At the end of last week’s BG View com­men­tary, which was head­lined, "Will Kam­la ex­pose 'forex dis­tri­b­u­tion car­tel’?" some as­pects of the Ex­change Con­trol Act were quot­ed, per­ti­nent to the abil­i­ty of the Gov­ern­ment to de­ter­mine the arrange­ments by which for­eign ex­change in T&T is bought and sold.

Last week’s com­men­tary cit­ed the fol­low­ing from sec­tion 3 of the Ex­change Con­trol Act:

“(1) The Min­is­ter may by or­der des­ig­nate the Cen­tral Bank es­tab­lished un­der the Cen­tral Bank Act, or an of­fi­cer in his Min­istry to be in charge of Ex­change Con­trol.

(2) Sub­ject to sub­sec­tion (1), the Cen­tral Bank shall be charged with the gen­er­al ad­min­is­tra­tion of this Act and in the ex­er­cise of its pow­ers and the per­for­mance of its du­ties the Bank shall con­form with any gen­er­al or spe­cial di­rec­tions giv­en to it by the Min­is­ter.”

My non-le­gal in­ter­pre­ta­tion of sec­tion 3 (1) of the Ex­change Con­trol Act is that al­though the ad­min­is­tra­tion of ex­change con­trols was del­e­gat­ed to the Cen­tral Bank in 1970, the Act al­lows the Min­is­ter of Fi­nance to des­ig­nate an of­fi­cer in the Min­istry of Fi­nance to be in charge of ex­change con­trol.

In oth­er words, the cur­rent Min­is­ter of Fi­nance, Mr Dav­en­dranath Tan­coo, could de­cide that from Ju­ly 1, 2025, the Cen­tral Bank would no longer be re­spon­si­ble for ex­change con­trol. He could man­date that one of the per­ma­nent sec­re­taries in the Min­istry of Fi­nance, ei­ther Suzette Tay­lor-Lee Chee or Michelle Durham-Kissoon, should be in charge.

It would not be un­prece­dent­ed for the Min­istry of Fi­nance to be re­spon­si­ble for cer­tain as­pects of ex­change con­trol.

“When the Bank was es­tab­lished in 1964, Trinidad and To­ba­go was part of the ster­ling area which pro­vid­ed for full con­vert­ibil­i­ty of the lo­cal cur­ren­cy in­to ster­ling. The Min­istry of Fi­nance ad­min­is­tered ex­change con­trols against oth­er cur­ren­cies,” ac­cord­ing to a Wikipedia ac­ti­cle on the is­sue.

In prac­ti­cal terms, there would be tremen­dous chal­lenges in del­e­gat­ing ex­change con­trol to an of­fi­cer in the Min­istry of Fi­nance. But while the day-to-day su­per­vi­sion of the dis­tri­b­u­tion of for­eign ex­change could re­main with the Cen­tral Bank, it is quite like­ly that sec­tion 3 (1) could be in­ter­pret­ed to al­low the Min­istry of Fi­nance to set pol­i­cy on how the coun­try’s for­eign ex­change earn­ings are dis­trib­uted.

And if sec­tion 3 (1) does not fa­cil­i­tate the Min­istry of Fi­nance in set­ting pol­i­cy to de­ter­mine the amount of for­eign ex­change re­ceived by com­pa­nies and in­di­vid­u­als, sec­tion 3 (2) states that the Cen­tral Bank “shall con­form with any gen­er­al or spe­cial di­rec­tions giv­en to it by the Min­is­ter” of Fi­nance in the ex­er­cise of its (the Cen­tral Bank’s) pow­ers and the per­for­mance of its du­ties un­der the Act.

It seems to me that the Ex­change Con­trol Act, in the sec­tions cit­ed above, pro­vides the Min­is­ter of Fi­nance with ex­ten­sive pow­er to di­rect the Cen­tral Bank on mat­ters per­ti­nent to the leg­is­la­tion.

What do spe­cial di­rec­tions mean?

The Ex­change Con­trol Act is not the on­ly leg­is­la­tion that re­quires the Cen­tral Bank to act on di­rec­tions giv­en by a min­is­ter of fi­nance. When the Cen­tral Bank took con­trol of Cli­co in Feb­ru­ary 2009, it did so pur­suant to its pow­ers un­der sec­tion 44 D of the Cen­tral Bank Act. Those pow­ers in­clud­ed that the Cen­tral Bank as­sumed con­trol and car­ried on the af­fairs of the in­sur­ance com­pa­ny, as well as tak­ing over “all the prop­er­ty and the un­der­tak­ings of that in­sti­tu­tion in­clud­ing, with­out lim­i­ta­tion, all free­hold and lease­hold prop­er­ties, con­tracts, shares and se­cu­ri­ties.”

Sec­tion 44F (5) of the Cen­tral Bank Act states, “In the per­for­mance of its func­tions and in the ex­er­cise of its pow­ers un­der sec­tion 44D the Bank shall com­ply with any gen­er­al or spe­cial di­rec­tions of the Min­is­ter and shall act on­ly af­ter due con­sul­ta­tion with the Min­is­ter.”

