Friday, November 13 2009

CENTRAL Bank Governor Ewart Williams yesterday appealed to foreign exchange buyers not to horde US dollars as there is sufficient reserves to cushion any shortage. Speaking at the launch of the October 2009 Monetary Policy Report, Williams explained that while there was a reduction in imports of about 50 percent, there has only been a decline in demand for foreign exchange of 15 percent.

“There might be some disconnect and clearly there is a level of foreign exchange demand that cannot be explained simply by trade transaction. It might have to do with the fact that because interest rate differentials between Trinidad and the US have narrowed that much, investors are finding it convenient to invest abroad, that might be the problem,” he said.

Williams said the Central Bank has made efforts to meet foreign exchange demands as sales for the year so far has reached US$1.4 billion compared with $500 million last year. The bank, he said, intends on increasing Foreign Exchange sales since demand has not been met despite the increase in sales for the year so far. “We think that part of the problem is due to allocation mechanism in commercial banks which tend not to favour the small purchases of $10,000 and we are in discussions to ensure that on occasions of temporary shortages that they find ways of meeting the needs of smaller customers as best they can,” he said.

Williams noted that the Bank has reserves of close to $9 billion or about a year of import cover. “The Central Bank reserves are more than ample to meet foreign exchange need,” he assured adding, “The Central Bank is going to be in the market every week to sell foreign exchange. The market becomes complicated because of concern or whatever reasons, when exporters do not surrender foreign exchange according to their normal schedule or when there are unusual demands or when people feel because of confidence problems they need to warehouse foreign exchange. There is no need to warehouse foreign exchange simply because the Central Bank is prepared to come out each week to sell to the market.”