Aleem Khan

The Cen­tral Bank of T&T yes­ter­day de­nied vi­o­la­tion of the for­eign ex­change (forex) rules of the In­ter­na­tion­al Mon­e­tary Fund (IMF) of which it is a mem­ber. Un­der IMF Ar­ti­cle VI­II, Gen­er­al Oblig­a­tions of Mem­bers, as a free mar­ket econ­o­my with no forex con­trols, T&T is oblig­ed to avoid the "re­stric­tions on the mak­ing of pay­ments and trans­fers for cur­rent in­ter­na­tion­al trans­ac­tions" and "dis­crim­i­na­to­ry cur­ren­cy prac­tices."In a re­lease on Feb­ru­ary 27, the Cen­tral Bank an­nounced that it will sell "US$50 mil­lion to fa­cil­i­tate some of the out­stand­ing trade re­lat­ed de­mand for US cur­ren­cy" but added that "the max­i­mum amount that will be sold to any one client is US$250,000" and that "all el­i­gi­ble buy­ers must present valid and cur­rent sup­port­ing doc­u­men­ta­tion, such as in­voic­es or pay­ment or­ders etc."

Sec­tion 2 of the IMF Ar­ti­cle, en­ti­tled "avoid­ance of re­stric­tions on cur­rent pay­ments," states: "Sub­ject to the pro­vi­sions of Ar­ti­cle VII, Sec­tion 3 (b) and Ar­ti­cle XIV, Sec­tion 2, no mem­ber shall, with­out the ap­proval of the IMF, im­pose re­stric­tions on the mak­ing of pay­ments and trans­fers for cur­rent in­ter­na­tion­al trans­ac­tions."Ex­change con­tracts which in­volve the cur­ren­cy of any mem­ber and which are con­trary to the ex­change con­trol reg­u­la­tions of that mem­ber main­tained or im­posed con­sis­tent­ly with this Agree­ment shall be un­en­force­able in the ter­ri­to­ries of any mem­ber. In ad­di­tion, mem­bers may, by mu­tu­al ac­cord, co-op­er­ate in mea­sures for the pur­pose of mak­ing the ex­change con­trol reg­u­la­tions of ei­ther mem­ber more ef­fec­tive, pro­vid­ed that such mea­sures and reg­u­la­tions are con­sis­tent with this Agree­ment."

Sec­tion 3 of the IMF Ar­ti­cle en­ti­tled "avoid­ance of dis­crim­i­na­to­ry cur­ren­cy prac­tices," states that: "No mem­ber shall en­gage in, or per­mit any of its fis­cal agen­cies re­ferred to in Ar­ti­cle V, Sec­tion 1 to en­gage in, any dis­crim­i­na­to­ry cur­ren­cy arrange­ments or mul­ti­ple cur­ren­cy prac­tices, whether with­in or out­side mar­gins un­der Ar­ti­cle IV or pre­scribed by or un­der Sched­ule C, ex­cept as au­tho­rized un­der this Agree­ment or ap­proved by the Fund."If such arrange­ments and prac­tices are en­gaged in at the date when this Agree­ment en­ters in­to force, the mem­ber con­cerned shall con­sult with the IMF as to their pro­gres­sive re­moval un­less they are main­tained or im­posed un­der Ar­ti­cle XIV, Sec­tion 2, in which case the pro­vi­sions of Sec­tion 3 of that Ar­ti­cle shall ap­ply."

In re­sponse to an e-mailed query from the T&T Guardian, the Cen­tral Bank said: "The spe­cial in­jec­tion does not con­sti­tute a vi­o­la­tion of Ar­ti­cle VI­II, Sec­tion 3 (avoid­ance of dis­crim­i­na­to­ry cur­ren­cy prac­tices).

"This is be­cause: (1) the Cen­tral Bank's for­eign ex­change sales to au­tho­rised deal­ers ac­count for less than 25 per cent of the to­tal mar­ket; (2) the spe­cial in­jec­tion is not a de­par­ture from the stand­ing pol­i­cy of reg­u­lar for­eign ex­change sales to au­tho­rised deal­ers. As such, reg­u­lar in­ter­ven­tions would not be sub­ject to the pro­ce­dures out­lined in the me­dia re­lease of Feb­ru­ary 27."In ad­di­tion, the auc­tion sys­tem re­mains func­tion­al; it was last used on Feb­ru­ary 20, 2014, for the size­able in­jec­tion of US$100 mil­lion; (3) spe­cial in­jec­tions are not fore­seen to form part of the de ju­re for­eign ex­change man­age­ment toolk­it. Hence they can­not be cat­e­gorised as an ex­change re­stric­tion."

Busi­ness­man In­shan Ish­mael sent out an e-mail to the me­dia yes­ter­day say­ing the "re­lease of US cur­ren­cy is a farce."He said: "To­day (Ash Wednes­day) I wait­ed with great an­tic­i­pa­tion for the US$50 mil­lion re­lease by Cen­tral Bank specif­i­cal­ly tar­get­ed to small and medi­um sized busi­ness­es. Big press re­lease sent out, 'ent all yuh know?"He said that just af­ter 8 am, he con­tact­ed his forex deal­er but was not sold the US dol­lars he want­ed. In­stead, he said he was told he could buy a max­i­mum of US$25,000."So what was all that non­sense about, that the max­i­mum any client can get is US$250,000? We have been tak­en for fools again," he said.