Over the course of recent months, there has been an uproar by the business community surrounding the lack of foreign exchange to meet payments to foreign suppliers.
This has led to a debate on the issue of foreign exchange availability within Trinidad and Tobago.
One will argue that such a debate is healthy for a developing economy such as ours, and the discussion should serve to assist us as a nation in coming up with sustainable solutions to what has been a perennial problem.
It is with this end in mind, of developing a sustainable solution that I add my voice to the debate.
In order to fully appreciate the challenge facing our economy, we need first to establish a context for the discussion taking place.
An appropriate starting point for the discussion would be with an assessment of the health of our economy.
According to the 2014 IMF Article IV Consultation conducted by the International Monetary Fund in Trinidad and Tobago during the period March 18 to April 1; Trinidad and Tobago is experiencing more robust growth after several years of under-performance.
The IMF, in its report, projects that the economy will grow around 2.5 per cent in 2014 after growing around 1.5 per cent in 2013.
Trinidad and Tobago’s external reserve position remains relatively healthy at US$10 billion, while the Heritage and Stabilisation Fund has accumulated in excess of US$5 billion in assets and continues to grow.
Trinidad and Tobago’s foreign external reserve position represents 13 months of import cover whereas international guidelines are in the vicinity of three months.
Despite such healthy statistics, there continues to be signs that the foreign exchange market has remained relatively tight.
Responding to several calls from the business community, and following a meeting with the chamber on Friday, June 6, the Central Bank responded by holding a follow-on meeting with members of the business community and the Bankers’ Association, following which an announcement was made that the Central Bank would intervene and inject sufficient liquidity into the system in order to meet the demand for foreign exchange.
Additionally, there was a commitment by the Central Bank Governor to inject US$30 million for foreign travel and university fees.
We must commend the Central Bank on its recent efforts at modifying the foreign exchange allocation system.
Following this, we have received assurances from three of the country’s largest banks that there will be no shortage of foreign exchange in meeting demand.
I am encouraged by the recent moves by the Central Bank and remain cautiously optimistic that the recent adjustments would serve to improve the tightness currently being experienced.
I would like to suggest the business community monitor the levels of foreign exchange liquidity over the course of the next three months for signs of improvement.
In closing, the Central Bank of Trinidad and Tobago would do well to consider moving towards a more flexible, market clearing system.
Such an environment would engender confidence among the population and the business community and would result in decreased pressures on the system by individuals and businesses attempting to source foreign exchange in anticipation of demand, as they will be confident that ample amounts of foreign exchange will be available as and when they need it.
I would like to take this opportunity to remind the country that our foreign exchange position has implications for our country’s credit rating. As such, we have a collective obligation to be responsible in the contributions which we make to this debate.