Howai brings something old, new on forex

TWO MONTHS into his tenure, Central Bank Governor Larry Howai held his first media conference on September 4.

Mr Howai’s 2012-2015 stint as Minister of Finance under the UNC/People’s Partnership often presented a figure ill at ease on the political party platform.

It seems the Central Bank podium is a better fit.

The new governor, a former banker, went some way to proving his mettle as he answered questions on the forex issue, offering something old and something new, while also indicating that he won’t be toeing anyone’s line.

Mr Howai’s declaration that the cause of the US dollar crunch is a mismatch between demand and supply is no revelation. Nor is his recommendation that part of the solution might involve encouraging fund repatriation.

Hackneyed, too, was the governor’s resort to blaming, effectively, the "small man" by saying, "consumption patterns may have to be addressed" and pointing out how much credit card usage has ballooned.

While that spending has moved from US$766 million in 2015 to US$2.3 billion in 2014, retail and distribution usage shifted in the opposite direction, declining from $1.7 billion to $861 million – something which the governor himself noted.

Spending has simply shifted online, reflecting higher levels of quality, discounts, customer service and access.

In a free market, asking people to curb buying serves to penalise broad swaths of the ordinary population while allowing bigger players to escape unscathed.

Attended by the ring of the familiar was also Mr Howai’s call for more local agriculture.

To listen to all these aspects of his power point-aided presentation was almost akin to listening to a Colm Imbert speech.

What was new was the governor’s call for higher interest rates to get more local, as opposed to US dollar, savings.

Refreshing, as well, was the acknowledgement of the role of geopolitical developments like tariffs in economic planning; this contrasted with the Prime Minister’s dismissal of concerns about Donald Trump’s tariffs on August 7.

The statistics given by Mr Howai, in which credit card holders are the largest pool of forex users and the automobile industry the fourth (US$300 million), also suggest the problem isn’t a secret "cartel." It’s notable that the public has more forex than the bank.

Much pressure also arises because of global commodity price fluctuations, as occurred in 2022.

Sometimes, reserves are diverted to cover things such as operating hospitals and utilities.

On May 15, Ms Persad-Bissessar promised a report on a "forex distribution cartel and conspiracy between certain operatives and businesses."

That report is eagerly awaited. But for the moment, the governor has painted a picture in which the bigger enemy might be a lack of transparency.

Yet, the most striking aspect of Mr Howai’s presentation was when he asked, "Will we get it right the first time, the measures that we put in place?"

"Probably not," he admitted. "We are going to have to adjust as we go along."

In an uncertain world, that open-minded nimbleness is the wisest approach.