Home' Trinidad and Tobago Guardian : December 31st 2015 Contents DECEMBER 31 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
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PO Box 122.
The December 23 termination
of the appointment of Jwala
Rambarran as the Governor
of the Central Bank has been
criticised by many com-
mentators, among whom are
those who justify his dis-
closure of confidential information on the sale
of foreign exchange by T&T s commercial banks
on the basis that "the country s foreign
exchange holdings are a vital national resource"
that are on the same level as its mineral deposits
That notion, expressed by Michael Harris
on December 14, is partly based on a concept
that the former governor himself placed into
the public space when, in his December 8
statement, he attempted to rationalise his dis-
closure of confidential information by arguing
that he did so after weighing competing inter-
"This balancing exercise involved the weigh-
ing of the public s right to be duly informed
of the use of a limited national financial resource
against private sector interests, desirous of pri-
vacy in such matters."
Later in the statement, the former governor
argues: "The Central Bank is of the considered
view that the use of the country s precious
foreign exchange reserves, which come from
finite and non-renewable oil and gas resources,
is an issue of public concern and justifies the
dissemination of the identity of the main recip-
ients to whom such reserves are distributed."
The former governor is arguing here that
T&T s foreign reserves are "limited," "precious,"
and constitute a "national financial resource,"
and that the use of those reserves is "an issue
of public concern" that "justifies the dissem-
ination of the identity of the main recipients
to whom such reserves are distributed."
The former governor s statement leads to
the following question: Are the country s foreign
reserves a national financial resource?
To answer that question the following facts
need to be understood:
• Most of the country s foreign reserves
come from the payment of taxes by T&T s
• The taxes are paid in US dollars and are
deposited into a government account at the
• The Government sells the Central Bank
its US-dollar energy taxes and uses the TT-
dollar equivalent to run the country: pay public
servants; fund transfers and subsidies; buy
goods and services etc
• The Central Bank is the agent of the Gov-
ernment and therefore makes all of the central
government s foreign payments, including debt
service, acquisition of foreign assets etc by
debiting government accounts
• The US dollars held by the Central Bank
constitute T&T s foreign reserves.
It can be argued, therefore, that the stock
of foreign reserves held by the Central Bank
constitute part of the nation s savings and that
how those savings are used is generally a matter
of the public concern, as are other national
savings such as the Government s Treasury
deposits at the Central Bank, the Green Fund,
the Unemployment Fund, the overdraft at the
Central Bank that constitutes 15 per cent of
government annual revenue etc.
But only about one-quarter of the foreign
exchange sold by commercial banks to the
population of T&T in the last three years comes
from the Central Bank selling foreign exchange
to commercial bank:
• According to a Republic Bank statement
issued on December 7, between January 2013
and December 2015, the Central Bank sold
US$5.575 billion to the banking system, which
would be the authorised dealers of foreign
• Between January 2013 and December 2015,
the T&T public sold US$15.826 billion to the
There are four important points that need
to be made about the information in the two
bullet points above:
1) That between January 2013 and December
2015, the banking system purchased at least
US$21.401 billion from the Central Bank and
the public of T&T
2) Of the US$21.401 billion purchased by
the banking system, only 26 per cent (some
US$5.575 billion) came from the Central Bank
with 74 per cent coming from the public
3) The banking system (or authorised forex
dealers) PURCHASES foreign exchange from
the Central Bank in commercial transactions,
with the Central Bank depositing mostly US
dollars into the accounts of commercial banks
and receiving TT dollars from them
4) If commercial banks PURCHASE foreign
exchange from the Central Bank, the ownership
of that money is transferred from the Central
Bank to the commercial banks
Therefore, it seems to me, the public s right
to know ends the second that foreign exchange
is sold to the commercial banks. The foreign
exchange then becomes the property of the
commercial banks, for them to decide who
they sell it to, but not, as yet, at what price
they sell it.
If the authorised forex dealers take possession
of foreign exchange in a legal transaction, it
is for them to decide whether they choose to
disclose their customers information---not the
To argue otherwise would be akin to saying
that someone named Michael Harris, Hamid
Ghany, Bhoe Tewarie or Ralph Maraj can sell
an asset such as a house, car, land, painting,
shares in a company or a company itself for
due consideration, but retain some kind of
ownership right in the asset.
Surely, logic would dictate that once the
asset has legally changed hands, the property
rights of the seller have come to an end.
I know of no special provision underlying
the sale of foreign exchange by the Central
Bank to commercial banks and it is therefore
absurd, in my opinion, to attempt to sustain
an argument that the public has an interest in
an asset that has been sold.
Of course, the Central Bank has an absolute
right to disclose that it is selling US$50 million
to the authorised dealers and Bank A received
US$12.5 million, Bank B US$5 million and so
on. The sale of foreign exchange to authorised
dealers is governed by a formula that has been
in place since April 1993.
But, it seems to me, once the foreign
exchange leaves the Central Bank account, it
would be a breach of the confidentiality pro-
visions of the Central Bank Act and the Finan-
cial Institutions Act to disclose to whom the
authorised dealers are selling the foreign
What transpired in this case is that the Cen-
tral Bank imposed its regulatory right to collect
information on foreign exchange sales from
the commercial banks but then breached the
confidentiality laws that govern that relation-
The above points only refer to 26 per cent
of the total foreign exchange purchased by
commercial banks in the last three years.
Some 74 per cent of the foreign exchange
purchased by T&T s commercial banks, some
US$15.826 billion, is bought from the public,
which refers mostly to energy companies selling
US dollars to the banking system and using
the TT dollars to pay their wages and salaries,
leases and rentals, equipment purchases etc.
But the public refers as well to T&T exporting
companies that need to pay local commitments
such as wages and salaries, leases and rentals,
equipment purchases and debt servicing.
The public also refers to visitors and tourists
who may wish to convert their US dollars, euro
and pounds to TT dollars.
If the public s right to be informed about
what transpires with foreign reserves ends
when those reserves are sold to the commercial
banks, one wonders what those who argue
that the former governor was right to disclose
the main users of T&T s foreign exchange
would say about foreign exchange that does
not even pass through the Central Bank.
Maybe the argument is that those energy
companies are exploiting assets that "belong"
to the people of T&T and therefore that public
has a right to know how those companies
spend every dollar they earn by exploiting T&T
Or maybe those who seek to challenge the
property rights argument would claim that
energy companies are exploiting depleting
resources, which somehow elevates public s
right to know to some special place.
We ll see.
To whom do T&T's
foreign reserves belong?
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