Ke­jan Haynes &

Rad­hi­ca De Sil­va

Min­is­ter of Fi­nance Colm Im­bert an­nounced yes­ter­day that the forex win­dow at the Ex­im­Bank for es­sen­tial im­ports, cre­at­ed dur­ing the COVID-19 pan­dem­ic, has been re­sumed in a re­struc­tured for­mat.

The new win­dow came in­to ef­fect on No­vem­ber 1, Im­bert re­vealed in a press re­lease.

“The Gov­ern­ment’s al­lo­ca­tion of US dol­lars to the Ex­im­Bank for this es­sen­tial im­ports fa­cil­i­ty will now be US$25M per month, a US$5M re­duc­tion from the COVID-19 list of im­ports. This is con­sid­ered to be ad­e­quate at this time. It should al­so be not­ed the forex win­dow for ex­port man­u­fac­tur­ers is not be­ing ad­just­ed and will re­main,” a re­lease sent by the Min­istry of Fi­nance said.

How­ev­er, the el­i­gi­bil­i­ty cri­te­ria have al­so been re­vised. The re­lease said pan­dem­ic-re­lat­ed items such as hand sani­tis­ers and face masks are no longer con­sid­ered es­sen­tial. The core list of es­sen­tial items, which in­cludes cer­tain foods and phar­ma­ceu­ti­cals, will re­main un­changed for now but will be sub­ject to pe­ri­od­ic re­views to as­sess the need for ad­di­tions or dele­tions.

Min­is­ter Im­bert said Gov­ern­ment will ex­am­ine the role of lo­cal man­u­fac­tur­ing, con­sid­er­ing ways to make it eas­i­er for lo­cal busi­ness­es to ac­cess for­eign cur­ren­cy need­ed for pro­duc­tion.

The cur­rent forex win­dow for ex­port man­u­fac­tur­ers re­mains the same.

Con­tact­ed on the an­nounce­ment yes­ter­day, Ex­im­Bank CEO Navin Dook­er­an said, “The Ex­im­Bank team is work­ing as­sid­u­ous­ly to recom­mence al­lo­ca­tions to im­porters/dis­trib­u­tors of el­i­gi­ble es­sen­tial items, in very short or­der and in ac­cor­dance with the re­vised pol­i­cy di­rec­tives.”

In a 20-minute video pro­duced by the Ex­im­Bank and aired ear­li­er this week, Dook­er­an was asked: What do you think is the so­lu­tion to the for­eign ex­change woes in the coun­try?

He re­spond­ed, “When some­body says there is a con­straint, I tell clients this all the time, that this is in your con­trol. You have the abil­i­ty to dri­ve your ex­port earn­ings. You can take steps and ad­just your busi­ness mod­el so that you can earn more for­eign ex­change.

“That way im­mu­nis­es you from any na­tion­al sit­u­a­tion. So the short so­lu­tion is that you ex­port more and earn more for­eign ex­change. And again, that’s hap­pen­ing in the man­u­fac­tur­ing sec­tor, it is hap­pen­ing in the ser­vices sec­tor too and we want to see how we can get it done more in the cre­ative sec­tor.”

Min­is­ter Im­bert has been teas­ing the idea of this change for a while.

“Dur­ing COVID, we cre­at­ed a spe­cial win­dow at the Ex­im­Bank to pro­vide USD for es­sen­tial im­ports, such as food and med­i­cine. COVID is over, so we are re­view­ing the fea­si­bil­i­ty of that forex win­dow,” Im­bert post­ed on X on Oc­to­ber 27.

On Oc­to­ber 29 mean­while, he post­ed, “Our Ex­im­Bank was es­tab­lished to fa­cil­i­tate the growth and ex­pan­sion of our ex­port and man­u­fac­tur­ing sec­tors; to en­hance our for­eign ex­change earn­ings, and cre­ate em­ploy­ment through as­sis­tance to our EX­PORT­ING com­pa­nies and NOT to fa­cil­i­tate whole­salers of im­port­ed fin­ished goods.”

Cham­bers wel­come de­ci­sion

Ch­agua­nas Cham­ber of Com­merce pres­i­dent Bal­dath Ma­haraj yes­ter­day said he wel­comes Gov­ern­ment’s de­ci­sion. 

“The cham­ber ap­pre­ci­ates the Gov­ern­ment’s com­mit­ment to sup­port­ing ac­cess to es­sen­tial foods, phar­ma­ceu­ti­cals, and hy­giene prod­ucts, and we look for­ward to dis­cus­sions about broad­en­ing forex ac­cess for lo­cal man­u­fac­tur­ers, which could strength­en our do­mes­tic in­dus­tries and re­duce im­port re­liance,” he said. 

“How­ev­er, the Ch­agua­nas Cham­ber re­mains cau­tious about the re­duc­tion in month­ly al­lo­ca­tion from US$30 mil­lion to US$25 mil­lion, which may present chal­lenges for busi­ness­es in our re­gion. We are com­mit­ted to mon­i­tor­ing the im­pact of this ad­just­ment close­ly to en­sure that the busi­ness com­mu­ni­ty’s needs are met ef­fec­tive­ly.

“We urge the Gov­ern­ment to main­tain an open line of com­mu­ni­ca­tion with stake­hold­ers and re­main re­cep­tive to feed­back on the forex win­dow’s per­for­mance, as we work to­geth­er to sup­port eco­nom­ic sta­bil­i­ty and growth in Ch­agua­nas and the wider Trinidad and To­ba­go econ­o­my.”

