Forex problems and solutions

THE EDITOR: Recently the issue of forex has raised its head, especially in the wake of falling oil and gas production, in particular how its pricing and distribution effects our import bill. There have been many in business and the public wanting solutions, so here are two.

The first would be to allow the currency to float. This will ensure that forex is used in an economical manner and prevent the excessive importation of goods.

This is especially important since large amounts are used to settle US denominated purchases. With the Ministry of Finance stating that almost $2 billion was spent doing so.

Another benefit would be that it would put less pressure on Exim Bank to provide financing for small enterprises as they can now go on the open market to obtain foreign currency.

The second solution would be to reform how Exim Bank allocates forex for businesses. At present over 90 per cent of the funds are given to small and medium enterprises with export earners not allowed to access the facility.

This sounds like a good idea to ensure that everyone has an equal opportunity, but it increases the difficulty in obtaining large loans for more capital-intensive projects.

Thus, a simple solution would be having the bank provide funding for already profitable businesses in the form of low-interest loans to help expand their operations, or even get into manufacturing such as distributors.

Of course, in order to prevent fraud or malinvestment there would be strict lending criteria, such as a good cash and having said company put up a share of ownership as collateral.

There are also structural issues to address with the economy, such as taxation and over-regualtion, but these two reforms would put us on the path to sustainable prospertity.

ANDRE ARAUJO

via e-mail