Economist: New $100 bill during Christmas can impact sales

Economist Dr Valmiki Arjoon said the effect of the introduction of the new $100 bill will depend on the time line and it could negatively impact spending and sales for the Christmas season.

He said the real effect depends on the length of time individuals will have to exchange bills and the length of time the two bills will be allowed to co-exist with each other. He explained this a process called demonetisation and the thrust is to combat issues like counterfeit money, tax evasion and black money (earned from money laundering, terrorist financing).

"If you have large sums of bills from illegal activities you will have to declare the source of funds by law." He said this will shed light on the level of illegal and illicit activities and bring to light individuals running unregistered companies and involved in tax evasion.

Arjoon said, however, that as quickly as people earn money from illicit activities they tend to launder it in physical assets such as land and other properties.

"If the two currencies are allowed to coexist for a fairly long period, like a few months, it will defeat the entire purpose to eliminate money laundering," he warned.

He said that if the time window is small and people have to exchange money in a fairly short time it will cause the money supply to contract, there will be less economic activity and it will contribute to TT's existing recession as the country is still in a period of negative growth. Arjoon expressed concern that the change was being done in the Christmas period.

"Could they not have found a better time to do this?" He stressed this was the time of year spending levels tend to increase and if it is there is a short window to exchange the $100 bills, then both spending levels and sales will fall simultaneously. "In this recessionary period small and medium-enterprise businesses cannot afford to endure further losses."

Arjoon said there could be negative effects for micro and small enterprises who only deal with cash and would have difficulties to pay their workers on time. He also said the older population and retirees tend to use cash on a daily basis and it may be difficult for them to join the long queues to exchange their money.

President of the Bankers Association, Karen Darbasie, said the banks were advised of the change by the Central Bank on Thursday afternoon.

"The banks will collaborate with the Central Bank to ensure the transition is as smooth as possible. On behalf of all the banks I can assure that banking operations will continue as normal during this phase," Darbasie said.

Chamber of Commerce CEO Gabriel Faria told Newsday via a text message, that his personal perspective is that the change was based on previous changes which were done.

"We do not anticipate any problems as we expect there will be a period of transition and there is some plan in place. It may have been better to schedule it at a less hectic time of the year but the authorities may have been told by some experts that this time is more conducive to collect the old currency based on the amount of cash in circulation," Faria said.