On Fri­day, the Min­istry of Fi­nance is­sued a news re­lease ad­vis­ing that the In­ter­na­tion­al Mon­e­tary Fund (IMF) will be con­duct­ing its an­nu­al staff vis­it to Trinidad and To­ba­go dur­ing the pe­ri­od Jan­u­ary 19 � 26.

Al­though it is not ex­plic­it­ly stat­ed in the re­lease, the pur­pose of the Fund's mis­sion pre­sum­ably is to con­duct the an­nu­al Ar­ti­cle IV con­sul­ta­tion with T&T in which IMF staffers hold bi­lat­er­al dis­cus­sions with rep­re­sen­ta­tives from min­istries, the Cen­tral Bank, gov­ern­ment de­part­ments and agen­cies and pri­vate sec­tor or­gan­i­sa­tions.

The IMF team will be led by Elie Canet­ti, (see pho­to at right) who is the ad­vi­sor in the IMF's West­ern Hemi­sphere De­part­ment. Canet­ti de­liv­ered an ad­dress at the In­vesTT in­vest­ment fo­rum held in New York in Sep­tem­ber last year and al­so at­tend­ed the Fund's high-lev­el con­fer­ence on de­vel­op­ment in the Caribbean in Mon­tego Bay in Oc­to­ber.

Ac­cord­ing to the Fi­nance Min­istry state­ment: "This staff vis­it by the IMF to Trinidad and To­ba­go was arranged for Jan­u­ary 2015 fol­low­ing dis­cus­sions be­tween IMF Staff and the T&T del­e­ga­tion to the 2014 An­nu­al Meet­ings of the IMF and the World Bank in Wash­ing­ton D.C. over the pe­ri­od Oc­to­ber 9th - 12th, 2014.

The staff vis­it forms part of its reg­u­lar meet­ings with the Min­istry of Fi­nance and the Econ­o­my and the Cen­tral Bank, which have been an an­nu­al fea­ture since Trinidad and To­ba­go be­came a mem­ber of the IMF in 1963.

"On a reg­u­lar ba­sis–usu­al­ly once each year–the IMF holds de­tailed dis­cus­sions with mem­ber coun­tries re­gard­ing eco­nom­ic and so­cio-eco­nom­ic de­vel­op­ments. These dis­cus­sions al­so al­low the in­sti­tu­tion to ob­tain a first­hand view of the coun­try's fis­cal po­si­tion."

The state­ment quot­ed Fi­nance Min­is­ter Lar­ry Howai as ad­vis­ing that he would fo­cus this year's dis­cus­sions around the im­pact on the na­tion­al bud­get of the re­cent de­clines in en­er­gy prices and the mea­sures be­ing tak­en to ad­dress the short­falls in rev­enue.

In the state­ment, Min­is­ter Howai said that he was "pleased with the tim­ing of this vis­it as it of­fers an op­por­tu­ni­ty to ob­tain in-depth in­for­ma­tion from a ma­jor mul­ti-lat­er­al in­sti­tu­tion on the like­ly tra­jec­to­ry of oil and gas prices and best prac­tices in man­ag­ing the ef­fect on the coun­try's over­all fis­cal sit­u­a­tion."

The state­ment from the Min­istry of Fi­nance was is­sued 54 min­utes be­fore a Cen­tral Bank re­lease an­nounc­ing the first for­eign ex­change in­ter­ven­tion by the Bank for 2015.

The in­ter­ven­tion in­volved the Cen­tral Bank sell­ing US$200 mil­lion to au­tho­rized deal­ers of for­eign ex­change on Thurs­day, which was the same day that Prime Min­is­ter Kam­la Per­sad Bisses­sar met with pri­vate sec­tor lead­ers–who com­plained bit­ter­ly about the con­tin­u­ing prob­lems of avail­abil­i­ty of for­eign ex­change–at the Diplo­mat­ic Cen­tre in St Ann's.

Since its sec­ond in­ter­ven­tion in May (an­nounced on May 23) the Cen­tral Bank has al­ways dis­closed the amount of the coun­try's net of­fi­cial re­serves as of the date of the state­ment and the num­ber of months of im­port cov­er. There have been eight state­ments giv­ing this im­por­tant in­for­ma­tion.

In­ter­est­ing­ly, the Jan­u­ary 16 state­ment from the Cen­tral Bank does NOT con­tain in­for­ma­tion on T&T's net re­serves and months of im­port cov­er.

While this may be a sim­ple over­sight, it may al­so be that the Cen­tral Bank has changed its pol­i­cy on mak­ing pub­lic the coun­try's net of­fi­cial re­serves num­bers.

Those re­serves to­talled US$11.3 bil­lion as at No­vem­ber 7, which was the last time the Cen­tral Bank made an in­ter­ven­tion an­nounce­ment be­fore Fri­day's an­nounce­ment. The No­vem­ber re­serves num­ber in­clud­ed the US$1.17 bil­lion from the sale of Cli­co's 56 per cent stake in Methanol Hold­ings (Trinidad) Ltd.

In the 2014 Ar­ti­cle IV con­sul­ta­tion, which is dat­ed June 4, the IMF team said: "Greater flex­i­bil­i­ty is need­ed in the for­eign ex­change mar­ket. De­spite siz­able re­serves, for­eign ex­change short­ages, which im­pose un­nec­es­sary eco­nom­ic costs, have re­curred. There is no con­crete ev­i­dence of ei­ther a par­al­lel mar­ket or ar­rears on for­eign ex­change, and the Cen­tral Bank has re­cent­ly sold for­eign ex­change with the ob­jec­tive to clear the mar­ket, but a re­cur­rence of the sit­u­a­tion could in­di­cate the ex­is­tence of an ex­change re­stric­tion. The Cen­tral Bank can ad­dress the prob­lem through in­creased flex­i­bil­i­ty in the for­eign ex­change sys­tem."

