On Monday Republic Bank announced a reduction on its customers on credit card limit from US$12,000 to US$10,000 per month.
The bank said the decision was an effort to better manage its sale of US dollars during the ongoing forex challenge.
The decision by Republic is not surprising as the foreign exchange situation has gotten progressively worse over the last six years.
Between 2014 and 2021 the country’s net official foreign reserves have fallen by four and a half billion United States dollars from US$11.49 billion down to US$6.862.
This is a staggering amount and does not include the US$1 billion-plus that the government has taken from the Heritage and Stabilisation Fund nor the almost US$2 billion it has borrowed on the foreign market. In other words, this country has gone through US$7.5 billion in forex in six years and there appears to be no clear strategy to stopping the bleeding and keeping us from finding ourselves at the doors of the IMF.
In a small open economy like ours, it needs to constantly generate foreign exchange to pay for the many goods and services.
In the past, this has mainly been done by the energy sector which has generated the forex that is used by the onshore economy to satisfy the country’s import needs.
With the downturn in crude and gas prices and lower energy production, this country’s economy has been reeling from both lower growth but lower forex conversion by the energy sector.
The Finance Minister has already said that there will be little benefit to a depreciation of the currency because the economy is not sufficiently competitive to benefit from it and it will only put more pressure on government to finance its external debt while hurting the most vulnerable on fixed incomes.
But what the Minister of Finance has not told us is a strategy to change things around.
The country’s external accounts remain challenged and there is a symbolic relationship between the non-energy economy and energy sector, in which the non-energy revenues are significantly dependent on energy revenues.
The government must tell us what is it doing to deal with the forex challenge other than hoping for energy prices to increase and to get a temporary bump in forex due to improved production.
As a country, we have to do many things differently, including ensuring the public service is transformed and efficient. We must improve the ease of doing business.
The government must also tell us what is the situation with the Revenue Authority and most of all must ensure it supports the development of an economy driven by the private sector in which it is a facilitator and uses taxpayers' money in an efficient and cost-effective manner.
These are troubled times, anyone needing forex knows the headache and it looks like getting worse.
We need clear leadership in a time in which the future looks at best uncertain.