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Thursday, July 24, 2025

Central Bank: Rising fertiliser prices will lead to high cost of imported food

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1135 days ago
20220614
Central Bank, left, at the Eric Williams Financial Complex, Independence Square, Port-of-Spain.

Central Bank, left, at the Eric Williams Financial Complex, Independence Square, Port-of-Spain.

ABRAHAM DIAZ

The Cen­tral Bank says the sup­ply-side stim­u­lus to both food and core in­fla­tion in T&T is an­tic­i­pat­ed to per­sist to the end of 2022.

Ac­cord­ing to its lat­est Mon­e­tary Pol­i­cy Re­port it ex­plained that ris­ing fer­tilis­er prices will al­so lead to high­er costs of im­port­ed food.

Ad­di­tion­al­ly, it said the war in Ukraine has dis­rupt­ed the sup­ply of agri­cul­tur­al fac­tor in­puts such as potash fer­tilis­er, adding that re­duced fer­tilis­er ap­pli­ca­tion may re­sult in low­er crop yields which can elic­it ex­port re­stric­tions from ma­jor food-ex­port­ing na­tions.

The re­port al­so not­ed that re­cent high in­ter­na­tion­al en­er­gy prices have boost­ed the pub­lic fi­nances and ex­ter­nal ac­counts, cre­at­ing a wel­come space for fi­nanc­ing fur­ther ad­just­ment to the lin­ger­ing ef­fects of the pan­dem­ic.

In the very un­cer­tain glob­al set­ting, how­ev­er, the sit­u­a­tion can change rapid­ly and care must there­fore be tak­en to avoid con­sid­er­ing this “wind­fall” as per­ma­nent, the re­port said.

It ad­vised that much need­ed struc­tur­al re­forms should al­so be ac­cel­er­at­ed to re­duce bu­reau­cra­cy and strength­en T&T’s dy­namism and at­trac­tive­ness in tourism, fi­nan­cial and oth­er ser­vice mar­kets. Re­gard­ing do­mes­tic econ­o­my and prices the re­port out­lined that pan­dem­ic-re­lat­ed un­der­cur­rents showed signs of abat­ing fol­low­ing an uptick in en­er­gy sec­tor ac­tiv­i­ty dur­ing the fourth quar­ter of 2021, along­side the re­open­ing of many non-en­er­gy sec­tor en­ti­ties.

It not­ed that in­fla­tion re­mained rel­a­tive­ly an­chored, but sev­er­al sup­ply-side fac­tors such as high and ris­ing in­ter­na­tion­al food prices and in­ter­na­tion­al trans­port de­lays had no­table pass-through to do­mes­tic prices.

El­e­vat­ed en­er­gy prices and in­creased ex­ter­nal de­mand set the tone for im­proved ex­ports, it added.

The re­port fur­ther not­ed that for­eign cur­ren­cy cred­it re­mained weak in 2020 and in ear­ly 2021 be­fore turn­ing pos­i­tive in late 2021, but for­eign cur­ren­cy de­posits re­bound­ed in ear­ly 2021 and strength­ened to­ward the end of the year.

The de­cline in for­eign cur­ren­cy cred­it, which be­gan in 2020 with the ad­vent of the pan­dem­ic, per­sist­ed in­to 2021 but turned pos­i­tive in late 2021, it said.

Ad­di­tion­al­ly, it said on a year-on-year ba­sis, for­eign cur­ren­cy cred­it ex­pand­ed by 12.9 per cent in March 2022 com­pared to a de­cline of 1.8 per cent one year pri­or.

“While cred­it ex­tend­ed by banks ex­pand­ed by 15.5 per cent, lend­ing from non-banks con­tract­ed by 47.3 per cent.

“Fol­low­ing con­sis­tent de­clines in ear­ly 2021, for­eign cur­ren­cy busi­ness loans turned around in De­cem­ber 2021 and con­tin­ued this up­ward tra­jec­to­ry in­to 2022,” the re­port cit­ed.

It al­so not­ed that the sales of for­eign ex­change by au­tho­rised deal­ers to the pub­lic reached US$1,994.5 mil­lion over the four months of 2022, an in­crease of 37.6 per cent rel­a­tive to the same pe­ri­od a year pri­or.

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