Experts take issue with PM’s statement on forex

Senior Reporter

akash.samaroo@cnc3.co.tt

Former managing director of ANSA Bank and government minister Robert Le Hunte is not in agreement with the Prime Minister’s assertion that the demand for the Government to devalue the TT dollar is only coming from people trying to make a quick profit.

On Monday, during Prime Minister’s Questions, Dr Keith Rowley rebuked the devaluation suggestion and said the pressure to do so was coming from special interest groups which have large sums of US in hand and stand to become wealthier if the conversion rate for US dollars increases.

But Le Hunte, who is also a former executive director of the Republic Bank Group, said he respectfully did not share this view.

“There is a genuine shortage of foreign exchange in the market, which has raised anxiety among the citizens across the board. There has therefore been genuine concern and calls by some for devaluation, a managed float, or for market forces to prevail,” Le Hunte told Guardian Media.

He added, “I believe, however, that if that were to occur, it would curb demand for forex without necessarily resulting in a flood of people converting their US dollars into TT. The reality is that there is a lack of confidence in the TT dollar, so even if the rate goes to ten to one, the mass conversion that the Prime Minister anticipates will not occur.”

However, Le Hunte who served as a Cabinet minister under Dr Rowley said if the Government chooses to maintain the dollar at the existing rate, there are other options that can be looked at.

“There are other levers within the economic environment, such as control over our money supply, the interest rate, taxes, the level of deficit spending etc, that could be adjusted, as suggested by a number of economists,” Le Hunte explained.

Meanwhile, economist Dr Indera Sagewan is accusing the Minister of Finance and Prime Minister of creating a facade to purport that the TT dollar is stronger than it actually is.

She said, like it or not, T&T was already operating on a floating market rate for US dollars.

“I think the Minister (of Finance) and Prime Minister can hold that position largely because while they continue to maintain an official exchange rate, the real reason this economy is operating is because of the black market rate, which hovers between $7.50 and $8. That is the rate at which everyone is operating because if you cannot get the money in the bank you have to go to the black market. So, the reality is the economy, given the current supply, is operating at the blackmarket rate,” Sagewan posited.

She said while she did not agree with devaluation, she would support a managed float.

The economist said the only sustainable solution to the forex crunch is to increase its supply, outside of the energy sector.

Meanwhile co-ordinator of the Confederation of Business Chambers Jai Leladharsingh is happy the Prime Minister took a firm stance against devaluation. However, he too believes long-term solutions must be looked at.

“He has to come up with a comprehensive plan for economic diversification and bringing stakeholders together to make sure it happens. Stakeholders in agriculture, stakeholders in tourism, services, and small and medium enterprises. He should also try to set up the Eteck parks where SMEs can invest in these factories to get into further light manufacturing to export so we can earn US dollars. That is what is needed now as an emergency,” Leladharsingh explained.

With respect to the Finance Minister’s attempts to meet with commercial banks as the Government looks at the possibility of regulating their distribution of the forex pumped into the system, Leladharsingh said it was a much-needed approach.

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