Banker: expect ease-up in foreign exchange woes
Sunday, February 23 2014
Central Bank’s input of US$140 million in foreign exchange to commercial banks in February should ease the current shortage of foreign currency in the local market according to President of the Bankers Association of TT, Larry Nath.
“We don’t expect it to be as acute with the Central Bank’s intervention,” Nath said adding, “We can see the shortage easing and improving next week until March when there is another intervention.”
The Central Bank sold US$140 million to commercial banks for February and according to Nath, the month has not yet ended.
“We have one more week to go, so there is the possibility that further injections could be made,” he said.
Central Bank, he said, was not the only supplier of foreign currency on the local market. He said with the arrival of visitors for Carnival, the local market should obtain some much needed foreign currency.
The Central Bank supplies 25 percent of the total foreign exchange needs of the market, with 75 percent supplied by the banking system which obtains it from among other businesses, oil and gas companies converting US dollars to pay their tax bills every quarter.
Oil and gas companies do their conversion in March, June, September, and December.
It is always seasonal in January and February for the system to become a bit tight, Nath said “because people who imported goods for Christmas on credit terms are required to make payments in January and February.”
Between November last year and February this year, the Central Bank sold US$500 million to commercial banks to ease foreign exchange shortages.
Nath said the shortages were due to an improving economy and the demand by businesses to pay off debts they would have incurred during the Christmas season.
President of the Downtown Owners and Merchants Association (DOMA) Gary Aboud told Sunday Newsday yesterday the association has been receiving numerous complaints about the scarcity of US dollars within the banking sector.
“Many, many businesses have been complaining that they are being given partial allotment for their request,” he said noting that in many cases, suppliers overseas were being made to wait for payment.
Some businesses, he said “are reporting that their shipments are being delayed because they are unable to meet their obligations and most of them are medium to small businesses.” Noting that these requests were not considered to be in the top brackets, he questioned whether “there is some confusion as to why these medium to small businesses were being rationed for foreign exchange and whether the explanation for the shortage is because of excessive demand from large users of foreign exchange.”
He also questioned whether the spread that exists between the buying and selling rate has caused some sellers of US dollars and persons who earn US dollars to not deposit their money in the banking system and instead sell it outside the system for a fairer price.
He also questioned whether government or state projects and other types of demands being made by the private sector with big purchases were drying up the existing foreign exchange.
In the past, the business community has experienced shortage at this time of the year, he said, “but it has never been as difficult like now.” In 2013 and 2012, there were periods leading up to Carnival when there was shortage, he said adding “We cannot understand why, because there is nothing about the Carnival season that should place greater demand on foreign exchange.”
Hoping that the highs and lows in the supply of foreign exchange will come to an end very soon, he said that “because this perception that a shortage exists, persons who would only need US$100 are applying for US$150. By allowing this perception of shortage to continue, what we are really doing is exciting the demand to create a shortage which should not exist.”