The Central Bank yesterday agreed to inject US$200 million into the market, Finance Minister Larry Howai said.
In a statement to Parliament, he said this was to address the immediate short-term need in the foreign currency market and to alleviate any concerns of the public.
“In addition, the Central Bank has agreed to introduce certain changes to the allocation system, which, I am advised, have been received by the banks,” he said.
The new system of foreign exchange distribution has not worked as effectively as originally anticipated, he said. As a consequence the Central Bank has decided to revisit the system.
“In addition over the past few days and in response to the difficulties being experienced by the public in acquiring foreign exchange, the Minister of Finance and the Economy has met with stakeholders to determine the nature and extent of the current problems and has encouraged discussion to address the short term difficulties being experienced in the market place as well as to determine measures which may be effected to improve the efficiency of the system,” Howai said.
Much of the country’s day-to-day foreign exchange needs were met by the energy sector companies selling funds to the banking system. He said when demand outstrips the supply generated, the Central Bank steps in to inject US dollars into the financial system. This was the case as recently as May 9 when some US $50 million was sold by the Central Bank to authorised dealers.
Howai said in the period 2010-2013, the Central Bank had sold on average $1.2 billion per year to the system. So far, for this year, the Central Bank has injected $410 million into the system. Notwithstanding this support for the market, there have been continuous occurrences of tightness of supply, he noted. This is what caused the Central Bank to revisit the system for allocation of foreign currency to authorised dealers earlier this year and to seek to introduce a new system to manage the distribution of foreign currency in a more effective manner.
He added that the new system not only introduced a new technical regime, but also required changes in the behavioural patterns of the market.
The Central Bank in a statement earlier yesterday said it met with the Bankers Association of Trinidad and Tobago (BATT) and mutually agreed to further improvements in the distribution of foreign exchange.
“This sizeable intervention together with the enhanced distribution system will help to restore normalcy and eliminate accumulated, unsatisfied demand,” the Bank stated.
The Central Bank said it wanted to assure the general public and the business community that the country has enough foreign exchange reserves to satisfy demand.
As at May 16, the level of net official reserves stood at US$10,378 million, more than enough to cover over one year of imports.