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Opposition warns on new foreign exchange plan: It can lead to devaluation
Opposition Senator Lester Henry has warned of a possible devaluation of the T&T dollar because of a new system for allocating foreign exchange to businesses. He spoke at a news conference at the Office of the Leader of the Opposition, Charles Street, Port-of-Spain, yesterday. Also speaking during the news conference were re-elected leader of the PNM Dr Keith Rowley, Senator Faris Al-Rawi and Diego Martin North/East MP Colm Imbert. The new system was introduced last month by Central Bank Governor Jwala Rambarran.
Henry said that was done without consultation and several banks were being allocated less foreign exchange as an expanded list of recipients had been established, forcing a black market for foreign exchange. He said the major earners of foreign exchange, such as National Gas Company, Petrotrin and PCS Nitrogen, were allowed to say which companies could be allocated funds and that was adversely affecting the banks and other institutions which dealt with the average citizen.
Many businesses have complained of the negative effects the measure was having on their operations. Imbert said the Central Bank was “now auctioning foreign exchange and this is not how it was done before.” Under the previous arrangement, foreign exchange was distributed to businesses by commercial banks. He added: “It is a crazy system. We can’t be auctioning foreign exchange in T&T. The manufacturers, banks and ordinary citizens are being adversely affected by this development.”
Imbert said he was told the “IMF has a hand in all of that and they (it) is of the view that our interest rate is artificial and they are pushing the Central Bank governor to push the rate upwards.” He said Prime Minister Kamla Persad-Bissessar must provide clarity on that issue and it was not expected the president of the Bankers Association, Larry Nath, of First Citizens, would say anything about it.
Rowley later said the Opposition was “not saying that the Government was going to devalue the currency. The market and the shortage will put a value on what the currency will be.” He said the Opposition was informed of the situation by users who were not receiving a ready supply of foreign exchange to do their business.
In the past few weeks several business groups, including the T&T Chamber of Commerce, the T&T Manufacturers Association, the Shipping Association and the Supermarket Association, have also complained that their members were experiencing severe problems in obtaining US currency for major transactions. The T&T Chamber will host a meeting on June 6 with members of the business community, the Bankers Association of T&T and Central Bank Governor Jwala Rambarran to discuss appropriate solutions to the problem.
...but there’s no risk, says Howai
Finance Minister Larry Howai last night assured there was no risk of any devaluation of the T&T dollar. Responding to comments by the Opposition yesterday, Howai, in a statement said the “economy remains robust and the country’s foreign exchange reserves are at a record high US$10.3 billion or over 12 months of import cover.
The statement added: “The international benchmark is three months of import cover. All indicators point to the fact that the economy is on solid footing. Unemployment is low, inflation has been subdued and government revenues are better than projected. “Regarding the foreign exchange market, the Central Bank, under the leadership of Governor Jwala Rambarran, has instituted a new system of managing the process.
“As with all newly-established systems there has been some negative reaction and some initial administrative problems. “It must be emphasised also that this new auction system is a controlled one which seeks to ensure that there is no disadvantage to small and medium businesses. “The Central Bank of T&T continues to monitor the new system and will make adjustments as it believes necessary. We are aware of the problems faced by local businesses and are confident that the matter will be sorted out soon.”