Former finance minister Larry Howai says this country’s current forex situation remains fraught with several complexities which need to be considered.
He made the comments while speaking during a virtual webinar on national conversations, titled An Assessment of Economic and Financial Sustainability: Forex Flows and Woes”, on Friday night. It was hosted by the University of the West Indies, St Augustine.
In sharing some of his thoughts with members of the business community, Howai noted that one recommendation was to “float the currency properly”.
“For some persons, that management of the foreign exchange issue would be straightforward... and they have said to float the currency properly and in some instances they are correct.
“If you make a commodity more expensive, less people would buy it,” Howai explained.
However, he said the issue was more complex and these factors must be taken into consideration.
“Not the least of which is the impact on the social framework ... as a small open economy, everything is dependent on foreign exchange and it affects every social aspect of society. The solution must, out of necessity, encompass broad considerations,” Howai advised.
He said while there should be consideration of a currency adjustment on those less privileged, at the same time, poorer countries have also lived through a similar experience.
Howai also shared how the rate could be managed, including having a fixed rate or having a variable rate.
He noted that Barbados, for instance, has opted for a fixed rate which it has held for many years.
“Barbados has been able to maintain that position partly by virtue of the consistent support from civil society and the way the island has coalesced around this matter.
“In the crisis that Barbados has experienced in the late 80s and early 90s, the trade unions, civil societies and that government came together and agreed on how they would proceed until they were able to fix the foreign exchange problem that they had,” Howai added.