PE­TER CHRISTO­PHER

For­mer Min­is­ter in the Min­istry of Fi­nance Mar­i­ano Browne does not agree that the Fi­nance Min­is­ter's stance is sole­ly based on an at­tempt to pro­tect the coun­try from in­fla­tion or a height­ened cost of liv­ing.

Rather, Browne ar­gues that by main­tain­ing the cur­rent rate amid lim­it­ed sup­ply of for­eign ex­change in the coun­try, in­fla­tion­ary pres­sure has al­ready come to bear on the pub­lic.

Last Sun­day, in re­sponse to an ar­ti­cle in Guardian, Fi­nance Min­is­ter Colm Im­bert said, "All a de­val­u­a­tion will do is cause a mas­sive spike in the cost of liv­ing and make every­thing more ex­pen­sive. It will not cre­ate any ad­di­tion­al US dol­lars for the coun­try or make forex more read­i­ly avail­able for or­di­nary cit­i­zens."

Speak­ing on CNC 3's the Morn­ing Brew on Mon­day, Browne said he agreed that de­val­u­a­tion would in­deed make things more ex­pen­sive, but stressed that the wider call has not been for de­val­u­a­tion but in­stead in­creased avail­abil­i­ty of the cur­ren­cy.

"The re­al prob­lem is that there is not enough for­eign ex­change be­ing earned, and the on­ly way you can solve that, and that re­quires both the pri­vate sec­tor and the gov­ern­ment to come to­geth­er, is that you have to im­prove or in­crease the amount of items that we are sell­ing and we are ex­port­ing. And that's a sim­ple that's a num­ber you have to pay at­ten­tion to all the time, and you have to talk about and you have to look at it. You have to get peo­ple get peo­ple to come down. But that's not what's hap­pen­ing. It's not in­creas­ing,' said Browne dur­ing the tele­vi­sion in­ter­view.

He con­tin­ued, "If you have a one way flow, it's al­ways go­ing to (run) out, what do you do in the short run? No­body's asked for the de­val­u­a­tion. No­body's ever said any­thing about de­val­u­a­tion, the min­is­ter is cre­at­ing a prob­lem or cre­at­ing an is­sue as though peo­ple are ask­ing for de­val­u­a­tion. No­body's asked for the de­val­u­a­tion. "

He said the lim­it­ed avail­abil­i­ty has pushed many busi­ness­es to turn to the black mar­ket where the cur­ren­cy is sold at a high­er price, and in­vari­ably this is still passed on to the com­mon man.

"I mean, if the rest of the world is ex­pe­ri­enc­ing in­fla­tion, how is Trinidad go­ing to avoid it? We im­port rough­ly 90 per cent of our re­quire­ments. Well, if you im­port 90 per cent of the re­quire­ments, and the rest of the world is hav­ing an in­fla­tion­ary prob­lem, you're go­ing to have in­fla­tion too, whether you have ex­change con­trol re­stric­tions or not. And in fact, what you're do­ing that is like­ly to ex­ac­er­bate the in­fla­tion­ary spi­ral," said Browne, "If you as a busi­ness­man, can't get all the for­eign ex­change that you want, and you have to re­ly on oth­er meth­ods to get to get your for­eign ex­change, you're go­ing to price your goods at what you know, what you call re­place­ment cost. And the re­place­ment cost will be what you pay for it."

He added, "We know the mar­ket struc­ture at the mo­ment is that you can get for­eign ex­change some­where be­tween $7.50 and $7.75 and those peo­ple are sell­ing us at $7.75. I'm not go­ing to sell in the bank at $6.50 so you're cre­at­ing a short­fall. And the busi­ness­men are buy­ing it at $7.75 and pric­ing based on $7.75. If you're keep­ing the ex­change rate at $6.80 to stop in­fla­tion stu­pid­ness, be­cause peo­ple are al­ready pric­ing it to the high­er rate."

This point was al­so raised by Trinidad born econ­o­mist Mar­la Dukha­ran in her post on the cur­rent is­sue re­leased on Mon­day en­ti­tled, "Why have suc­ces­sive gov­ern­ments of T&T de­lib­er­ate­ly cre­at­ed a for­eign ex­change cri­sis?"

"By main­tain­ing an over­val­ued cur­ren­cy, the Gov­ern­ment is es­sen­tial­ly sub­si­diz­ing im­ports and pe­nal­iz­ing or tax­ing ex­ports. This would make lo­cal­ly made goods less com­pet­i­tive rel­a­tive to the im­port­ed sub­sti­tutes and could dam­age the lo­cal man­u­fac­tur­ing sec­tor. This would then hin­der fur­ther in­vest­ment in­to the man­u­fac­tur­ing sec­tor, whether lo­cal or FDI," said Dukha­ran, how­ev­er she al­so stat­ed that de­val­u­a­tion was not a so­lu­tion to the prob­lem.

"An over­val­ued cur­ren­cy is not sus­tain­able but a de­val­u­a­tion in and of it­self is not go­ing to solve the un­der­ly­ing struc­tur­al chal­lenges that have ex­ist­ed for sev­er­al years. While de­val­u­a­tion is an ‘op­tion’, it has to be part of a com­pre­hen­sive re­form agen­da, be­cause, by it­self, it will achieve lit­tle. It may just serve to make im­ports more ex­pen­sive, dri­ve in­fla­tion, and by ex­ten­sion, dri­ve re­newed over­val­u­a­tion of the cur­ren­cy, and it would al­so dri­ve the debt/GDP ra­tio high­er in TTD terms."