An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers

@guardian.co.tt

De­spite calls from the In­ter­na­tion­al Mon­e­tary Fund (IMF) for the Gov­ern­ment to end for­eign ex­change re­stric­tions, Fi­nance Min­is­ter Colm Im­bert in­sists that the Gov­ern­ment has main­tained its fixed for­eign ex­change regime to con­trol in­fla­tion.

In a com­ment shared ex­clu­sive­ly with Guardian Me­dia last Fri­day, the IMF said T&T’s for­eign ex­change re­stric­tions are not con­sis­tent with the fund’s Ar­ti­cles of Agree­ment. The IMF com­ment fol­lows height­ened con­cerns about forex sup­ply con­straints.

How­ev­er, the IMF spokesper­son said the fund has fol­lowed a co­op­er­a­tive ap­proach, pre­fer­ring to en­cour­age mem­bers to elim­i­nate these mea­sures, in­clud­ing through sur­veil­lance and tech­ni­cal as­sis­tance.

Min­is­ter Im­bert in­di­cat­ed that the IMF’s call for greater ex­change rate flex­i­bil­i­ty is not new, as it was made back in 2012.

He said in the IMF’s 2013 Ar­ti­cle IV Re­port on T&T, the fund re­it­er­at­ed its view that “our ex­change rate should be al­lowed to fluc­tu­ate with­in a wider band.”

How­ev­er, he point­ed out that the then UNC gov­ern­ment told the IMF that they were not con­tem­plat­ing changes to the ex­change rate sys­tem at that time.

“Again in 2014, the IMF told the then UNC gov­ern­ment that the for­eign ex­change al­lo­ca­tion sys­tem ex­ist­ing at that time ‘had led to a wide­spread and per­sis­tent re­cur­rence of for­eign ex­change short­ages’.”

The UNC gov­ern­ment “did not agree to the IMF’s rec­om­men­da­tion that our dol­lar be al­lowed to float,” Im­bert added.

The Fi­nance Min­is­ter point­ed out that the Peo­ple’s Na­tion­al Move­ment Gov­ern­ment has con­sis­tent­ly stat­ed since 2015 that it main­tains this coun­try’s fixed ex­change rate to con­trol in­fla­tion, which is now al­most the low­est in the world, “and it will not im­pose hard­ship on the poor and vul­ner­a­ble” by giv­ing in­to the ir­ra­tional de­mands of provo­ca­teurs that Gov­ern­ment de­val­ue the dol­lar.

“All a de­val­u­a­tion will do is cause a mas­sive spike in the cost of liv­ing and make every­thing more ex­pen­sive. It will not cre­ate any ad­di­tion­al US dol­lars for the coun­try or make forex more read­i­ly avail­able for or­di­nary cit­i­zens,” he lament­ed.

Econ­o­mists weigh in

Com­ment­ing on the is­sue, econ­o­mist Dr In­dera Sage­wan agrees with Min­is­ter Im­bert that the IMF has long called on the Gov­ern­ment to al­low mar­ket forces to de­ter­mine the re­al val­ue of the ex­change rate, peg­ging the over­val­u­a­tion of the cur­rent rate at about 33 per cent.

This is, in fact, a re­cur­ring state­ment in its an­nu­al re­views, she said. A lib­er­al ap­proach to mar­kets, she said, is the cor­ner­stone of IMF pol­i­cy frame­works so it pro­motes un­re­strict­ed ac­cess to the for­eign ex­change mar­ket.

“Of course, this is not what is hap­pen­ing in T&T and so the IMF is cor­rect that we are prac­tic­ing pol­i­cy in­con­sis­tent with the fund’s ar­ti­cles. If we were in an IMF pro­gramme at this mo­ment, de­val­u­a­tion would be a first con­di­tion­al­i­ty.”

Sage­wan al­so out­lined that the min­is­ter’s claim a de­val­u­a­tion would bring hard­ship up­on the mass­es is now moot. “Bot­tom line, the econ­o­my is op­er­at­ing at the black mar­ket rate. We are long past prop­ping up the cur­rent ex­change rate to pro­tect the mass­es. That boat sailed for a long time,” she said.

“There is no short-run so­lu­tion to this cur­rent forex prob­lem. It’s as sim­ple as that. Ask­ing the multi­na­tion­als to pay tax­es in the US on­ly shifts where the US ends up, the Cen­tral Gov­ern­ment ver­sus the com­mer­cial bank. All we’re do­ing is try­ing to bal­ance a bad sit­u­a­tion pray­ing that the en­er­gy sec­tor some­how turns around.”

The Gov­ern­ment, the econ­o­mist said, has no choice at this mo­ment but to im­pose re­stric­tions. “I’m al­so of the view that it should move to a more re­al­is­tic ex­change rate. This will ease the sit­u­a­tion at least im­me­di­ate­ly un­til we ad­just.”

Al­so com­ment­ing on the mat­ter was for­mer min­is­ter in the Min­istry of Fi­nance Mar­i­ano Browne, who made it clear that “no one is de­mand­ing de­val­u­a­tion.”

“The point is that there are two prices; a black mar­ket price which is dif­fer­ent to which the min­is­ter is op­er­at­ing, and every­body is pric­ing their goods at the black mar­ket.”

Browne said there was an agree­ment with the IMF and the or­gan­i­sa­tion is act­ing in ac­cor­dance with the agree­ment that has noth­ing to do with a coun­try be­ing part of the IMF pro­gramme.

He out­lined that whether Im­bert likes it or not, there is a dif­fer­ent price on the black mar­ket for for­eign ex­change and busi­ness­es are us­ing the black mar­ket.

