Hours before Finance Minister Colm Imbert announced a 15 per cent hike in super unleaded gas and diesel fuel, several gas stations in San Fernando ran out of supply.
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Howai on cause of forex problems: Many buyers, few sellers
Bottlenecks in T&T’s foreign currency supply are nothing new in T&T, according to Finance Minister Larry Howai. “We have always had periods of tightness over the years. It is not new. It has been a problem since 1996 where we have had ongoing periods of tightness and complaints. “This is because of the very nature of the economy. There are a lot of buyers and very few sellers,” he said in his contribution to a pre-budget forum at the University of the West Indies (UWI), St Augustine.
Howai, who was commenting on complaints over the last few months from businesses and business associations about shortages of US dollars in the economy, said all of these challenges highlight the need for diversification of the economy.
“There is the underemployment issue where we need to create quality jobs for our university graduates. The more we diversify and people get into the export sector then the more sellers of foreign exchange we will have on a much broader basis and less lumpy will be the inflows and less problems with the demand and supply,” he explained.
The minister denied that banks are hoarding money: “I do not believe that. As the banks say they make money by selling money, if they get a spread when they sell the foreign exchange. There is always portfolio diversification. “Over the last few years we have seen an increase in US dollar deposits locally. “It moved from US$500 million in 2008 to about close to US$4 billion now. There are probably many central banks out there where everyone has a central bank, so they deposit the funds and hold it in US dollars.”
Howai said the foreign exchange situation is not as bad as some make it out to be. “Between the reserves we have, the Heritage and Stabilisation Fund (HSF), and the deposits people have in the banking sector, I do not think the problem is as big as it sounds when you look at the media,” he said. Speaking about the upcoming budget, Howai said Government will try to meet the legitimate needs of all the country’s stakeholder.
“I think it is important for us to stay on course for the fiscal things we want to achieve. Right now my goal is to try to narrow that gap and to see how best we can do it while meeting the legitimate needs of all the stakeholders that will be clamouring and knocking on the door next few months,” he said.
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