In that re­port, the IMF team said that par­tic­i­pants in the for­eign ex­change mar­ket had re­port­ed "fair­ly wide­spread and per­sis­tent for­eign ex­change short­ages since the fourth of 2013."

Ac­cord­ing to the IMF, the per­sis­tence of the short­ages, in con­trast to pre­vi­ous episodes, "may sug­gest grow­ing bal­ance of pay­ments pres­sures stem­ming from high do­mes­tic liq­uid­i­ty, rather than mere­ly a tem­po­rary mis-cal­i­bra­tion of short-term shifts in sup­ply and de­mand."

It seems to me that the IMF's call for greater flex­i­bil­i­ty in the for­eign ex­change mar­ket and its sug­ges­tion that the long queues for for­eign ex­change may be an in­di­ca­tion of a bal­ance of pay­ment prob­lem must tell the T&T au­thor­i­ties that the cur­rent sys­tem for al­lo­cat­ing for­eign ex­change is a ma­jor con­trib­u­tor to the prob­lem of avail­abil­i­ty of for­eign ex­change.

The IMF's view is that "the cur­rent sys­tem of for­eign ex­change al­lo­ca­tion has im­posed eas­i­ly avoid­able costs, de­spite the high lev­el of for­eign ex­change re­serves" and it raised as a pos­si­bil­i­ty, back in June 2014, that Trinida­di­an busi­ness­es "may suf­fer dam­age from be­ing un­able to pay their for­eign sup­pli­ers and those par­ties un­able to pur­chase for­eign ex­change from au­tho­rized deal­ers at the of­fi­cial ex­change rate could be in­cen­tivized to pay a pre­mi­um to pur­chase for­eign ex­change else­where.

The IMF opines that "re­peat­ed short­ages have re­sult­ed in in­cen­tives to hoard for­eign ex­change," which means, to me at least, that the cur­rent al­lo­ca­tion sys­tem is con­tribut­ing to the prob­lem of avail­abil­i­ty.

The IMF con­clud­ed that greater flex­i­bil­i­ty can be achieved through an un­con­di­tion­al com­mit­ment to meet for­eign ex­change de­mand or by greater flex­i­bil­i­ty in the pric­ing mech­a­nism (e.g. by widen­ing the lim­its on the ex­change rate).

It seems to me that the pos­si­bil­i­ty of an un­con­di­tion­al com­mit­ment to meet for­eign ex­change de­mand is out of the ques­tion be­cause of con­cerns about the re­duced sup­ply of for­eign ex­change as a re­sult of the col­lapse in en­er­gy prices.

It would seem, there­fore, that widen­ing the lim­its on the ex­change rate–which would mean al­low­ing the rate to find its true val­ue–would be the pre­ferred op­tion for the IMF.

But it added: "Ei­ther way would like­ly re­store con­fi­dence in the for­eign ex­change mar­ket, elim­i­nate short­ages and hoard­ing, and pro­vide au­thor­i­ties a rapid­ly re­spond­ing barom­e­ter of for­eign ex­change sup­ply and de­mand con­di­tions, thus pro­vid­ing use­ful sig­nals about macro-eco­nom­ic pol­i­cy.

"It may be that re­cent short­ages are mask­ing bud­ding bal­ance of pay­ments pres­sures, stem­ming from high gov­ern­ment sub­si­dies and trans­fers and bank cred­it for im­port­ed goods (no­tably au­to­mo­biles).

"Should there be con­tin­ued pres­sures for for­eign ex­change, notwith­stand­ing the changes in­tro­duced by the CBTT in late May, a fail­ure to in­tro­duce greater flex­i­bil­i­ty in­to the for­eign ex­change mar­ket could lead to re­newed short­ages, in­di­cat­ing the ex­is­tence of an ex­change re­stric­tion."

If the T&T for­eign ex­change sys­tem is found by the IMF to con­sti­tute a "re­stric­tion" this coun­try would be in breach of Ar­ti­cle VI­II of the IMF's char­ter which states that "mem­bers shall not im­pose or en­gage in cer­tain mea­sures, name­ly re­stric­tions on the mak­ing of pay­ments and trans­fers for cur­rent in­ter­na­tion­al trans­ac­tions, dis­crim­i­na­to­ry cur­ren­cy arrange­ments, or mul­ti­ple cur­ren­cy prac­tices, with­out the ap­proval of the Fund."

It is al­so in­ter­est­ing to note a state­ment made in each Mon­e­tary Pol­i­cy Re­port is­sued by the Cen­tral Bank, which is that the Bank "con­ducts mon­e­tary pol­i­cy geared to­wards the pro­mo­tion of low in­fla­tion and a sta­ble for­eign ex­change mar­ket that is con­ducive to sus­tained growth in out­put and em­ploy­ment."

Can the Bank say it has achieved these goals with in­fla­tion at 9 per cent and a forex mar­ket that has led to queue­ing by le­git­i­mate busi­ness­es for up to six weeks to get enough mon­ey to pay le­git­i­mate for­eign bills and in­voic­es?