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Wednesday, July 9, 2025

Farrell asks Govt: Why do you want forex information?

...Ramkissoon urges cau­tion in try­ing to con­trol Cen­tral Bank through choice of Gov­er­nor

by

GEISHA KOWLESSAR ALONZO
6 days ago
20250703

GEISHA KOW­LESSAR ALON­ZO

A ‘mis­di­ag­no­sis of the sit­u­a­tion’ says for­mer Cen­tral Bank deputy gov­er­nor Dr Ter­rence Far­rell as he em­pha­sis­es that gov­ern­ments need to un­der­stand that there are cer­tain things that they shouldn’t even both­er to ask cen­tral banks when it comes for for­eign ex­change al­lo­ca­tion.

He spoke to the Busi­ness Guardian on the heels of last week’s fir­ing of Dr Alvin Hi­laire as Gov­er­nor of the Cen­tral Bank of T&T (CBTT).

While no of­fi­cial rea­son has been ex­plic­it­ly stat­ed by the gov­ern­ment, Prime Min­is­ter Kam­la Per­sad-Bisses­sar told the June 5 post-Cab­i­net news con­fer­ence that Hi­laire was re­fus­ing to di­vulge in­for­ma­tion on the top users of for­eign ex­change in the coun­try. This re­fusal is be­lieved to be the cat­a­lyst for his dis­missal.

How­ev­er, Far­rell asked, “Why do you want that in­for­ma­tion? To do what with it? To say that what? That X is get­ting more for­eign ex­change than Y and so on. But then re­al­ly, what is the prob­lem with this thing about al­lo­ca­tion of for­eign ex­change? Be­cause why is it that over how many years, no­body can solve the prob­lem of al­lo­ca­tion of for­eign ex­change?

“(For­mer Cen­tral Bank Gov­er­nor Jwala) Ram­bar­ran raised the is­sue in 2015, so it’s been at least 10 years now peo­ple are talk­ing about the al­lo­ca­tion of for­eign ex­change. It is the mis­di­ag­no­sis of the sit­u­a­tion...We’ve tak­en our­selves down a rab­bit hole with this and it seems as though there’s no com­ing back be­cause it’s been go­ing on now for how many years.

“... For me, quite frankly, I shake my head and I say to my­self, what is the point of even say­ing any­thing in these cir­cum­stances? Be­cause peo­ple are just go­ing down this rab­bit hole with the forex al­lo­ca­tion, and who got and who didn’t get. That’s not the sys­tem...You go back to 2015, the (then) PNM gov­ern­ment did the same thing. The PNM gov­ern­ment for the last 10 years has run that same pol­i­cy of try­ing to al­lo­cate what is un­al­lo­cat­able.”

Far­rell, who was ac­tive in the im­ple­men­ta­tion of the man­aged flota­tion of the TT dol­lar in April 1993, not­ed that ex­change con­trols were abol­ished at that time. But, he said, it seemed as though there has been a lack of un­der­stand­ing of the pol­i­cy mea­sures adopt­ed then meant.

“There is no al­lo­ca­tion of for­eign ex­change. The Ex­change Con­trol Act abol­ished that in 1993, 22 years ago,” Far­rell said.

He ex­plained that be­fore the ex­change con­trols were abol­ished and T&T went to the man­aged float, the Cen­tral Bank of T&T had an ex­change con­trol de­part­ment, where­by if some­one want­ed to buy/ob­tain for­eign ex­change, that per­son had to go to the Cen­tral Bank.

“And by the way, dur­ing the time that the Cen­tral Bank ran ex­change con­trols, did you ever hear any­body ask how much for­eign ex­change some com­pa­ny got? Nev­er hap­pened. We ran ex­change con­trol from 1964 up to 1993 in the Cen­tral Bank of Trinidad and To­ba­go and not once did you ever hear any­one say­ing that this one got this amont and that one got so much. We didn’t know.

“I was in the re­search de­part­ment, I was deputy gov­er­nor of the Cen­tral Bank and I didn’t know. I couldn’t ask them. When this thing was abol­ished, it was no longer the case that the Cen­tral Bank was do­ing that ex­change when it was float­ed on a man­aged ba­sis and you go to the com­mer­cial bank for for­eign ex­change. It was the ex­change rate that was man­aged,” Far­rell fur­ther ex­plained.

He said the re­al prob­lem that has to be ad­dressed is how to bring de­mand and sup­ply for for­eign ex­change in­to some kind of bal­ance.

“When you have no ex­change con­trol? That is the ques­tion. And let them an­swer that ques­tion,” Far­rell added.

Par­al­lels to Hi­laire’s fir­ing can be drawn to the 2015 fir­ing of Jwala Ram­bar­ran, sug­gest­ing a pat­tern of re­mov­ing gov­er­nors who re­sist gov­ern­ment pres­sure re­gard­ing for­eign ex­change al­lo­ca­tion in­for­ma­tion.

Ram­bar­ran’s ap­point­ment was re­voked short­ly af­ter he pub­licly an­nounced that T&T was in a re­ces­sion and, sig­nif­i­cant­ly, dis­closed the names of com­pa­nies that were the largest users of for­eign ex­change.

