An­tho­ny Wil­son

Fi­nance Min­is­ter, Colm Im­bert, said yes­ter­day that a de­val­u­a­tion or a de fac­to flota­tion of the TT cur­ren­cy would do “tremen­dous dam­age” to the lo­cal econ­o­my, throw­ing hun­dreds of thou­sands of peo­ple in­to pover­ty and caus­ing hy­per­in­fla­tion.

He was speak­ing at a vir­tu­al news con­fer­ence, called to dis­cuss the con­clud­ing state­ment of the In­ter­na­tion­al Mon­e­tary Fund (IMF) team. Dur­ing the news con­fer­ence, Im­bert went through each of the 20 points made in the con­clud­ing state­ment, which was is­sued the day af­ter the mis­sion’s two-week Ar­ti­cle IV con­sul­ta­tion.

In point 12, the IMF mis­sion said a more ef­fi­cient for­eign ex­change in­fra­struc­ture in T&T would help elim­i­nate for­eign ex­change short­falls that have been ex­pe­ri­enced here since 2013.

“IMF staff en­cour­ages the au­thor­i­ties to re­move all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions, while pro­vid­ing suf­fi­cient for­eign ex­change to meet de­mand for all cur­rent in­ter­na­tion­al trans­ac­tions,” said the mis­sion from the world’s lender of last re­sort.

Im­bert said T&T is not now in an IMF pro­gramme and has not been in one since 1991 “and it is un­like­ly that we will ever get in­to an IMF pro­gramme, at least not un­der this gov­ern­ment.”

The fact that T&T is not now in an IMF pro­gramme, Im­bert said, means “we don’t have to agree with any­thing that the IMF ad­vis­es us to do, and we don’t agree with this,” (re­mov­ing all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions).

Im­bert said, “For sev­en years, this Gov­ern­ment has re­sist­ed any calls from any sec­tor to de­val­ue or float the TT dol­lar, be­cause we be­lieve that is go­ing to send hun­dreds of thou­sands of peo­ple in­to pover­ty. We be­lieve it would cause hy­per­in­fla­tion and we be­lieve that it will do tremen­dous dam­age.

“So, when the IMF says that they en­cour­age the au­thor­i­ties to re­move all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions, we are not do­ing that.”

In re­ject­ing out of hand the IMF’s ad­vice on re­mov­ing all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions, Im­bert said: “We shall not be pump­ing US dol­lars in­to the sys­tem for peo­ple to buy town­hous­es in Mi­a­mi, which is the end re­sult of this.”

He said: “So, when the IMF says they en­cour­age ‘the au­thor­i­ties to re­move all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions,’ we are not do­ing that.

He said the Gov­ern­ment’s re­sis­tance to the IMF’s en­cour­age­ment on the for­eign ex­change is­sue ex­plains why the cur­rent ad­min­is­tra­tion came up with its Ex­im Bank fa­cil­i­ties. Through those fa­cil­i­ties, the Ex­im Bank sells for­eign ex­change to im­porters of es­sen­tial foods and phar­ma­ceu­ti­cals as well as man­u­fac­tur­ers who ex­port a sub­stan­tial per­cent­age of their out­put.

He said the Gov­ern­ment will con­tin­ue to ex­pand the Ex­im Bank fa­cil­i­ties to oth­er cat­e­gories of im­ports that are in the pub­lic in­ter­est.

“We will put more mon­ey in­to the Ex­im Bank, so that our for­eign ex­change is fo­cused on cre­at­ing jobs and on boost­ing ex­ports, and al­so deal­ing with the im­port of es­sen­tial items,” said Im­bert.

Both Im­bert and Prime Min­is­ter Kei­th Row­ley were mem­bers of the 1991 to 1995 Cab­i­net head­ed by then Prime Min­is­ter Patrick Man­ning.

Asked whether the flota­tion of the TT dol­lar in April 1993 re­sult­ed in sky­rock­et­ing in­fla­tion and re­ces­sion, Im­bert said: “The sim­ple an­swer to that is yes, but that is not the point. We are now in 2023. I can’t look at what went on 30 years ago and con­struct a hy­po­thet­i­cal sce­nario.

“I am telling you, I am not ask­ing you, that if we were to de­val­ue the dol­lar to TT$10 to US$1, for ex­am­ple, which would be a 50 per cent or 40 de­val­u­a­tion, we would have an im­me­di­ate in­crease in the cost of im­port­ed goods and we would have im­me­di­ate de­mands from the labour unions, which would be very dif­fi­cult to chal­lenge, for in­creased wages. That would have a cycli­cal ef­fect and a domi­no ef­fect on in­fla­tion.”

Im­bert said he did not think the ques­tion about the flota­tion of the TT dol­lar was a se­ri­ous one.

“I don’t think you need to be a rock­et sci­en­tist to fig­ure out that if you de­val­ue the dol­lar sig­nif­i­cant­ly–be­cause we have such a high im­port bill and be­cause so many man­u­fac­tured goods and food comes from abroad–I don’t think we need to be­labour this point.”

In­ter­est rates

The con­clud­ing state­ment by the IMF mis­sion al­so said the Cen­tral Bank should “se­ri­ous­ly con­sid­er” in­creas­ing the re­po rate to con­tain in­fla­tion­ary pres­sures and to nar­row the in­ter­est rate dif­fer­en­tials be­tween T&T and US three-month trea­sury bills.

Im­bert said that un­like the US Fed­er­al Re­serve (cen­tral bank) which has a le­gal man­date to use in­ter­est rates to use in­ter­est rates to con­tain in­fla­tion, the lo­cal cen­tral bank has no such man­date.

“Our Cen­tral Bank looks at all sorts of things– eco­nom­ic growth; cred­it to busi­ness­es, the rate of un­em­ploy­ment, among oth­er things–and makes a very care­ful de­ci­sion on the re­po rate, in terms of main­tain­ing it at 3.5 per cent. That’s be­cause the Cen­tral Bank does not want to crash the econ­o­my. Look at what is hap­pen­ing in the Unit­ed States....

“I want to com­mend the Cen­tral Bank and I agree with its pol­i­cy. When you look at in­ter­est rates, it must not just be nar­row­ly fo­cused on in­fla­tion, but must al­so look at GDP, em­ploy­ment and eco­nom­ic ac­tiv­i­ty,” said Im­bert.

He said: “We are not do­ing this,” re­fer­ring to in­creas­ing in­ter­est rates.