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Thursday, July 10, 2025

Howai on foreign exchange supply: Teething problems with new system

by

20140507

Thanks to US dol­lars from for­eign di­rect in­vest­ment (FDI) by oil and gas com­pa­nies, this coun­try's for­eign ex­change re­serves will con­tin­ue to grow, Fi­nance and Econ­o­my Min­is­ter Lar­ry Howai told re­porters yes­ter­day.He said so while field­ing ques­tions from re­porters af­ter he ad­dressed the T&T Man­u­fac­tur­ers' As­so­ci­a­tion's (TTMA) An­nu­al Gen­er­al Meet­ing and Break­fast at the Hy­att Re­gency Trinidad in Port-of-Spain.

"The Cen­tral Bank has just in­tro­duced a new (for­eign ex­change) dis­tri­b­u­tion sys­tem. They thought we had out­grown the sys­tem we had be­fore. They put a new sys­tem in place. The new sys­tem is dif­fer­ent in very sig­nif­i­cant re­spects from the pre­vi­ous sys­tem. It's al­most like an op­tions sys­tems...it's clos­er to that type of sys­tem," Howai ex­plained.

The min­is­ter ex­pressed the view that "when you put any new sys­tem in place, there will be some teething prob­lems, some un­in­tend­ed con­se­quences, some things that you didn't fore­see. So I think what we're ex­pe­ri­enc­ing now is part of try­ing to work through some of those ar­eas, but our own ex­pec­ta­tion is that the lev­el of for­eign ex­change re­serves will con­tin­ue to grow."He said for­eign ex­change re­serves are now "in the re­gion of about 12 months of im­port cov­er."

Asked if out­ward FDI is putting a strain on for­eign ex­change avail­abil­i­ty, Howai said that "has al­ways been a chal­lenge we've faced and it's rea­son­able for peo­ple to di­ver­si­fy port­fo­lios.""We did see a re­ver­sal of (FDI) flows a few years ago, when there was an eco­nom­ic col­lapse in­ter­na­tion­al­ly.

"On the oth­er hand, on the in­flow side, we ex­pect to see sig­nif­i­cant in­creas­es as a re­sult of the new in­vest­ments, par­tic­u­lar­ly off­shore by the oil and gas sec­tor. There are a num­ber of fields that will be com­ing on stream and there are a num­ber of plat­forms. That will mean an in­flow of for­eign ex­change in­to T&T."Howai said Cen­tral Bank Gov­er­nor Jwala Ram­bar­ran will say more about the for­eign ex­change sit­u­a­tion when he ad­dress­es a TTMA event in the next few weeks. .

Neg­a­tive car­ry

On the net debt or neg­a­tive car­ry al­lud­ed to in the 2014 In­ter­na­tion­al Mon­e­tary Fund's (IMF) Ar­ti­cle IV coun­try re­port, Howai ac­knowl­edged that the coun­try's net debt in TT dol­lars ex­ceeds how much the coun­try has saved in the Her­itage and Sta­bil­i­sa­tion Fund (HSF). How­ev­er, he said, in US dol­lars–in which the HSF is de­nom­i­nat­ed–the coun­try's for­eign debt is low­er than the US$5.1 bil­lion in the HSF.

"In oth­er words, the for­eign cur­ren­cy com­po­nent of the debt is still low­er than the Her­itage Fund's (net as­set val­ue). If you in­clude all the TT dol­lar debt, it is more than what we have in the Her­itage Fund, but we are re­gard­ed as a very low-in­debt­ed coun­try by in­ter­na­tion­al stan­dards. Our debt to gross do­mes­tic prod­ucts about 41 per cent, and in­ter­na­tion­al­ly that would be con­sid­ered a low lev­el of in­debt­ed­ness."

The min­is­ter said "many coun­tries are over 100 per cent. In the re­gion, Ja­maica, St Kitts and so on, are at that kind of lev­el and most of the oth­er is­lands in the Caribbean are well over 70�80 per cent."He said the ab­solute val­ue of debt has in­creased but "that is one of the rea­sons why our strat­e­gy, in terms of how we deal with the econ­o­my in the short term, was to try to grow the econ­o­my."

"The ef­fect of that was that the to­tal de­nom­i­na­tor would have ex­pand­ed and there­fore the nu­mer­a­tor would have grown. The over­all ra­tio has come down, from 45 per cent of GDP last year to now 41 per cent of GDP."Notwith­stand­ing the fact that the ab­solute val­ue has in­creased, the rel­a­tive val­ue and our abil­i­ty to ser­vice that debt, which is the most im­por­tant thing, has im­proved."

On re­port­ed low lev­els of un­em­ploy­ment in T&T–3.7 per cent as at March 31, 2013–bol­stered by gov­ern­ment make-work pro­grammes, the min­is­ter said: "It is im­por­tant for us, of course, is to grow the lev­el of em­ploy­ment. The more peo­ple are em­ployed, the more the econ­o­my it­self can ex­pand and grow. But the is­sue, of course, is the qual­i­ty of jobs.

"There are a num­ber of peo­ple who are per­haps un­der­em­ployed, and there­fore we need to deal with those par­tic­u­lar is­sues, so while we men­tion the over­all fig­ure for un­em­ploy­ment, I don't want to sug­gest, or seem to sug­gest, that we're say­ing that all the prob­lems in that par­tic­u­lar sec­tor have been re­solved. We have to in­vest in good qual­i­ty jobs on an on­go­ing ba­sis, and en­hance the qual­i­ty of skills of our peo­ple."


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