Howai announces US$200 million injection
By Andre Bagoo Saturday, May 24 2014
FINANCE and Economy Minister Larry Howai yesterday stated the new system of allocation of foreign exchange “has not worked as effectively as originally anticipated” as he advised Parliament that a Central Bank review was in order, in addition to an immediate injection of US$200 million (TT$1.2billion) into the system.
In a special appearance at the House of Representatives, Howai said while foreign reserves remained strong, the injection was being done, “to address the immediate short term needs of the market and to alleviate any concerns of the public”. Further changes are to be introduced to the current system, though Howai did not specify these. He said the new system had introduced a new technical regime but had required changes in the behavioural patterns of the market.
“The new system has not worked as effectively as originally anticipated,” Howai told MPs at the International Waterfront Centre, Wrightson Road, Port-of-Spain. “As a consequence, the Central Bank has decided to revisit the system.”
Howai said given “difficulties being experienced by the public in acquiring foreign exchange” over the past few days he held meetings with unspecified stakeholders.
“To address the immediate short-term needs of the market and to alleviate any concerns of the public, the Central Bank has today agreed to inject US$200 million into the market,” the minister said. “This will meet all demands in the system and allow for the continuing smooth operation of the market. In addition, the Central Bank has agreed to introduce certain changes to the allocation system which, I am advised, has been well-received by the banks.”
In a statement which made no mention of the issue of devaluation of the foreign exchange rate, Howai nonetheless assured the level of foreign reserves remains healthy and the economy good.
“The country’s foreign exchange reserves remain strong and have continued to grow over the past decade,” the minister said. He said the foreign exchange reserves have climbed from US$9.07 billion in 2010 to US $10.3 billion at the end of the first quarter of 2014. Howai said day-to-day foreign exchange needs are met by energy sector companies.
“Much of the country’s day-to-day foreign exchange needs are met by the energy sector companies selling funds to the banking system,” he said. “Where demand outstrips the supply generated, the Central Bank of Trinidad and Tobago steps in to inject US dollars into the system. This was the case as recently as May 9 when some US$50 million was sold by the Central Bank to authorised dealers.” Howai said over the past four years, the Central Bank has sold an average of $1.2 billion per year to the system. So far this year, he said, the Bank has sold $410 million.
“Notwithstanding this support for the market, there have been continuous occurrences of tightness of supply,” he said.
St Joseph MP Dr Terrence Deyalsingh, later in the sitting, said it took the PNM to raise the issue at a press conference earlier this week for Government action. He said there was a US dollar “black market” but gave no specifics.
He stated there was a link between guns and drugs and this illicit trade in foreign currency. Howai gave a positive outlook on the economy.
“Our balance of payments remains positive, foreign direct investment is projected to grow well over US$2 billion this year, the economy continues to grow and is projected by Moody’s Investor Services to expand by more than three percent next year, unemployment remains low, inflation is subdued,” Howai said. He continued, “the exchange rate remains stable, the Hertitage and Stabilisation Fund continues to grow, Government’s fiscal operations have continued in surplus for the first six months of this year and debt levels remain well-managed.”
On Tuesday, Howai had told reporters the issue of devaluation did not arise and framed the issue of the supply of foreign exchange in terms of consumer behaviour patterns. He encouraged consumers to shop around for currency.