T&T’s pre­vi­ous min­is­ter of fi­nance, Mr Colm Im­bert gave spe­cif­ic di­rec­tions to the Cen­tral Bank to di­rect Cli­co to trans­fer its prop­er­ties at 76-78 St Vin­cent St, Port-of-Spain, 3 Rush­worth St in San Fer­nan­do and the Mau­si­ca Es­tate to the Gov­ern­ment or a des­ig­nat­ed Gov­ern­ment en­ti­ty “for an ap­pro­pri­ate re­duc­tion in the li­a­bil­i­ties” Cli­co owed to the Gov­ern­ment for the 2009 bailout.

Does the Ex­change Con­trol Act cov­er forex dis­tri­b­u­tion?

That re­al­ly is a ques­tion that may end up be­ing lit­i­gat­ed by le­gal lu­mi­nar­ies such as Rus­sell Mar­tineau, Deb­o­rah Peake and Anand Ram­lo­gan.

But if not the Ex­change Con­trol Act, what oth­er leg­is­la­tion gives the Cen­tral Bank the pow­er to over­see an ex­change rate regime that is clear­ly dys­func­tion­al?

That, ac­cord­ing to the In­ter­na­tion­al Mon­e­tary Fund’s (IMF) Ar­ti­cle IV re­ports on T&T, al­lows the Bank to:

* Re­strict the max­i­mum mar­ket buy and sell rates, and pro­hib­it for­eign ex­change trans­ac­tions be­yond the max­i­mum rates;

* Not pro­vide enough for­eign ex­change to meet all de­mand for cur­rent trans­ac­tions at that rate;

* Lim­it sales of its for­eign ex­change in­ter­ven­tion funds to meet on­ly “trade-re­lat­ed” de­mand, which do not in­clude non-trade trans­ac­tions that are, how­ev­er, cur­rent in­ter­na­tion­al trans­ac­tions as de­fined un­der Ar­ti­cle XXX(d) of the IMF’s Ar­ti­cles of Agree­ment; and

* En­cour­age au­tho­rised deal­ers to sim­i­lar­ly pri­ori­tise sales of for­eign ex­change ob­tained from oth­er sources.

Fur­ther, ac­cord­ing to the IMF’s June 2024 Ar­ti­cle IV con­sul­ta­tion with T&T, “The au­thor­i­ties pri­ori­tise pro­vi­sion of for­eign ex­change to cer­tain man­u­fac­tur­ers and im­porters of ne­ces­si­ties (such as food and med­i­cines) through spe­cial for­eign ex­change fa­cil­i­ties with­in the Ex­im­Bank.”

The fo­cus on en­sur­ing that the for­eign ex­change goes to those who im­port ne­ces­si­ties such as food and phamaceu­ti­cals has led to a sit­u­a­tion in which one com­pa­ny con­trolled more than 40 per cent of the $4.4 bil­lion spent on im­port­ing phamaceu­ti­cals un­der the Chron­ic Dis­ease As­sis­tance Pro­gramme (CDAP), be­tween 2015 and 2024, ac­cord­ing to Guardian Me­dia’s Joshua Seemu­n­gal’s re­port­ing in the last Sun­day Guardian.

As very few of the phamaceu­ti­cals im­port­ed un­der the CDAP are man­u­fac­tured lo­cal­ly, the $4.4 bil­lion spent on phamaceu­ti­cal im­ports over the 10-year pe­ri­od is equal to about US$650 mil­lion. Those dom­i­nant phamaceu­ti­cal im­porters are prob­a­bly among the com­pa­nies that get pri­or­i­ty pro­vi­sion of for­eign ex­change, ac­cord­ing to the IMF’s analy­sis.

As­sum­ing, but not ac­cept­ing, that it is the Ex­change Con­trol Act that al­lows the Cen­tral Bank to be in con­trol of T&T’s for­eign ex­change dis­tri­b­u­tion arrange­ments, it is clear that those arrange­ments are not work­ing for the ma­jor­i­ty of the pop­u­la­tion. But that ma­jor­i­ty is not rea­son­able be­cause they most­ly want ac­cess to as much for­eign ex­change as their in­comes would al­low, but they want to pay the cur­rent mar­ket rate, which is heav­i­ly sub­sidised.

Sup­port for dis­clo­sure and re­dis­tri­b­u­tion?

I be­lieve sup­port for dis­clo­sure of the s0-called "forex dis­tri­b­u­tion car­tel" is com­ing from sup­port­ers of the Gov­ern­ment, es­pe­cial­ly those who are in­volved in Small and Medi­um-sized En­ter­pris­es (SMEs).

Those sup­port­ers per­ceive that ac­cess to for­eign ex­change has al­lowed the en­rich­ment of cer­tain com­pa­nies and the pau­peri­sa­tion of their busi­ness­es. They view those with ac­cess to for­eign ex­hange as be­ing sup­port­ers of the pre­vi­ous ad­min­is­tra­tion and they are de­mand­ing dis­clo­sure of the top users of for­eign ex­change as a pre­lude to the Gov­ern­ment tak­ing de­ci­sive ac­tion to cor­rect what they firm­ly be­lieve to be an in­jus­tice.

But the Gov­ern­ment needs to be very care­ful that its de­ci­sion mak­ing in this area does not hurt some com­pa­nies that could be on the cut­ting edge of the fu­ture ex­pan­sion of T&T’s non-en­er­gy ex­port sec­tor, while cater­ing to a group of busi­ness­peo­ple who sim­ply want ac­cess to for­eign ex­change to prof­it from im­ports.