He added, “While un­der­stand­ing the need for pru­dent forex dis­tri­b­u­tion, we em­pha­sise that busi­ness­es re­ly­ing on this fa­cil­i­ty may face chal­lenges, es­pe­cial­ly with the fes­tive sea­son ap­proach­ing. Changes like these sig­nif­i­cant­ly im­pact busi­ness plan­ning, par­tic­u­lar­ly dur­ing crit­i­cal times like Christ­mas. We strong­ly en­cour­age the Min­istry of Fi­nance to give the busi­ness com­mu­ni­ty ad­vance no­tice for ad­just­ments of this na­ture, al­low­ing us to man­age our sup­ply chains ef­fec­tive­ly.”

Greater San Fer­nan­do Area Cham­ber of Com­merce pres­i­dent Ki­ran Singh al­so said re­duc­ing the al­lo­ca­tion from US$30 mil­lion to US$25 mil­lion will as­sist with the forex cri­sis.

“It’s five mil­lion dol­lars less on a month­ly ba­sis but it’s a step in the right di­rec­tion that the Gov­ern­ment is seek­ing to ad­dress dif­fer­ent ways and means of en­sur­ing that we re­main sta­ble to get es­sen­tial items to the shelves of the stores and the su­per­mar­kets,” Singh said. 

He hopes the list of cov­ered items will be ad­dressed over time and po­ten­tial­ly ex­pand­ed, adding there could be a way to in­crease the month­ly al­lo­ca­tion. But for now, he is sat­is­fied with the re­sponse. 

Ma­yaro MP Rush­ton Paray al­so wel­comed the de­ci­sion, say­ing the move will ad­dress the needs of busi­ness­es. He said re­cent re­stric­tions placed con­sid­er­able strain on im­porters, threat­en­ing the sta­bil­i­ty of es­sen­tial goods sup­ply.

“While the al­lo­ca­tion is re­duced from pre­vi­ous COVID-era lev­els, it is a step for­ward in sta­bil­is­ing ac­cess to es­sen­tial goods for house­holds and busi­ness­es,” Paray said in a state­ment. 

Econ­o­mists: More sus­tain­able so­lu­tion need­ed

Econ­o­mist Dr Mar­lene Attzs has al­so wel­comed the de­ci­sion but not­ed it was more of a quick fix than a sus­tain­able so­lu­tion.

She said the re-in­tro­duc­tion of the re­struc­tured Ex­im­Bank win­dow will pro­vide some tem­po­rary re­lief and as­suage the con­cerns of the busi­ness com­mu­ni­ty, but not­ed that goods in those sec­tors not in­clud­ed un­der the new Ex­im­Bank win­dow will still need to source forex, pos­si­bly from the black mar­ket, where rates are sig­nif­i­cant­ly high­er, which will per­pet­u­ate the forex short­age.

“This could dri­ve up un­of­fi­cial ex­change rates, which may lead to a par­al­lel mar­ket that is dif­fi­cult to con­trol and may con­tribute to in­fla­tion­ary pres­sures for non-es­sen­tial goods,” Attzs said. 

“The crux of the mat­ter re­mains in­suf­fi­cient sup­ply of forex to meet over­all de­mand for forex and the root caus­es of the forex cri­sis, such as re­duced for­eign ex­change in­flows due to de­clin­ing en­er­gy rev­enues, lim­it­ed eco­nom­ic di­ver­si­fi­ca­tion, and a struc­tur­al re­liance on im­ports, per­sist.”

Dr Attzs not­ed that the root caus­es of the forex cri­sis per­sist, such as re­duced for­eign ex­change in­flows due to de­clin­ing en­er­gy rev­enues, lim­it­ed eco­nom­ic di­ver­si­fi­ca­tion, and a struc­tur­al re­liance on im­ports. 

She said in the ab­sence of a sus­tain­able forex so­lu­tion,  tap­ping in­to forex re­serves (in­clud­ing the Her­itage and Sta­bil­i­sa­tion Fund) will con­tin­ue to be op­tions,  how­ev­er un­de­sir­able.

“A sus­tain­able so­lu­tion to the forex cri­sis re­quires ad­dress­ing struc­tur­al is­sues, in­clud­ing iden­ti­fy­ing non-en­er­gy sec­tors and eco­nom­ic ac­tiv­i­ties, to gen­er­ate in­creased forex and en­hanc­ing the ex­ist­ing en­abling en­vi­ron­ment to fur­ther en­cour­age forex gen­er­a­tion in those non-en­er­gy sec­tors,” Dr Attzs said. 

She not­ed that the coun­try needs to curb the de­mand for im­port­ed non-es­sen­tial goods to help bal­ance forex de­mand with avail­able sup­ply over time.

Fel­low econ­o­mist Dr Vaalmik­ki Ar­joon agreed the Ex­im­Bank al­lo­ca­tion of­fers on­ly tem­po­rary re­lief from pres­sures, re­duc­ing im­porters’ re­liance on the black mar­ket and en­abling time­ly pay­ments to sup­pli­ers.

“How­ev­er, while such mea­sures via the Ex­im­Bank are cru­cial now, they should be viewed as short-term tem­po­rary sup­port,” Dr Ar­joon said.

“Sus­tain­able forex avail­abil­i­ty re­quires a long-term so­lu­tion - in­creas­ing forex sup­ply through ex­pand­ed ex­ports. Achiev­ing this will de­pend on en­hanc­ing pri­vate-sec­tor pro­duc­tiv­i­ty and com­pet­i­tive­ness to dri­ve ex­port growth and forex in­flows. Crit­i­cal steps in­clude re­mov­ing bar­ri­ers to busi­ness growth, such as im­prov­ing SME fi­nanc­ing, re­duc­ing port and cus­toms de­lays, ad­dress­ing crime, and pro­mot­ing spe­cial eco­nom­ic zones to at­tract FDI.” —With re­port­ing by Shas­tri Boodan