Browne em­pha­sised that the min­is­ter “wants to twist the IMF’s state­ments be­cause he knows the IMF agree­ments are not be­ing ful­filled.”

Browne added, “Your fix peg is not work­ing, that is why we are not get­ting more for­eign ex­change, and if he wants to play crick­et, you would be breach­ing the agree­ment and caus­ing more grief in the long run,” he added.

Mean­while, econ­o­mist and for­mer banker Dr Ronald Ramkissoon said the IMF’s po­si­tion on T&T’s ex­change rate in sev­er­al of its pre­vi­ous re­ports has sug­gest­ed greater flex­i­bil­i­ty in the way in which the ex­change rate op­er­ates.

Asked for his thoughts on the min­is­ter’s po­si­tion that the coun­try will not be float­ing the dol­lar at this time, Ramkissoon said, “If that is the min­is­ter’s po­si­tion, that is the min­is­ter’s po­si­tion. I have noth­ing to add to it, ex­cept that when a coun­try de­cides to pur­sue a de fac­to fixed ex­change rate pol­i­cy, there are cer­tain con­se­quences of that.”

Ac­cord­ing to the da­ta cen­tre of the Cen­tral Bank, T&T’s net of­fi­cial for­eign re­serves for Sep­tem­ber 2024, amount­ed to $5.664 bil­lion.

Tan­coo: Im­bert cre­at­ing a dis­trac­tion

Weigh­ing in on the is­sue, Oropouche West MP and Shad­ow Fi­nance Min­is­ter Dave Tan­coo ac­cused Im­bert of cre­at­ing a dis­trac­tion with the float­ing ex­change rate. To be clear, he said the UNC was not in sup­port of float­ing the dol­lar at this time be­cause this would cause a wors­en­ing of the eco­nom­ic hard­ship faced by cit­i­zens.

Tan­coo said we need a trans­par­ent, eq­ui­table dis­tri­b­u­tion of the ex­ist­ing for­eign ex­change, the cre­ation of an at­trac­tive en­vi­ron­ment for for­eign and do­mes­tic in­vest­ment, and a gov­ern­ment-fo­cused pol­i­cy in cre­at­ing new for­eign ex­change rev­enue-gen­er­at­ing busi­ness­es.

“This Gov­ern­ment knows all of this but lacks the po­lit­i­cal will to break the forex ca­bal.

“What Im­bert should be telling his coun­try is, 1. Why has he not done a sin­gle thing to treat the se­cret bi­ased dis­tri­b­u­tion of for­eign ex­change? 2. Why has he not re­signed giv­en the is­sues raised by the Law Lords at the Privy Coun­cil and his role in the at­tack on the Au­di­tor Gen­er­al?

He stat­ed that Im­bert was the same Min­is­ter of Fi­nance who was found li­able in court con­cern­ing a mat­ter in­volv­ing for­mer Cen­tral Bank gov­er­nor Jwala Ram­bar­ran. He added, “Tax­pay­ers are forced to face mas­sive le­gal bills from PNM lawyers ... This abuse must stop.”

San­do Cham­ber pres­i­dent: Cri­sis not easy to nav­i­gate

Pres­i­dent of the Greater San Fer­nan­do Cham­ber of Com­merce Ki­ran Singh said the IMF’s re­quest that the Gov­ern­ment re­moves the re­stric­tions forth­with as per in­ter­na­tion­al fi­nan­cial agree­ments may be eas­i­er said than done.

Singh told Guardian Me­dia yes­ter­day that the forex cri­sis this coun­try is fac­ing is not easy to nav­i­gate, as en­er­gy prices are down along with pro­duc­tion lev­els in the en­er­gy sec­tor, while for­eign re­serves have al­so been de­plet­ed.

He said the Fi­nance Min­is­ter faces a forex sup­ply dilem­ma that is not go­ing to dis­ap­pear any­time soon.

“A new pres­i­dent-elect will be sworn in­to the White House soon our cur­ren­cy is pegged to the US dol­lar. Its val­ue is de­pen­dent on the strength of the US dol­lar.

“Its trad­abil­i­ty de­pends on sta­ble gov­er­nance and the for­eign pol­i­cy stance that Pres­i­dent Trump es­pous­es. There are grow­ing con­cerns about the US dol­lar in world trade mar­kets re­sult­ing from oth­er glob­al play­ers threat­en­ing to un­der­mine the de­pen­dence on US cur­ren­cy. This can have fur­ther ram­i­fi­ca­tions for our own cur­ren­cy,” Singh ex­plained.

Al­so com­ment­ing was the pres­i­dent of the Cou­va/Point Lisas Cham­ber of Com­merce De­o­raj Ma­hase, who said a coun­try has to weigh the ef­fects of forex re­stric­tions, re­mov­ing re­stric­tions and giv­ing more ex­change rate flex­i­bil­i­ty.

For a coun­try that im­ports large quan­ti­ties of goods, Ma­hase said this can fur­ther in­crease the cost of goods and in some cas­es ser­vices.

“In this case pos­si­bly an in­crease in fu­el cost which will have a chain re­ac­tion through­out the econ­o­my.

“Pur­chas­ing pow­er can de­crease and what about debt ser­vic­ing of ex­ter­nal loans or bills.”

While it is a chal­lenge for busi­ness own­ers to ac­cess forex, he said the ap­proach of con­sul­ta­tion, re­view, and a cred­itable dis­tri­b­u­tion mech­a­nism should be at­tempt­ed as in­di­cat­ed to seek to ad­dress the is­sue.