Finance Minister rejects claims of IMF forex caution

FINANCE Minister Colm Imbert has rejected claims published in certain sections of the media that government has received a caution from the International Monetary Fund (IMF) on the distribution of foreign exchange (forex).

In a statement issued by the ministry on November 10, Imbert noted commentary in the public domain about difficulties being experienced by companies and individuals in accessing forex; government allowing the TT dollar to float (devalue) because the IMF says so; that to address the perception of an unfair distribution of forex, the government should get directly involved in the distribution of forex and not leave it up to the commercial banks or the Central Bank; and government gave into pressure from businessmen and a daily newspaper to resume a forex window at the EximBank for essential imports.

He said, "The reality is that the IMF’s recommendation that the government should allow the TT dollar to float, which would result in an immediate devaluation of the TT dollar, is not new."

Imbert added the recommendation did not appear for the first time in the 2024 IMF Article IV report, as alleged in a daily newspaper report on November 10.

As far back as 2012, he continued, the IMF recommended “greater exchange rate flexibility to allow pricing to play a bigger role in equilibrating the market.”

Imbert said it was repeated in the IMF’s 2013 Article IV Report, where it reiterated its view that “our exchange rate should be allowed to fluctuate within a wider band."

He added the then UNC-led People's Partnership (PP) coalition government "told the IMF that they were not contemplating changes to the exchange rate system at that time."

Again in 2014, Imbert continued, the IMF told the PP that the forex allocation system at that time “had led to an apparently widespread and persistent recurrence of forex shortages.”

He said the PP maintained its objection to the IMFs recommendation that the dollar be allowed to float.

The PNM, Imbert continued, has consistently stated since 2015 that it maintains "our fixed exchange rate to control inflation, which is now almost the lowest in the world."

He said the PNM has also maintained that it would not impose hardship on the poor and vulnerable by giving into irrational demands from certain people and entities to devalue the dollar.

"All a devaluation will do is cause a massive spike in the cost of living and make everything more expensive. It will not create any additional US dollars for the country or make forex more readily available for ordinary citizens."

He said a daily newspaper was doing TT a disservice "by pretending that we are subject to the dictates of the IMF, therefore, and constantly pushing its devaluation agenda for the last nine years.

"In this context, it is noteworthy that Barbados, which has been in an IMF programme for many years, and at one time within the last ten years almost ran out of foreign reserves, has resolutely refused for the last 49 years to float or devalue its dollar."

Imbert repeated his commitment to hold consultations over the next month with various interest groups to determine the best way forward on forex issues.

At a news conference on November 5, Imbert said the ministry was engaging various chambers of commerce and the TT Manufacturers Association (TTMA) on whether or not the system by which forex is distributed should be changed.

He said the Central Bank, in distributing forex to local commercial banks, depends on their adhering to an “honour system” in allocating US currency to customers.

“It is a system that has been in place for over 25 years, where it is expected that the banks would exercise responsibility, equity and justice in the distribution,” he said.

He said an alternative was to specify that percentages of this allocation should go to SMEs (small and medium enterprises), or for medical expenses, education, travel or imports for manufacturers.

"Again, this is not new, and it was based on representation made by the business community that the Government make forex available in a targeted manner, that the forex windows at the EximBank, which from all accounts are working well, were created four years ago."

Imbert said it was the figment of a daily newspaper's imagination that it and certain business people forced government to resume a window at the EximBank to access forex for essential imports.

In a statement from his ministry on November 3, Imbert said the decision to resume the window from November 1 was made by Cabinet after a comprehensive review by his ministry.

The window was reopened with a US$25 million monthly allocation.

"The truth is that the government signalled months ago to clients of the EximBank that it was reviewing the list of essential imports and the quantum of forex made available through that particular forex window, which was created by the Ministry of Finance in 2020."

He said the forex windows, namely the window for export manufacturers and the window for essential imports, "are innovations of this government, to ensure better focus, equity and rationality in the distribution of the government’s forex."

Imbert added these are policy instruments of the government and the ministry designed to facilitate diversification of the economy and to ensure that forex is available for essential items.

In a notice issued on November 8, RBC announced a 66 per cent reduction in the forex limits on its personal and business banking credit cards, effective December 1.

In an e-mail sent to some customers on October 30, Scotiabank said it will reduce the US spending limit on its credit cards and stop the use of its Visa debit card for overseas transactions from December 1.

Last September, Republic Bank advised customers of changes to come into effect in that month. This involved the US-dollar limit on its credit cards being reduced from US$10,000 to US$5,000 per cycle.