article IV or prescribed by or under Schedule C, except as authorized under this Agreement or approved by the Fund. “If such arrangements and practices are engaged in at the date when this Agreement enters into force, the member concerned shall consult with the IMF as to their progressive removal unless they are maintained or imposed under Article XIV, Section 2, in which case the provisions of Section 3 of that Article shall apply.”
In response to an e-mailed query from the T&T Guardian, the Central Bank said: “The special injection does not constitute a violation of Article VIII, Section 3 (avoidance of discriminatory currency practices). 

“This is because: (1) the Central Bank’s foreign exchange sales to authorised dealers account for less than 25 per cent of the total market; (2) the special injection is not a departure from the standing policy of regular foreign exchange sales to authorised dealers. As such, regular interventions would not be subject to the procedures outlined in the media release of February 27. “In addition, the auction system remains functional; it was last used on February 20, 2014, for the sizeable injection of US$100 million; (3) special injections are not foreseen to form part of the de jure foreign exchange management toolkit. Hence they cannot be categorised as an exchange restriction.”


Businessman Inshan Ishmael sent out an e-mail to the media yesterday saying the “release of US currency is a farce.” He said: “Today (Ash Wednesday) I waited with great anticipation for the US$50 million release by Central Bank specifically targeted to small and medium sized businesses. Big press release sent out, ‘ent all yuh know?” He said that just after 8 am, he contacted his forex dealer but was not sold the US dollars he wanted. Instead, he said he was told he could buy a maximum of US$25,000. “So what was all that nonsense about, that the maximum any client can get is US$250,000? We have been taken for fools again,” he said. 


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