Imbert: Govt, Central Bank must together save TT economy from covid19

FINANCE Minister Colm Imbert said the Government and Central Bank must now have a “deeper co-operation” so as to revive economy in this covid19 era, addressing a virtual briefing from his ministry on Friday. However in an immediate reaction Opposition Senator Wade Mark told Newsday that nations like the US, UK and India always insulate their central banks from influence by their respective governments, saying Imbert’s call was “a most retrograde step.”

Imbert said, “As we go forward under this uncertain covid environment, the role of monetary policy is going to become far more important. We will have to have a stronger connection with the Central Bank and work in tandem with them, to deal with things like the money supply, interest rates and other methods of influencing GDP such as possibly inflation targeting and so on. This will require much deeper collaboration now between the Government and the Central Bank. It’s going to be all hands on deck.

“We are in a very, very difficult situation financially and we will now have to use a combination of fiscal policy and monetary policy going forward, to see how we could get our economy going. So we have to be very careful how we select these (Central Bank) governors. They can’t be just selecting someone on the basis of friendship or paper qualifications. We have to pick people who could assist the country with monetary policy in growing the economy.”

Imbert said TT's foreign exchange situation was “very, very challenging,” although glad TT has eight months of import cover, with the Heritage and Stabilisation Fund near $6 billion.

“It is challenging, it is difficult, it is going to be a very tough 2021. In terms of forex it is going to be hard but we’ll try to use what we have.”

Asked about Mark’s concern in the Senate last week about TT’s debt-to-GDP ratio being at 80 per cent, Imbert recalled revealing that in his budget presentation and said Mark was repeating old news just to create bacchanal.

Imbert did not see any devaluation of the TT dollar on the cards, saying its benefits would be limited in a time of little foreign exchange earnings from energy exports. More so, devaluation could push up prices of goods and services for people, and fuel wage demands, as he recalled other countries incurring unforeseen problems after their devaluations.

Asked by Newsday how TT was bouncing back from covid19, he admitted to depressed earnings from individual income tax, corporate tax, energy sector royalties and VAT. Yet he said that was nothing unique to TT, as all the economies of the world have been battered by covid19. He said TT was lucky the Prime Minister had managed covid19 so well as to keep so many businesses open, even as he noted shattered economies in the US, Europe and the Far East. “We still have covid coming at us but are doing much better than others.”

Mark, in reply, lamented that the Central Bank Act says in any conflict between the bank and government, the latter predominates.

However he said in all serious countries a proper separation exists between the bank setting monetary policy while the Government creates fiscal policy.

“So what is this ‘collaboration' you are talking about?”

He asked what the Government would do if it disliked the contents of a Central Bank report such as the Monetary Policy Report (MPR.)

“They will reduce the Central Bank Governor to a CEPEP contractor begging to renew his contract and compromise the Central Bank’s independence.

“What is the Government seeking to do in imposing executive control over an autonomous institution?” Mark asked.