Charles Kong Soo

Leg­is­la­tion to re­place the $100 bank note with a new poly­mer bill was passed in the House of Rep­re­sen­ta­tives just af­ter 10 pm on Fri­day.

Min­is­ter of Fi­nance Colm Im­bert said in the Mis­cel­la­neous Pro­vi­sions (Pro­ceeds of Crime and Cen­tral Bank) Bill 2019, from the date of no­tice by the Cen­tral Bank to the ap­point­ed date, cit­i­zens can use the old pa­per notes and the new note, but at the end of the pe­ri­od on­ly the poly­mer notes will be ac­cept­ed.

Na­tion­al Se­cu­ri­ty Min­is­ter Stu­art Young said the mea­sure was tak­en to fight mon­ey laun­der­ing, the fi­nanc­ing of drugs and il­le­gal firearms, tax eva­sion, the black mon­ey econ­o­my, coun­ter­feit­ing and oth­er il­le­gal ac­tiv­i­ties.

As the 14 day count­down for the im­ple­men­ta­tion of the new poly­mer $100 bill ticks down, Guardian Me­dia con­tact­ed econ­o­mists Dr Vaalmik­ki Ar­joon and Mary King to weigh in on the is­sue.

Dr Vaalmik­ki Ar­joon said the de­mon­eti­sa­tion was not with­out some po­ten­tial­ly se­ri­ous con­se­quences and there ought to be mea­sures in place to lim­it them.

He said even though many Trinida­di­ans used cred­it/deb­it cards, it was are still a cash-based so­ci­ety.

Ar­joon said If the win­dow to ex­change the notes was small, like the two-week min­i­mum stip­u­lat­ed by the new leg­is­la­tion, there will be long pos­si­bly chaot­ic lines at the bank to ex­change the cot­ton notes for the poly­mer notes.

He said some peo­ple could miss the can­cel­la­tion date, this process will tem­porar­i­ly re­move monies out of ac­tive cir­cu­la­tion and de­lay spend­ing.

Ar­joon said the mon­ey sup­ply could al­so fall when funds brought to the banks are red-flagged and were not al­lowed to be re­deemed, giv­en that monies il­le­git­i­mate­ly held were still part of the mon­ey sup­ply.

He said less cash in cir­cu­la­tion meant that less mon­ey was be­ing spent and less cash is avail­able for cash-based busi­ness­es in the very short term.

Ar­joon said sales rev­enue will there­fore fall fur­ther and there will be a slow­down in busi­ness ac­tiv­i­ty, es­pe­cial­ly mi­cro and small busi­ness such as small re­tail­ers, farm­ers, man­u­fac­tur­ers and con­struc­tion firms, which don’t have Linx/cred­it card ma­chines.

He said many of these busi­ness­es have been sus­tain­ing loss­es for years.

Ar­joon said while the coun­try re­al­ly can­not af­ford to ex­pe­ri­ence any fur­ther down­turn in eco­nom­ic ac­tiv­i­ties, the de­mon­eti­sa­tion will cause even more short-term re­ces­sion­ary im­pli­ca­tions for the coun­try.

He said the coun­try should have im­ple­ment­ed this de­mon­e­ti­za­tion out­side of the Christ­mas pe­ri­od, as it could re­strict the po­ten­tial sales that small busi­ness­es could re­ceive in this pe­ri­od.

Ar­joon said flea mar­kets that op­er­at­ed dur­ing Christ­mas don’t ac­cept elec­tron­ic pay­ment and pri­mar­i­ly used cash.

He said many re­tirees and aged per­sons al­so didn’t use deb­it/cred­it cards and oth­er forms of elec­tron­ic monies, they tend­ed to keep cash at home from their pen­sions and many had med­ical ail­ments.

Ar­joon said the com­mer­cial banks should have some con­tin­gen­cies in place to al­low for re­tirees to ac­cess this new poly­mer note as con­ve­nient­ly and as quick­ly as pos­si­ble, with­out hav­ing to join queues at the bank.

Mary King said the coun­try had changed notes be­fore and all it meant was that if you held any $100 bills, sim­ply take them to the bank and ex­change them for the new bills and give an ex­pla­na­tion of source of funds if the quan­ti­ty was above $90,000.

She said this should not af­fect small le­git­i­mate busi­ness­es be­sides hav­ing to go to the bank.

King said the move was to both im­pact the mon­ey laun­der­ing, oth­er il­lic­it ac­tiv­i­ties and al­so to make the bills more se­cure, a help to eco­nom­ic ac­tiv­i­ty.

She said the Bankers As­so­ci­a­tion of T&T said that they were pre­pared for the changeover and the tech­no­log­i­cal change was sim­ple giv­en the same ma­chines can be used in many coun­tries on dif­fer­ent kinds of mon­ey bills.

King said the as­so­ci­a­tion had al­so as­sured the pub­lic that be­ing in the front line of the changeover that they were com­fort­able with both the scale of the task and the time al­lot­ted for it.

She said the ef­fect of the changeover was to force those hold­ing large num­bers of $100 bills to ei­ther come up with al­ter­nate schemes to ex­change them or sim­ply dump them as use­less and per­haps the Gov­ern­ment was hop­ing for the lat­ter in many cas­es.

King said there will al­ways be a black mar­ket when the de­mand for US green­backs out­stripped the sup­ply and this tend­ed to take place in T&T’s re­ces­sion pe­ri­ods, like now when the pe­tro­le­um sec­tor can­not sup­ply the amount of for­eign ex­change re­quired. She said some peo­ple be­lieve that by de­valu­ing the cur­ren­cy, they can stop the black mar­ket, but a de­val­u­a­tion does not cre­ate ad­di­tion­al for­eign ex­change.

King said a de­val­u­a­tion showed that the coun­try’s cur­ren­cy was volatile, risky, so the fact that the coun­try will de­val­ue al­so drove a black mar­ket and peo­ple would grav­i­tate to hold­ing a less risky cur­ren­cy; the US dol­lar.

She said the fact that there were or maybe large stacks of TT cur­ren­cy, $100 dol­lar bills, out there, could dri­ve the black mar­ket since their ex­change for US was part of the mon­ey laun­der­ing trade.

King said by mak­ing this large cache of TT dol­lars in­valid very quick­ly can put a dent in the black mar­ket.