Forex reform long overdue, experts say

PE­TER CHRISTO­PHER

Se­nior Mul­ti­me­dia Re­porter

pe­ter.christo­[email protected]

Changes to the for­eign ex­change regime have been long over­due. This was the com­mon­ly shared view fol­low­ing the Trinidad and To­ba­go Cham­ber of Com­merce’s re­lease of a po­si­tion pa­per out­lin­ing caus­es and so­lu­tions to the coun­try’s wors­en­ing for­eign ex­change (forex) cri­sis while urg­ing the Gov­ern­ment to take ac­tion.

For­mer fi­nance Min­is­ter Karen Nunez-Tesheira not­ed there had been signs of de­cline in the for­eign ex­change re­serves from as far back as 2011, but there had been lit­tle ad­just­ments to al­le­vi­ate the is­sue since then.

She felt the best course of ac­tion was to place pri­or­i­ty on lo­cal com­pa­nies that could earn for­eign ex­change as op­posed to com­pa­nies that con­sume for­eign ex­change with­out gen­er­at­ing any re­turns.

“What I’ve said from the very in­cep­tion is that in terms of for­eign ex­change dis­tri­b­u­tion and al­lo­ca­tion, what should be a crit­i­cal fac­tor is the com­pa­nies or or­gan­i­sa­tions or en­ti­ties that are in­volved are earn­ing for­eign ex­change. Whether it is the man­u­fac­tur­ing, non-man­u­fac­tur­ing or en­er­gy sec­tor. Clear­ly the en­er­gy sec­tor would be a ma­jor con­trib­u­tor to for­eign ex­change, but al­so the non-en­er­gy sec­tor, the man­u­fac­tur­ing sec­tor,” said Nunez-Tesheira.

“These com­pa­nies are able to earn for­eign ex­change; those are the com­pa­nies that are go­ing to help to al­le­vi­ate our for­eign ex­change scarci­ty in this coun­try,” Nunez-Tesheira added.

The for­mer fi­nance min­is­ter ac­knowl­edged the ar­gu­ment raised by the cham­ber for de­val­u­a­tion of the TT dol­lar but stat­ed there were far more fac­tors that need­ed to be ad­dressed, such as the dis­par­i­ty in our im­port spend ver­sus ex­port rev­enue.

“The more that you ex­port, the more you earn in for­eign ex­change. And the less that you im­port, or the low­er the val­ue of the goods that you im­port, the less that you’re go­ing to see the use of your for­eign ex­change. So I think, by the way, what I think is a good mea­sure is the Cari­com Pay­ment and Set­tle­ment sys­tem,” she said.

Econ­o­mist Dr Ronald Ramkissoon com­pli­ment­ed the TT Cham­ber for pre­sent­ing a well-ar­gued po­si­tion for a change in Trinidad and To­ba­go’s ex­change rate regime.

He said, “Es­pe­cial­ly note­wor­thy is the recog­ni­tion that a change in this coun­try’s ex­change rate regime by it­self would not cor­rect this coun­try’s cri­sis sit­u­a­tion. The Cham­ber’s state­ment clear­ly iden­ti­fies the need for ac­com­pa­ny­ing re­forms such as pub­lic sec­tor re­form, dig­i­tal trans­for­ma­tion and the re­moval of hin­drances to do­ing busi­ness.”

How­ev­er, Dr Ramkissoon stressed that changes are even more dif­fi­cult to im­ple­ment now, as the sit­u­a­tion has reached a cri­sis lev­el which has not been aid­ed by geopo­lit­i­cal is­sues.

He said, “Un­for­tu­nate­ly, a change in the ex­change rate regime should have been done sev­er­al years ago. This coun­try’s over­all sit­u­a­tion has, if any­thing, wors­ened, not on­ly with re­spect to our for­eign re­serves but al­so in re­spect of the re­cent neg­a­tive out­look as as­sessed by Moody’s. I need not point to the ris­ing un­ease and un­cer­tain­ty as­so­ci­at­ed with the US-Venezuela con­flict.

“What all of this means is that pol­i­cy­mak­ing and im­ple­men­ta­tion have be­come that more chal­leng­ing, and our pol­i­cy­mak­ers have much more chal­lenges to ur­gent­ly ad­dress in ad­di­tion to the crit­i­cal ex­change rate regime as raised by the cham­ber.”