Forex policy needed

On Tuesday, a private motion brought by Independent Senator Amrita Deonarine which called on the government to bring a foreign exchange (forex) policy to Parliament within six months was defeated for the third time.

All 15 government senators opposed the proposed amendments, while six opposition senators and nine independent senators voted to approve.

Senate President Christine Kangaloo broke the tie on all three votes, as she explained, to keep the motion in its original form and maintain the status quo.

For the forex business, that status quo remains challenging.

Among the critical issues with forex in TT has been the distribution of an almost continuously scarce resource, with small and medium businesses complaining of a scarcity that has proved deleterious to their operations.

In December 2019, Republic Bank led reductions in the maximum US-dollar spending limits on credit cards in the banking sector, dropping the limit for spending from US$15,000 to US$12,000.

Cash distributions to travellers have been even more dramatically limited for years.

Constraints on forex availability have also affected larger companies and even government itself.

Then THA Education Secretary Kelvin Charles explained in November 2020 that 4,000 devices for the island's schoolchildren were stuck in a warehouse awaiting the availability of forex to pay for them.

In the first three quarters of its financial year 2020-2021, Pricesmart had a decline in merchandise sales of 21.8 per cent because of reduced inventory imports related to forex shortages.

LJ Williams Ltd, which runs The Home Store, announced in February that forex shortfalls were forcing it to reconsider its investments in Trinidad.

In response to this, the government has offered straw-man defences.

The Prime Minister chided car dealers calling for more forex in October 2020 by saying he preferred to use it to buy medicine instead of cars.

Public Administration Minister Allyson West called for restaurants to use local food sources to make fries in the Senate on Tuesday, apparently unaware of previous such efforts and how completely they have failed. Those changes demand major upgrades in production capacity as well as a change in public tastes.

The government's continued defence of the exchange rate is a critical element in the supply-and-demand imbalance, creating an underground forex economy where the informal exchange rate is as high as TT$8 to US$1.

There is general agreement among economists that even extends to the Opposition that a devaluation of the TT currency won't help matters, but the widespread concern about the equity of distribution of forex remains significant.

Ms Deonarine called for an ombudsman to monitor forex distribution in March, but surely the Central Bank must play a role in addressing the pain points in the allocation of this scarce resource.