Home' Trinidad and Tobago Guardian : February 25th 2016 Contents The Central Bank's sale of foreign
exchange to T&T's authorised
dealers last month was 67.5 per
cent less than in January 2015,
analysis of Central Bank data
In a statement on January 28, 2015, the Cen-
tral Bank disclosed that it had sold US$400
million to the banking system in January 2015,
which it described as the "largest foreign
exchange intervention made by Central Bank
in a single month to date."
In disclosing that it made its largest inter-
vention in January 2015, the Central Bank sug-
gested that "unsatisfied demand and signif-
icant tightening persisted in the foreign
exchange market" in that month.
The sale of foreign exchange to the autho-
rised dealers in January 2015 was surpassed
in October 2015, when some US$695 million
was sold, according to a table in the Central
Bank's data centre. Sales in that month includ-
ed US$500 million special injection that
Finance Minister Colm Imbert had directed
former Central Bank Governor Jwala Ram-
barran to make to clear the backlog in the sys-
In January 2016, the Central Bank sold
US$130 million to authorised dealers, which
is 67.5 per cent less than the amount that the
institution sold to the dealers a year earlier.
On Tuesday, the Central Bank disclosed that
for 2016 to date, it sold US$180 million to
authorized dealers, US$130 million in January
and US$50 million on February 12.
The sharp reduction in the Central Bank's
intervention in the foreign exchange market
is due to the falloff in the amount of taxes
paid by the energy companies operating in
T&T, which has been partly caused by the
decline in the price of oil and natural gas and
by the substantial early write-offs of capital
The Central Bank's disclosures on the extent
of its interventions in the foreign exchange
market came in response to questions from
the Business Guardian noting that the Central
Bank's US dollar selling rate today was $6.5511
on Tuesday and that the exchange rate had
been above $6.50 on 10 days for this month.
On December 28, 2015, Central Bank Gov-
ernor Alvin Hilaire's first day in office, the
selling rate of US$1 was $6.4477. On Monday,
the rate was $6.5511, which means that the
exchange rate has slipped by 1.6 per cent in
the period since Hilaire replaced Rambarran,
who was fired for disclosing the names of
some of the country's largest users of foreign
Among the questions asked by the Business
• Has the Central Bank, under the new
Governor, shifted its policy on the exchange
rate to allow for more flexibility?
• What is the Central Bank's judgment on
the impact of this creeping depreciation on
• Does the rate of $6.5511 reflect the dynam-
ics of demand and supply for US dollars?
• For how long will the Central Bank con-
tinue to fail to meet legitimate demand for
foreign exchange and what impact does the
institution believe that such failure will have
on T&T's trade and other relations?
• Does the Governor subscribe to the policy
of his immediate predecessor to "provide a
pre-announced schedule of its interventions
to commercial banks to maintain stability in
The Central Bank did not respond fully, if
at all, to any of those questions.
It did, however, respond to a question on
when was the last time it intervened in the
foreign exchange market, when it said: "The
Central Bank of Trinidad and Tobago intervenes
periodically in the foreign exchange market,
selling or purchasing foreign currency from
authorized dealers. Currently, the Bank inter-
venes at least on a bi-weekly basis.
"In determining the precise timing of such
activity, as well as the volume and the exchange
rate of the transactions, the Bank considers
among other things prevailing demand and
supply conditions, as well as past and prospec-
tive foreign exchange inflows and outflows,
while aiming to limit exchange rate volatility.
"The Central Bank last sold US$50 million
on Friday February 12, 2016 to authorized
dealers. For 2016 to date, the Bank sold
US$180 million to authorized dealers."
FEBRUARY 25 • 2016 www.guardian.co.tt BUSINESS GUARDIAN
NEWS | BG5
Sharp drop in CBTT's
forex sales to dealers
Central Bank Governor Alvin Hilaire talks to the media during an Old Year's Day 2015 news
conference at the Central Bank in Port-of-Spain. PHOTO: SEAN NERO
University of the West Indies Economist, Vaalmikki Arjoon
is suggesting that the finance sector be used for deepening this
country's diversification thrust. He added that diversification
initiatives can be funded through Initial Public Offerings of
State entities. Specifically, Arjoon said issuing diaspora bonds
should be used to fund diversification efforts.
"Diaspora bonds allow Trinidadians living abroad to contribute
to local development, through purchasing bonds issued by the
government. The Latin American Development Bank and the
Andean Development Bank can be approached to provide much
needed development financing, as there is currently too much
reliance on the IDB," Arjoon said in emailed responses to Business
Confident that there is enough investor interest in IPOs in
T&T, Arjoon said, "We have already seen the success of IPOs
here in Trinidad, and this will also help to boost much needed
activity on the stock exchange, which can aid in eliminating
"Tariffs can be implemented for certain products that are
imported but are also available locally, especially certain agri-
cultural products. This can not only aid in boosting tariff
revenues, but also help to stimulate the other sectors by forcing
businesses and citizens to buy locally."
There are 18,000 Small and Medium Enterprises (SME) in
T&T which account for more than 28 per cent of T&T's GDP,
he said. The SMEs, according to Arjoon, employ more than 35
per cent of the workforce. This means that SMEs have a role
to play in the growth of the economy.
"Internationally, we have seen that SMEs are essential in
transforming countries into economic powerhouses. In the Asia-
Pacific region, SMEs alone contribute up to 50 per cent of GDP
and 42 per cent of export value. These economies have invested
heavily in the development of such companies, which is one
of the key reasons that they enjoy rapid growth and competitive
But in T&T, SMEs have to face many obstacles.
Said Arjoon: "SMEs face many problems, including an inability
to raise sufficient financing, a lack of much needed technology
and infrastructure, and little access to markets, just to name
a few. In fact, 70 per cent of their financing comes from private
savings, while 11 per cent is sourced from banks, with great
difficulty, as they have to compete with larger companies for
loans. Increased business levies and the hike in fuel prices will
increase their costs, hurting their operations even further, as
many of them are already cash strapped."
Arjoon said staff cuts have already started to happen in the
SME sector in T&T due to a higher cost for SMEs to do business.
Arjoon said there is need therefore to provide assistance to
enhance the competitiveness of SMEs so that T&T's overall
competitiveness can be improved.
"As a starting point, the government could focus on enhancing
SMEs in strategic sectors, particularly manufacturing, agriculture
and film and fashion. This could substantially raise our inter-
national competitiveness in a multitude of markets. The gov-
ernment needs to focus more on enhancing the innovation of
such companies, through allowances for start-ups, financing
and entrepreneurial training. They need to support these com-
panies with state of the art technology and factory facilities to
build their productive capacity, and assist with intellectual prop-
SMEs can be funded through the capital markets, he suggested.
"They (The SMEs) ought to be encouraged to make full use
of the SME market established in the T&T Stock Exchange,
which will aid them in attaining much needed financing to
develop their business operations.
Use IPO funds, bonds for diversification says economist
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