The then gov­ern­ment ac­cused him of vi­o­lat­ing laws by mak­ing this in­for­ma­tion pub­lic.

A High Court rul­ing in 2022 found that Ram­bar­ran had been wrong­ful­ly ter­mi­nat­ed and award­ed him sig­nif­i­cant com­pen­sa­tion, a de­ci­sion up­held by the Court of Ap­peal in Feb­ru­ary 2025.

In­de­pen­dence of the Cen­tral Bank

Far­rell said the in­de­pen­dence of the Cen­tral Bank refers to pol­i­cy in­de­pen­dence.

He ex­plained that cen­tral bank in many coun­tries are in­de­pen­dent.

“The Fed­er­al Re­serve in the Unit­ed States is in­de­pen­dent of the rest of the ex­ec­u­tive in mak­ing mon­e­tary pol­i­cy, and in some cas­es fi­nan­cial pol­i­cy. What that means is that ef­fec­tive­ly, the Cen­tral Bank makes pol­i­cy, and the rest of the ex­ec­u­tive, pres­i­dent of the Unit­ed States or the Prime Min­is­ter they don’t say any­thing. They don’t do any­thing.

“...So in our case, how­ev­er, the pol­i­cy in­de­pen­dence of the Cen­tral Bank is not, how should I put it, leg­is­lat­ed. And in fact, if you look at sec­tion 50 of the Cen­tral Bank Act, it says that if there’s a dis­agree­ment be­tween the gov­er­nor, be­tween the Cen­tral Bank and the Gov­ern­ment about mon­e­tary pol­i­cy, the Gov­ern­ment can is­sue a di­rec­tive to the Cen­tral Bank to im­ple­ment its pol­i­cy,” Far­rell ex­plained.

He fur­ther not­ed that in T&T’s case, the Cen­tral Bank was not set up to be in­de­pen­dent like the Bun­des­bank in Ger­many or the Fed­er­al Re­serve.

“It has a de­gree of in­de­pen­dence, so it can do things, maybe nor­mal course of things, it will do things and the gov­ern­ment will not in­ter­fere. But in our sys­tem, the Gov­ern­ment may have a view that is dif­fer­ent from that of the Cen­tral Bank, about in­ter­est rates or about the ex­change rate or what­ev­er. And if there’s a dis­agree­ment be­tween the two, the Cen­tral Bank will say to the gov­ern­ment, ‘I don’t agree with you in my pro­fes­sion­al judge­ment, and if you want me to do X or Y, then you have to write me and tell me to do it.

And they get a Sec­tion 50 di­rec­tive.

“This is what hap­pened with for­mer Cen­tral Bank Gov­er­nor Dr Eu­ric Bobb back in 1988, when he even­tu­al­ly had to leave the Cen­tral Bank. There was a dis­agree­ment about pol­i­cy, and he said, give me a Sec­tion 50 di­rec­tive. They gave him a Sec­tion 50 di­rec­tive and he re­signed,” he not­ed.

He stressed that in­de­pen­dence has noth­ing to do with the ques­tion of the tenure of the gov­er­nor.

Cen­tral Bank con­trol?

Dr Ronald Ramkissoon, who was an econ­o­mist at the Cen­tral Bank of T&T, warned that pol­i­cy­mak­ers need to think “very deeply “about at­tempt­ing to con­trol the Cen­tral Bank through the choice of gov­er­nors.

“I don’t know what the de­tails are. I’m say­ing that any Gov­ern­ment that seeks to con­trol the Cen­tral Bank by ap­point­ments, whether it is to the Gov­er­nor or the staff of the bank or the board, they have to be ex­treme­ly aware of what hap­pens else­where, what the im­pli­ca­tions are, and why good eco­nom­ics favour an in­de­pen­dent cen­tral bank.

“In­sti­tu­tions are crit­i­cal to the func­tion­ing of an econ­o­my and when we are go­ing to in­ter­fere with them, we must have good rea­son. We must mon­i­tor what the re­sults are,” Ramkissoon said.

He made it clear how­ev­er, he had no is­sue with Lar­ry Howai as Hi­laire’s suc­ces­sor stat­ing, “I know him to be a pret­ty bal­anced per­son.”

“He has good ground­ing in fi­nan­cial mat­ters and I recog­nise that and I want to put that on the ta­ble,” Ramkissoon added.

He said he was un­cer­tain whether ad­min­is­tra­tions have been learn­ing from the mis­takes of past ad­min­is­tra­tions and be­hav­ing in a man­ner which would en­sure so­cioe­co­nom­ic de­vel­op­ment and growth of this econ­o­my.

“If pol­i­cy­mak­ers add to the al­ready ex­ist­ing chal­lenges in the en­vi­ron­ment for do­ing busi­ness, and we have heard a lot of that with the last ad­min­is­tra­tion, if we are go­ing to com­pound that, then it is clear as to the di­rec­tion in which we are head­ing in.

“...Which is not a good place. The place we want to be is where there’s con­fi­dence in the econ­o­my, where for­eign in­vestors and do­mes­tic in­vestors will want to hold more of their for­eign ex­change bal­ances in Trinidad and To­ba­go, and to in­vest in Trinidad and To­ba­go,” Ramkissoon added.


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