PE­TER CHRISTO­PHER

Se­nior Mul­ti­me­dia Re­porter

pe­ter.christo­pher@guardian.co.tt

Econ­o­mist Dr Vaalmik­ki Ar­joon is hope­ful the mid-year bud­get re­view can be a cat­a­lyst for full im­ple­men­ta­tion of a for­eign ex­change fa­cil­i­ty for Small and Medi­um En­ter­pris­es.

He said should SMEs gain greater ac­cess to such a fa­cil­i­ty, it could po­ten­tial­ly aid in a re­duc­tion of the cost of liv­ing.

“In the bud­get last year, the min­is­ter pro­posed a for­eign ex­change fa­cil­i­ty to specif­i­cal­ly as­sist SMEs in ac­cess­ing for­eign ex­change. Of course, many con­tin­ue to face much dif­fi­cul­ties in sourc­ing ad­e­quate for­eign ex­change from banks to pay sup­pli­ers. This has caused de­layed pay­ments on nu­mer­ous oc­ca­sions, strain­ing their re­la­tions with sup­pli­ers in some in­stances, or even los­ing sup­pli­ers in oth­er in­stances,” said Ar­joon in an in­ter­view yes­ter­day.

“It has al­so caused de­layed pay­ments for ship­ping and in­ter­rupts their op­er­a­tions which nat­u­ral­ly af­fects their rev­enues and in some in­stances, their abil­i­ty to pay staff,” said Ar­joon.

“Some re­sort to us­ing their cred­it cards to pay for­eign sup­pli­ers, but what is very preva­lent as us­ing the black mar­ket to source for­eign ex­change where of course they are go­ing to pay a high price, some­times as much as $9 to US$1 de­pend­ing on how ur­gent they need the funds.”

These chal­lenges, the econ­o­mist ex­plained, had a di­rect im­pact on re­tail prices around the coun­try, as these busi­ness­es had lit­tle choice but to pass on the cost to cus­tomers.

“When they pay high­er black mar­ket rates, this ex­ac­er­bates their costs and there­fore prices have pushed up to com­pen­sate for this high­er cost. With the SME for­eign ex­change fa­cil­i­ty though, once it is well cap­i­talised, it can help to mit­i­gate this to some ex­tent. It can help to sup­ple­ment the for­eign ex­change that is sourced from banks and there­fore ease some of the chal­lenges in ac­cess­ing for­eign ex­change so they can make their pay­ments on time, face few­er in­ter­rup­tions on their op­er­a­tions, and very im­por­tant, less re­liance on the black mar­ket,’ said Ar­joon.

He al­so said ac­cess to the fa­cil­i­ty could be an av­enue for in­creased tax rev­enue for the state if a prop­er reg­is­ta­tion is im­ple­ment­ed by the state and im­por­tant­ly ad­hered to by SMEs ac­cess­ing the fa­cil­i­ty.

“An­oth­er spin-off ben­e­fit is that to ac­cess this win­dow when it is set up, the re­quire­ment must be that the en­ti­ty is reg­is­tered. So it is an­oth­er way to force busi­ness­es to be­come reg­is­tered and start pay­ing their fair share of tax­es. Plus, we’ve al­so seen the suc­cess of the Forex win­dow at the Ex­im Bank for man­u­fac­tur­ers. By pro­vid­ing man­u­fac­tur­ers with ur­gent­ly need­ed for­eign ex­change this would have con­tributed to the non-en­er­gy man­u­fac­tur­ing sec­tor grow­ing by about 20 per cent from the third quar­ter of 2020 to the third quar­ter of 2023.

“But like this forex win­dow for man­u­fac­tur­ers, the SME win­dow must al­so be well cap­i­talised to reach as many SMEs as pos­si­ble who are high­ly im­port in­ten­sive,” said Ar­joon.