In de­liv­er­ing the 2024 Bud­get on Mon­day, Min­is­ter of Fi­nance Colm Im­bert ex­pressed con­cerned about the in­creas­ing de­mand for for­eign ex­change (forex) and pledged to sta­bilise and strength­en the for­eign ex­change mar­ket through a col­lab­o­ra­tive process among the Min­istry of Fi­nance, the Cen­tral Bank, the com­mer­cial banks and the busi­ness com­mu­ni­ty, among oth­er stake­hold­ers.

He said: “We will set an agen­da to de­ter­mine the caus­es and ef­fects of the in­creased de­mand for forex, de­sign strate­gies to deal with the cur­rent chal­lenges and es­tab­lish the most ap­pro­pri­ate pol­i­cy for the al­lo­ca­tion, man­age­ment and dis­tri­b­u­tion of for­eign cur­ren­cy.

“We in­tend to move ag­gres­sive­ly to de­vel­op strate­gies to in­crease the repa­tri­a­tion of forex earned over­seas by lo­cal and for­eign busi­ness­es op­er­at­ing in Trinidad and To­ba­go, as this is key to an in­creased lo­cal sup­ply of forex.

“In par­tic­u­lar, in 2024, we will cre­ate new arrange­ments for pref­er­en­tial ac­cess to forex for qual­i­fied small and medi­um en­ter­pris­es (SME), and in this re­gard, I have al­ready re­ceived very use­ful rec­om­men­da­tions from the Cham­ber of Com­merce, the com­mer­cial banks and the Ex­im­Bank.

“I ex­pect to be able to im­ple­ment this new SME forex fa­cil­i­ty with­in the next six months, which should re­duce the de­mand for sales of forex us­ing cred­it cards.”

In re­sponse to ques­tions from me, the Cen­tral Bank sent the ta­ble at right.

The last row of the ta­ble in­di­cates to­tal sales of forex by au­tho­rised deal­ers in 2022 was US$6.55 bil­lion, which was 10.29 per cent more than in 2019, the last full year be­fore the on­set of the COVID-19 pan­dem­ic. The da­ta al­so in­di­cate that to­tal sales of forex in 2022 were 31.83 per cent more than in 2021. That’s not sur­pris­ing giv­en that most COVID re­stric­tions end­ed in T&T by April 2022.

The da­ta al­so in­di­cate that in the 2019 to 2022 pe­ri­od:

n Some US$5.79 bil­lion was used to pay for­eign trans­ac­tions on lo­cal cred­it cards. A to­tal of US$21.96 bil­lion was sold by au­tho­rised deal­ers in that four-year pe­ri­od, which means that 26.36 per cent of all the forex sold in the four-year pe­ri­od went to pay for­eign cred­it card bills;

n In the pe­ri­od 2019 to 2022, to­tal sales of forex to the re­tail and dis­tri­b­u­tion sec­tor ac­count­ed for US$4.52 bil­lion, which was 20.58 per cent of to­tal sales;

n The third largest user of forex in the 2019 to 2022 pe­ri­od was “en­er­gy com­pa­nies,” which re­ceived US$2.45 bil­lion, or 11.15 per cent of to­tal forex sales. En­er­gy com­pa­nies re­fer to Paria Fu­el Trad­ing.

The in­for­ma­tion pro­vid­ed by the Cen­tral Bank rep­re­sents a shift in the pat­tern of forex sales from the end of No­vem­ber 2015.

In the De­cem­ber 4, 2015, speech that re­sult­ed in his ter­mi­na­tion 20 days lat­er, for­mer Cen­tral Bank gov­er­nor, Jwala Ram­bar­ran, not­ed that the re­tail and dis­tri­b­u­tion sec­tor was “the most vo­ra­cious con­sumer of for­eign ex­change” ac­count­ing for “near­ly one-third of the to­tal forex sold” over the pe­ri­od Jan­u­ary 2013 to No­vem­ber 2015. In that pe­ri­od, cred­it card us­age con­sumed 13 per cent of to­tal forex sup­ply.

In my view, how­ev­er, the fun­da­men­tal forex prob­lem faced by T&T is that for the 15 years be­tween 2008 and 2022, sales of forex by au­tho­rised deal­ers to the pub­lic (de­mand) have con­sis­tent­ly ourstripped pur­chas­es of forex from the pub­lic (sup­ply), at the pre­vail­ing ex­change rates, ac­cord­ing to my cal­cu­la­tion of Cen­tral Bank da­ta.

In that 15-year pe­ri­od, US$90.54 bil­lion was sold to the pub­lic, av­er­ag­ing US$6.03 bil­lion a year. For the same pe­ri­od, US$68.76 bil­lion was pur­chased from the pub­lic, av­er­ag­ing US$4.58 bil­lion a year.

That means T&T has had a 15-year gap av­er­ag­ing about 32 per cent be­tween the de­mand and sup­ply of forex, at the pre­vail­ing ex­change rates.

Both Mr Im­bert and our Cen­tral Bank Gov­er­nor Dr Alvin Hi­laire know this. No amount of tin­ker­ing with a bro­ken, dys­func­tion­al for­eign ex­change al­lo­ca­tion regime is go­ing to change the im­bal­ance be­tween de­mand and sup­ply of for­eign ex­change at the cur­rent ex­change rate.