An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

More fo­cus needs to be placed on for­eign ex­change earn­ings and what can be done to boost the coun­try’s ex­ports and plug the forex leak­ages in­to the sys­tem. 

That’s ac­cord­ing to Econ­o­mist Dr Vaalmik­ki Ar­joon, re­spond­ing to the re­cent ar­ti­cles on busi­ness­men com­plain­ing bit­ter­ly about the on­go­ing forex crunch. 

Min­is­ter of Fi­nance, Colm Im­bert, in a news re­lease yes­ter­day said that the for­eign ex­change win­dow opened by the Ex­im Bank for whole­sale im­porters of ba­sic foods and phar­ma­ceu­ti­cals dur­ing the COVID-19 pan­dem­ic was a tem­po­rary ini­tia­tive. 

 Im­bert said, "The ad­di­tion of a sec­ond forex win­dow at the Ex­im Bank for es­sen­tial im­ports dur­ing the COVID-19 pan­dem­ic can­not cre­ate a sit­u­a­tion where, four years lat­er, the Gov­ern­ment is be­ing held li­able by cer­tain pri­vate sec­tor busi­ness­men for the items they or­dered and re­ceived with­out pay­ing for them. 

Lat­er on in the day, in a so­cial me­dia post, the min­is­ter said, “The Ex­im Bank was es­tab­lished to fa­cil­i­tate the growth and ex­pan­sion of our ex­port and man­u­fac­tur­ing sec­tors; to en­hance our for­eign ex­change earn­ings and cre­ate em­ploy­ment through as­sis­tance to our EX­PORT­ING com­pa­nies and NOT to fa­cil­i­tate whole­salers of im­port­ed fin­ished goods.” 

  On Oc­to­ber 18, Ra­j­nanan Ram­saran, own­er and founder of Ram­saran Dairy Prod­ucts, sent a let­ter to the In­ter­na­tion­al Mon­e­tary Fund's (IMF) ex­ec­u­tive di­rec­tor, the Cen­tral Bank Gov­er­nor and the Au­di­tor Gen­er­al rais­ing con­cern over the non-ex­is­tence of records of poli­cies with re­spect to forex. 

“The ab­sence of these fun­da­men­tal doc­u­ments sug­gests the Cen­tral Bank can­not ef­fec­tive­ly man­age for­eign ex­change dis­tri­b­u­tion or en­sure com­pli­ance with in­ter­na­tion­al stan­dards, which rais­es con­cerns about ac­count­abil­i­ty and cor­po­rate re­spon­si­bil­i­ty,” Ram­saran de­tailed. 

Com­ment­ing on this de­vel­op­ment, Econ­o­mist Dr Vaalmik­ki Ar­joon told Guardian Me­dia that the forex leak­ages are an­oth­er ma­jor con­cern, which in­cludes trans­fer pric­ing, where multi­na­tion­als shift prof­its to low-tax ju­ris­dic­tions, cap­i­tal flight, where lo­cals in­vest in for­eign as­sets deemed less risky, and trade mis-in­voic­ing, which in­volves ex­porters un­der­re­port­ing the val­ue goods to move cap­i­tal out of the coun­try or evade tax­es.  

Ar­joon stressed that plug­ging these leak­ages is cru­cial, but im­prov­ing forex earn­ings via in­creased ex­ports is even more vi­tal.  

“The fo­cus should shift from sim­ply re­duc­ing forex de­mand to in­creas­ing sup­ply, dri­ven by en­hanced pri­vate-sec­tor pro­duc­tiv­i­ty and com­pet­i­tive­ness, which will in­crease ex­ports and forex in­flows. This re­quires re­mov­ing busi­ness ob­sta­cles to boost pri­vate sec­tor in­vest­ment, such as im­prov­ing SME fi­nanc­ing, re­duc­ing port/cus­toms de­lays, mit­i­gat­ing crime, and pro­mot­ing spe­cial eco­nom­ic zones for greater for­eign di­rect in­vest­ment (FDI).”  

He al­so high­light­ed that a com­pet­i­tive and di­ver­si­fied pri­vate sec­tor will sup­port im­port sub­sti­tu­tion by en­abling lo­cal man­u­fac­tur­ing of a wider va­ri­ety of items at low­er costs and high­er ef­fi­cien­cy.  

“This re­duces de­pen­dence on for­eign goods and on­line shop­ping, eas­ing the de­mand for for­eign ex­change.” 

Fur­ther, Ar­joon said that the de­val­u­a­tion of the dol­lar is not the so­lu­tion, as we lack the con­di­tions to ben­e­fit from it.

“Our econ­o­my is too im­port-de­pen­dent, and our pro­duc­tion struc­ture isn’t di­verse enough for ef­fec­tive im­port sub­sti­tu­tion. While some ex­ports may rise, this would be lim­it­ed since many of our ex­ports re­ly on im­port­ed in­puts we can't pro­duce lo­cal­ly. Key goods like med­ica­tion, tech­nol­o­gy, equip­ment, elec­tron­ics, etc. are all im­port­ed,” said Ar­joon. 

Re­spond­ing to Ram­saran’s let­ter to the IMF about the sit­u­a­tion, for­mer min­is­ter in the Min­istry of Fi­nance, Mar­i­ano Browne said the IMF has no ca­pac­i­ty to in­ter­vene in a sov­er­eign coun­try with­out an in­vi­ta­tion from the gov­ern­ment. 

“A let­ter goes to the IMF say­ing what the coun­try will do, which is called a con­di­tion­al state­ment of in­tent.”  

Browne al­so not­ed that the min­is­ter should al­so shoul­der some blame for the forex short­age. 

“If the min­is­ter is not re­spon­si­ble for the sta­bil­i­ty of the fi­nan­cial sys­tem, who is? The cen­tral bank gov­er­nor doesn't sit in the cab­i­net.  The min­is­ter does. If there's a prob­lem in terms of for­eign ex­change de­liv­ery, the fi­nan­cial sys­tem is es­sen­tial­ly run by the Cen­tral Bank and the Min­is­ter of Fi­nance. They have to take some po­si­tions in terms of what is re­quired mov­ing for­ward. He can't just sim­ply wash his hands and be a Pon­tius Pi­lote,” Browne em­pha­sised.  

Mean­while when asked if he thinks T&T risks run­ning afoul of Ar­ti­cle VI­II, sec­tion 2 of the IMF's Ar­ti­cles of Agree­ment, which per­tains to "avoid­ance of re­stric­tions on cur­rent pay­ments,’ econ­o­mist and for­mer Cen­tral Bank deputy Gov­er­nor, Dr. Ter­rence Far­rell, said, “In my view, the au­thor­i­ties have im­posed no ‘re­stric­tions’ on the mak­ing of pay­ments, so a breach of Ar­ti­cle VI­II does not arise” 

Asked whether T&T im­porters of ba­sic foods and phar­ma­ceu­ti­cals run the risk of be­ing black­list­ed by in­ter­na­tion­al sup­pli­ers if the lo­cals con­tin­ue be­ing late with their pay­ments, Far­rell said, "That is a com­mer­cial mat­ter be­tween the im­porters and their sup­pli­ers, but it stands to rea­son that where a coun­try is ex­pe­ri­enc­ing for­eign ex­change avail­abil­i­ty is­sues, sup­pli­ers are like­ly to im­pose more strin­gent cred­it terms on im­porters."

Guardian Me­dia reached out to the own­er of Ram­saran Dairy Prod­ucts to ask whether he has re­ceived forex from Ex­im­bank, but he pre­ferred not to say any­thing fur­ther than the let­ters that were sent.