An­tho­ny Wil­son

Con­sul­tant Busi­ness Ed­i­tor

an­tho­ny.wil­son@guardian.co.tt

The In­ter­na­tion­al Mon­e­tary Fund (IMF) said on Fri­day that T&T’s for­eign ex­change re­stric­tions are not con­sis­tent with the Fund’s Ar­ti­cles of Agree­ment.

And the Wash­ing­ton DC-based lender of last re­sort is seek­ing to per­suade this coun­try to end the re­stric­tions.

The com­ment from the IMF, which was ex­clu­sive to Guardian Me­dia, fol­lows a pe­ri­od of height­ened con­cern about for­eign ex­change sup­ply con­straints in T&T.

In its com­ment, the IMF spokesper­son not­ed that Un­der Ar­ti­cle VI­II, Sec­tion 2(a) of the Fund’s Ar­ti­cles of Agree­ment, no mem­ber of the Fund shall, with­out the ap­proval of the Fund, im­pose re­stric­tions on the mak­ing of pay­ments and trans­fers for cur­rent in­ter­na­tion­al trans­ac­tions (ie, ex­change re­stric­tions).

The IMF not­ed T&T’s ex­change re­stric­tions are iden­ti­fied and as­sessed in Ar­ti­cle IV Con­sul­ta­tion Staff Re­ports.

As de­tailed in T&T’s 2024 Ar­ti­cle IV Con­sul­ta­tion staff re­port, T&T main­tains an ex­change re­stric­tion that was not ap­proved by the Fund, ac­cord­ing to in­for­ma­tion­al an­nex of the re­port.

“While such ex­change re­stric­tions are in­con­sis­tent with the Fund’s Ar­ti­cles, the Fund has fol­lowed a co­op­er­a­tive ap­proach, en­cour­ag­ing mem­bers to elim­i­nate these mea­sures, in­clud­ing through sur­veil­lance and tech­ni­cal as­sis­tance,” said the IMF spokesper­son.

“In T&T’s 2024 Ar­ti­cle IV Con­sul­ta­tion staff re­port, it was not­ed that ‘ad­dress­ing for­eign ex­change short­ages re­mains a pri­or­i­ty,” and “the re­moval of all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions and greater ex­change rate flex­i­bil­i­ty over the medi­um term would help to meet the de­mand for for­eign ex­change’.

“The Fund looks for­ward to dis­cussing this and oth­er eco­nom­ic and fi­nan­cial poli­cies with the au­thor­i­ties in the next Ar­ti­cle IV Con­sul­ta­tion.”

Speak­ing at a news con­fer­ence on Tues­day, Min­is­ter of Fi­nance Colm Im­bert said the Gov­ern­ment, through the Cen­tral Bank, the Ex­im­bank of T&T and a spe­cial win­dow for state en­ter­pris­es, in­ject­ed a lit­tle more than US$2 bil­lion in­to the mar­ket in 2023.

“We have been av­er­ag­ing around US$1.8 bil­lion, US$1.9 bil­lion, some­times US$2 bil­lion and we went to US$2.4 bil­lion quite re­cent­ly. That does de­plete the re­serves, of course. But we have been fac­ing this sit­u­a­tion since we came in 2015, and we have man­aged the process where we have not run out of for­eign ex­change,” said Im­bert.

“Of course, the in­jec­tion of for­eign ex­change, through the Cen­tral Bank and through the Ex­im­bank, ecetera, draws down our re­serves, but we have come up with many dif­fer­ent and in­no­v­a­tive ways of re­plen­ish­ing those re­serves. This is why we still have al­most US$6 bil­lion in re­serves af­ter nine years and es­pe­cial­ly af­ter COVID, where we had to use quite a bit of for­eign ex­change,” he said.

