Finance Minister Colm has said Trinidad and Tobago has enough foreign reserves to defend the T&T dollar for the next ten years.
In a letter to the editor Imbert said, “In the face of over US$13 billion available to the Government to defend the exchange rate, which is sufficient to keep our exchange rate stable for over 10 years, and the Government’s clearly stated policy of defending our exchange rate, Fitch Solutions’ so-called warning of a devaluation was uninformed and irresponsible, especially since any decision to devalue the currency is a Government decision.”
The Finance Minister was responding to the Sunday Guardian’s editorial which called on the Minister to focus on growing the economy and noted that Fitch Solutions, which is an associate of Fitch Ratings Inc and part of the Fitch group, had predicted a devaluation of the T&T dollar.
Imbert again insisted that Fitch Ratings Inc was not contracted to do a country risk report for Trinidad and Tobago and did not warn of a devaluation.
“Further, Fitch Solutions is not a credit rating agency and has had no interaction with the authorities in Trinidad and Tobago, nor any access to official data,” he argued.
Fitch Solutions is a reputable organisation that provides country analysis based on publicly available data and does not have to confer with its affiliate Fitch Ratings Inc to provide country analysis.
Fitch Solutions’ report insisted that in the medium term the Central Bank cannot continue to defend the T&T dollar. It noted that its analysis was based on the fact that the country’s external accounts remain weak and there will continue to be greater outflows than inflows for currency.
“We maintain our view that the CBTT will devalue the dollar over the medium term. Our forecasts assume a devaluation to TTD8.00/USD by end-2019. Our view is underpinned by an expectation that T&T’s external accounts will remain weak, keeping the peg under downside pressure.”
It added, “The rise in dollar sales over recent months appears to be underpinned in part by the sale of foreign reserves. By end-2018, foreign reserves had contracted 9.5% Year on Year (y-o-y) and 34.1% since peaking at end-2014.”
Since Imbert has become Finance Minister the country’s net official reserves have fallen by close to a quarter.
The Central Bank’s January 2019 economic bulletin painted a picture of the falling reserves.
It read, “Trinidad and Tobago’s gross official reserves amounted to $7,575.0 million at the end of December 2018; $794.7 million lower than the level recorded at the end of 2017. This portends an overall deficit on the external accounts. The level of reserves at the end of December 2018 represents 8.0 months of prospective imports of goods and services, compared to the import cover of 9.7 months at the end of 2017. At the end of September 2018, gross official reserves amounted to $7,465.3 million or 8.1 months of prospective imports of goods and services.”
The Central Bank reported that at the end of 2015 the country’s net official reserves was $9.933 billion. It means that since Imbert has been minister of finance the country’s net official reserves have fallen by $2.358 billion or by 23 per cent in a three year period.
Several economists and the international agencies have counselled the Government to allow the exchange rate to depreciate to where it will find its equilibrium and its real value but so far the Government has been reticent that it will not allow the dollar to fall beyond the present value.