Tancoo: Forex shortage is the cause of the crisis

OROPOUCHE West MP Davendranath Tancoo is accusing Finance Minister Colm Imbert of playing "word semantics" on the foreign exchange shortage.

“The Minister of Finance is trying to play word semantics with the population when he claims that we don’t have a forex crisis, but a shortage, Tancoo said in a media release on Sunday.

"However, the facts speak for themselves. Businesses and individuals still experience difficulty in securing forex, as the economy continues to struggle, SME’S (Small and Micro Enterprises) fight for survival, while the poverty line extends to include more citizens daily.”

Tancoo is the shadow minister for finance in the Opposition.

Referring to assurances made by the Finance Minister to Jamaican businessmen recently, "telling them Trinidad and Tobago had eight-and-a-half months of import cover, without counting US reserves in the Heritage and Stabilisation Fund (HSF)", Tancoo said it was nothing more than a public relations exercise.

"He ignores the fact that our foreign exchange inflows have slowed drastically with the closure of the Petrotrin refinery and the resultant multiple plant closures at Point Lisas," Tancoo said.

He added that while the minister was seeking the interest of the large business sector, small traders, entrepreneurs and the SMEs, which represented 91 per cent of all registered businesses in TT, suffer.

"The ordinary citizen who requires forex for travel or university tuition fees abroad for their children have to stand in bank lines daily for a maximum of US$200 at a time,” he said,

Tancoo said with US federal reserve interest rates rising eight times - most recently on February 1 - bringing the rate to a range of 4.5 per cent to 4.75 per cent - the highest since October 2007 - this will affect the overall value of the HSF.

"One economist warned that 'over 75 per cent of our HSF is invested in US securities, and the rate hikes last year lowered the value of US equities and bonds, therefore lowering the overall HSF value from US$5.58 billion to US$4.77 billion over June 2021 to June 2022.' This decline in value could further be exacerbated by this latest rate increase," he said.

Tancoo said the Governor of the Central Bank, Dr. Alvin Hilaire, had endorsed this view. Hilaire had noted that "since 2020 a total of US$1,872.6 million was withdrawn from the HSF to finance health and other requirements of the pandemic and in 2022, two deposits were made, totalling US$345.8 million, while volatility in international equity markets also affected the value of the fund.”

Tancoo further warned, "With the US interest rates affecting stocks, bonds and other investments around the world, it is reasonable to expect that the local economy will also be adversely affected.

"This means that our slow inflow of foreign exchange will be further disturbed."

He wanted the minister to say how he planned to rectify the shortfall in forex revenues particularly since US rate hikes were causing oil and gas prices to fall to levels below those which the national budget was predicated.

"Pretending that we do not have a problem is not a credible fiscal strategy and it is not one that that would instill confidence in his competence to ably steer our economy through the present and imminent challenges."