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Jwala to announce new US$ system
Finance and the Economy Minister Larry Howai says Central Bank Governor Jwala Rambaran is to announce changes to the recently implemented system of allocation of foreign exchange in the next few days. Howai told legislators yesterday that the new system, implemented recently by Rambaran, was the cause of some concern and had been revisited and adjusted. He was speaking during his presentation of a motion to approve the First Finance Committee Report for debate in the House of Representatives.
The motion seeks to supplement and transfer millions of dollars in the 2013/14 national budget.
The minister said the “big ticket items” include a request for an increase in the budget by $3.8 billion. Some $1.2 billion of the allocation will be for payment of salaries, NIS, Cola, allowances for public servants, including the settlement of new collective agreements for over 20,000 daily-paid workers, $1.6 billion for infrastructure development for projects such as the Diego Martin and Point Fortin highways and $1.2 billion for the needs of various ministries, including National Security.
Addressing the recent foreign exchange situation, Howai said the country was experiencing tightness in the market and not a crisis in the allocation of foreign exchange, saying that happens from time-to-time. He said, however, that he was aware businesspeople wanted their foreign exchange immediately and did not want to stand in line. Howai said based on that he accepted their views that it was a crisis.
He quickly pointed out that from a macro-economic point of view, “if you have $10 billion in reserves, there is no question that there is a crisis.” He said a crisis would be if there was no foreign exchange and people were looking for it.
Growth in foreign reserves
But the minister pointed out that the foreign exchange reserves have grown from $8.9 billion from late 2010 to $10.3 billion presently. Howai said the real issue was the management of the foreign exchange to allow for a continuation of confidence in the system and to allow for people to get the funds when they require it. He confirmed that the Central Bank had made some changes to the allocation system “and to some extent some of those changes may have impacted and resulted in the situation in which we found ourselves.”
Over the past months, many business organisations, including banks, have complained about not getting their required supply of foreign exchange to service customers. It occurred after Rambaran increased the number of institutions which supply foreign exchange to the public from eight to 12 and the process by which those institution are alloted the foreign exchange made available by the Central Bank.
The move led to some major businesses being unable to source US currency to pay bills to creditors and even members of the public being able to access small sums to travel and pay for their children’s educational needs abroad. Howai said the Government and Central Bank officials had since discussed this matter. He said the Central Bank had also met with the banks and following the last meeting the banks were confident the situation would improve.
Looking ahead, Howai said there would soon be a major boost to the country’s foreign reserves. He added: “The (Central Bank) Governor assures me that during the next week or so, significant conversions are expected from the energy sector and these conversions will improve the supply of foreign exchange in the market. “The Central Bank is working and has given the assurance that they will do what is required to ensure that the funding is available.”
He also assured that the Central Bank “has revisited the formula that they have (recently) put in place to ensure that we get ourselves out of this particular situation which has created the concern.” But Howai said the ministry would not stop there and would “continue to monitor very closely” the situation to ensure it returned to normalcy.