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.