Legislation to replace the $100 bank note with a new polymer bill was passed in the House of Representatives just after 10 pm on Friday.
Minister of Finance Colm Imbert said in the Miscellaneous Provisions (Proceeds of Crime and Central Bank) Bill 2019, from the date of notice by the Central Bank to the appointed date, citizens can use the old paper notes and the new note, but at the end of the period only the polymer notes will be accepted.
National Security Minister Stuart Young said the measure was taken to fight money laundering, the financing of drugs and illegal firearms, tax evasion, the black money economy, counterfeiting and other illegal activities.
As the 14 day countdown for the implementation of the new polymer $100 bill ticks down, Guardian Media contacted economists Dr Vaalmikki Arjoon and Mary King to weigh in on the issue.
Dr Vaalmikki Arjoon said the demonetisation was not without some potentially serious consequences and there ought to be measures in place to limit them.
He said even though many Trinidadians used credit/debit cards, it was are still a cash-based society.
Arjoon said If the window to exchange the notes was small, like the two-week minimum stipulated by the new legislation, there will be long possibly chaotic lines at the bank to exchange the cotton notes for the polymer notes.
He said some people could miss the cancellation date, this process will temporarily remove monies out of active circulation and delay spending.
Arjoon said the money supply could also fall when funds brought to the banks are red-flagged and were not allowed to be redeemed, given that monies illegitimately held were still part of the money supply.
He said less cash in circulation meant that less money was being spent and less cash is available for cash-based businesses in the very short term.
Arjoon said sales revenue will therefore fall further and there will be a slowdown in business activity, especially micro and small business such as small retailers, farmers, manufacturers and construction firms, which don’t have Linx/credit card machines.
He said many of these businesses have been sustaining losses for years.
Arjoon said while the country really cannot afford to experience any further downturn in economic activities, the demonetisation will cause even more short-term recessionary implications for the country.
He said the country should have implemented this demonetization outside of the Christmas period, as it could restrict the potential sales that small businesses could receive in this period.
Arjoon said flea markets that operated during Christmas don’t accept electronic payment and primarily used cash.
He said many retirees and aged persons also didn’t use debit/credit cards and other forms of electronic monies, they tended to keep cash at home from their pensions and many had medical ailments.
Arjoon said the commercial banks should have some contingencies in place to allow for retirees to access this new polymer note as conveniently and as quickly as possible, without having to join queues at the bank.
Mary King said the country had changed notes before and all it meant was that if you held any $100 bills, simply take them to the bank and exchange them for the new bills and give an explanation of source of funds if the quantity was above $90,000.
She said this should not affect small legitimate businesses besides having to go to the bank.
King said the move was to both impact the money laundering, other illicit activities and also to make the bills more secure, a help to economic activity.
She said the Bankers Association of T&T said that they were prepared for the changeover and the technological change was simple given the same machines can be used in many countries on different kinds of money bills.
King said the association had also assured the public that being in the front line of the changeover that they were comfortable with both the scale of the task and the time allotted for it.
She said the effect of the changeover was to force those holding large numbers of $100 bills to either come up with alternate schemes to exchange them or simply dump them as useless and perhaps the Government was hoping for the latter in many cases.
King said there will always be a black market when the demand for US greenbacks outstripped the supply and this tended to take place in T&T’s recession periods, like now when the petroleum sector cannot supply the amount of foreign exchange required. She said some people believe that by devaluing the currency, they can stop the black market, but a devaluation does not create additional foreign exchange.
King said a devaluation showed that the country’s currency was volatile, risky, so the fact that the country will devalue also drove a black market and people would gravitate to holding a less risky currency; the US dollar.
She said the fact that there were or maybe large stacks of TT currency, $100 dollar bills, out there, could drive the black market since their exchange for US was part of the money laundering trade.
King said by making this large cache of TT dollars invalid very quickly can put a dent in the black market.