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Wednesday, July 16, 2025

TTMA: Repo rate rise worrisome

by

20150816

The T&T Man­u­fac­tur­ers' As­so­ci­a­tion (TTMA) has de­scribed as "a bit wor­ri­some" the de­ci­sion by the Cen­tral Bank to in­crease the re­po rate.

The busi­ness group said: "In coun­tries like Cana­da and oth­er com­mod­i­ty-based economies like T&T, the re­verse is hap­pen­ing. In­ter­est rates con­tin­ue to be low in ad­di­tion, all cur­ren­cies are at a low com­pared to the US dol­lar. US in­ter­est rates are trend­ing up­ward; our cur­ren­cy is pegged to the US dol­lar so our mon­ey has ac­tu­al­ly strength­ened com­pared to the oth­er bas­ket of cur­ren­cies. So high in­ter­est rates, strong TT dol­lar means low­er ex­ports and less glob­al com­pet­i­tive­ness."

In its re­cent mon­e­tary pol­i­cy an­nounce­ment, the Cen­tral Bank said one of the rea­sons for the in­crease was the US Fed­er­al Re­serve's com­mence­ment of nor­mal­iza­tion of its mon­e­tary pol­i­cy. Th Cen­tral Bank al­so said it in­creased the re­po rate for the sixth con­sec­u­tive time to 4.25 per cent since it pre­dict­ed in­fla­tion in T&T in the com­ing months.

The TTMA said in re­sponse to ques­tions from the T&T Guardian that small and medi­um en­ter­pris­es are like­ly to be af­fect­ed if the re­po rate con­tin­ues it up­ward climb and com­mer­cial banks con­tin­ue to in­crease their base rates."One of the main caus­es of the need for high­er over­draft these days is the cost of hold­ing US dol­lars to cov­er out­stand­ing in­voic­es to be able to pay them on time," the group said.

"We have to have US dol­lars in hand six weeks ahead of the due date of in­voic­es be­cause of the slow rate it is be­ing al­lo­cat­ed. This makes us un­able to take ad­van­tage of our cred­it terms with sup­pli­ers which are some­times in ex­cess of 90 days cred­it. A re­al waste of good cred­it."

The TTMA added: "In our chal­leng­ing econ­o­my, one would as­sume that we would adopt the same mea­sures as oth­er coun­tries in our sit­u­a­tion–ad­just­ments in both the in­ter­est rates and for­eign cur­ren­cy rates. We need to ad­dress our com­pet­i­tive­ness and pro­duc­tiv­i­ty so as to be more sus­tain­able."

The group warned that there could be an in­crease in the cost of goods and ser­vices if over­draft and loan fa­cil­i­ties had to be used by busi­ness­es."Some firms have elect­ed to ab­sorb in­creased bor­row­ing costs by re­duc­ing prof­it mar­gins, and while it may not be im­me­di­ate, oth­ers may pass on the ad­di­tion­al cost to cus­tomers through high­er prices. Mar­ket share may fall for those com­pa­nies as most busi­ness­es op­er­ate in price sen­si­tive en­vi­ron­ments. In­deed, it will im­pact on the prof­itabil­i­ty and growth po­ten­tial of start-up man­u­fac­tur­ers."

The TTMA al­so said the in­crease in the re­po rate is like­ly to make its mem­bers less com­pet­i­tive.

"With rev­enues from some firms al­ready un­der pres­sure from low sales do­mes­ti­cal­ly and re­gion­al­ly, it means that prof­it mar­gins will be even small­er if they are to re­main in busi­ness. Fur­ther­more, this in­crease will im­pact on cash flow and ul­ti­mate­ly hin­der busi­ness growth as the trend­ing in­creas­es will in­flu­ence in­vest­ment de­ci­sions," the group said.


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