Ac­cord­ing to the da­ta cen­tre of the Cen­tral Bank, T&T’s net of­fi­cial for­eign re­serves for Sep­tem­ber 2024, amount­ed to $5.664 bil­lion. T&T’s net of­fi­cial for­eign re­serves de­clined by 45.84 per cent be­tween the end of Sep­tem­ber 2015, when the re­serves po­si­tion was US$10.539 bil­lion, and Sep­tem­ber 2024. The cur­rent ad­min­is­tra­tion was elect­ed on Sep­tem­ber 7, 2015

Ex­plain­ing how T&T for­eign re­serves are gen­er­at­ed, Im­bert said when tax­es are paid by the com­pa­nies in the en­er­gy sec­tor, it goes in­to a spe­cial ac­count at the Cen­tral Bank.

“T&T al­so gets US dol­lars when we bor­row from in­ter­na­tion­al agen­cies and banks. That goes in­to the for­eign re­serves ac­count,” said Im­bert, adding that the Cen­tral Bank sells for­eign ex­change to the coun­try’s com­mer­cial banks every two to three weeks, based on a for­mu­la that has been in place for ten years.

The Cen­tral Bank for­mu­la is based fac­tors in­clud­ing the size of the bank and the num­ber of branch­es and cus­tomers they have.

The Bank al­so in­di­cates the ex­change rate at which the com­mer­cial banks can sell to their cus­tomers. The com­mer­cial banks are in­formed that pref­er­ence must be giv­en to cus­tomers who trade.

In its An­nu­al Eco­nom­ic Sur­vey for 2023, the Cen­tral Bank dis­closed that the de­mand for for­eign ex­change—mea­sured by sales of for­eign ex­change by au­tho­rised deal­ers to the pub­lic—to­talled US$6.228 bil­lion. Sup­ply of for­eign ex­change—mea­sured by pur­chas­es of for­eign ex­change from the pub­lic by au­tho­rised deal­ers—amount­ed to US$4.614 bil­lion.

That left a net sales gap of US$1.614 bil­lion, of which the Cen­tral Bank sup­plied US$1.342 bil­lion to au­tho­rised deal­ers to sup­port the mar­ket.

On Oc­to­ber 30, Sco­tia­bank in­formed its cus­tomers that the US-dol­lar spend­ing lim­it per cal­en­dar month on its Aero Mas­ter­card black would be re­duced to US$5,000 and all of its oth­er per­son­al cred­it cards would be lim­it­ed to US$2,000 spend­ing per month. This change, said Sco­tia­bank, in­cludes all trans­ac­tions con­duct­ed out­side of T&T along with all in­ter­na­tion­al on­line trans­ac­tions, and be­comes ef­fec­tive on De­cem­ber 1.

In the last two weeks, Sco­tia­bank T&T and RBC T&T re­duced the US-dol­lar spend­ing lim­it on their cred­it cards.

On Fri­day, RBC T&T said it was cut­ting the for­eign ex­change lim­its on its cred­it cards from $41,000 (US$6,038) to $14,000 (US$2,061). Those re­duc­tions come in­to ef­fect on De­cem­ber 1.

Those de­ci­sions fol­lowed Re­pub­lic Bank’s an­nounce­ment in Sep­tem­ber 2023 that it was cut­ting its lim­it.

“Di­rec­tors stressed that ad­dress­ing for­eign ex­change short­ages re­mains a pri­or­i­ty and en­cour­aged adopt­ing a more ef­fi­cient and mar­ket-clear­ing in­fra­struc­ture for al­lo­cat­ing FX. They not­ed that re­mov­ing all re­stric­tions on cur­rent in­ter­na­tion­al trans­ac­tions and greater ex­change rate flex­i­bil­i­ty over the medi­um term would help meet the de­mand for for­eign ex­change.”

“A more ef­fi­cient for­eign ex­change in­fra­struc­ture and greater ex­change rate flex­i­bil­i­ty over the medi­um term would help ad­dress FX short­falls and im­prove the busi­ness en­vi­ron­ment.”

“With pos­i­tive US-TT in­ter­est rate dif­fer­en­tials, res­i­dent hold­ings of US Trea­suries have in­creased by about US$1.3 bil­lion be­tween mid-2022 and end-2023.”