Senior multimedia reporter
geisha.kowlessar@guardian.co.tt
Over the 12 months ended September 30, 2022, total purchases of foreign exchange by authorised dealers from the public amounted to US$5.356 billion, which represented an increase of 52.1 per cent when compared with the previous financial year.
This was revealed in the Central Bank’s 2022 annual report, which was posted on its website yesterday.
It also noted that energy sector conversions, which remained the primary source of inflows to the market, rose by 66 per cent and contributed 74.2 per cent of the dealers’ total purchases from the public for the year.
According to the annual report, the bank maintained its regular interventions in the market, selling a total of US$1.25 billion to the authorised dealers during the year.
It added that sales of foreign exchange by authorised dealers to the public reached US$6.257 billion during FY2021/22, an increase of 35.1 per cent from the US$4.631 billion sold in the previous financial year.
The report further noted that the TTD/US$ weighted average exchange rate depreciated slightly over the year with the selling rate standing at TT$6.7803/US$1.00 as at September 30, 2022, compared to TT$6.7795/US$1.00 at the end of September 2021.
The report also spoke on foreign currency reserve management.
It stated that unrelenting high inflation, ongoing disruptions to trade stemming from Russia’s invasion of Ukraine and worsening energy shocks in Europe resulted in significant financial market volatility during the FY2021/22.
Moreover, global growth prospects were negatively impacted as most major developed central banks raised interest rates to curb inflation— the Fed raised rates five times over the year to bring its federal funds target range to between 3.00 to 3.25 per cent in September 2022.
On the issue of foreign reserve management, the Central Bank noted that against the backdrop of expected market volatility, the board approved a strategic asset allocation for the period 2021 to 2024, underpinned by the investment philosophy of capital preservation, maintaining adequate liquidity to meet obligations and an acceptable return within well-defined risk parameters.
During FY2021/22, the board also approved adjustments to the approved framework, to allow investments in ESG (environment, social, governance) securities, in keeping with the bank’s commitment to climate change and the introduction of exchange-traded funds (ETF’s).
“The composite portfolio lost 1.57 per cent compared with a return of 0.20 per cent one year earlier. The portfolio losses were driven by the poor performance of the bond market as major central banks increased their policy rates to combat rising inflation and the resultant losses made on the portfolio’s bond holdings more than outweighed the positive earnings on the fixed deposits,” the report explained.
It also noted that net official reserves decreased to US$6.8 billion as at September 30, 2022, from US$7.1 billion at the end of September 2021.
Energy sector inflows totalling US$2.6 billion were more than offset by interventions in the domestic foreign exchange market amounting to US$1.3 billion, disbursements of US$0.9 billion to various foreign exchange facilities, Central Government debt payments of US$0.5 billion and other Government payments totalling US$0.2 billion.
During the year, the Government deposited US$164 million into the Heritage and Stabilisation Fund (HSF), which also contributed to the overall decline in the reserve portfolio.
