Imbert: Forex window reopens, US$25m available from EximBank

FINANCE Minister Colm Imbert has announced that EximBank's forex window has been reopened, with a US$25 million monthly allocation.

In a release 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 created in 2020 in response to the covid19 pandemic and ran until September 2024.

The release said the items for the window were selected from the final list of zero-rated items that came into effect on February 1, 2016, by the Value Added Tax (Amendment to Schedule 2) Order 2016: items not manufactured in Trinidad and Tobago and items not specifically pandemic-related.

"Items outside these definitions should not be considered essential and should not qualify for preferential access to the Government’s foreign exchange through the EximBank."

The release said the forex facility consumed US$30 million monthly since its inception and included items such as cleaning supplies, bleach, sanitary equipment, protective gear, face masks, toothpaste, hand sanitisers, hygiene products like deodorant, vaccines, over-the-counter drugs, pharmaceuticals and essential foods.

It said the list of foods, pharmaceuticals, and essential hygiene products, such as sanitary napkins and pads, which qualified for this special forex window from 2020- September 2024 will remain unchanged but it will be subject to periodic review to see whether items should be added or deleted.

"For example, retaining borderline food items (on the margin between essential and non-essential) such as sausages is arguable."

With the emergency phase of the pandemic declared over in May 2023, the release said related items like hand soap, toothpaste, face masks, deodorant, respirators and hand sanitisers will no longer be considered "essential" imports.

Additionally, it said the government will now allocate US$25 million a month to EximBank for the window, a reduction of US$5 million from the previous iteration. It said the forex window for export manufacturers is not being adjusted and will remain.

The release said the role and impact of locally manufactured products, which substitute for imports, are being carefully examined. It also said greater access to forex for inputs for local consumption will be considered shortly.

"Further details of this aspect of forex distribution will be announced after consultation with stakeholders."

In a post to X.com on October 27, Imbert first revealed the forex window was being reviewed. Responding to a newspaper article (not Newsday's) on the platform two days later, Imbert said: "Our EXIMBANK was established to facilitate the growth and expansion of our export and manufacturing sectors; to enhance our foreign exchange earnings, and create employment through assistance to our EXPORTING companies and NOT to facilitate wholesalers of imported finished goods."

Business groups welcome forex window reopening

Business groups have welcomed the reintroduction of a restructured forex window from the EximBank for essential imports and economists have joined them in rejecting the idea of a "floating" foreign exchange solution to the country's shortage.

Greater San Fernando Area Chamber of Commerce president Kiran Singh told Newsday the reintroduction of the forex window would help alleviate what he believes is the "forex crisis" facing the country.

"Supermarkets, wholesalers and manufacturers- everyone is complaining about the desperate need for forex to assist in literally every value-added input we need. We're heavily import-dependent and this will certainly add to relieving the crisis that we currently face in terms of foreign exchange."

He said even though US$5 million less will be invested in the window monthly, it's still a step in the right direction. Singh hoped the list could be expanded and more money invested into the forex window in the future.

Despite welcoming the window's reintroduction, Chaguanas Chamber president Baldath Maharaj expressed concern about the government's reduced monthly allocation.

While acknowledging the importance of responsible forex management, he said businesses dependent on this facility may face challenges, especially with the upcoming festive season.

“Changes of this nature can disrupt business planning, particularly during critical times like Christmas. We urge the Ministry of Finance to provide the business community with advance notice for adjustments like these to better manage our supply chains."

Maharaj also asked for further clarification on forex support for local manufacturers, which "could be instrumental in reducing import reliance and strengthening the domestic economy.

"The Chamber encourages the Government to maintain open dialogue with stakeholders to ensure the needs of the business community are met effectively, fostering both economic resilience and growth across Chaguanas and Trinidad and Tobago."

'Floating' foreign exchange not a solution

Over the last week, issues surrounding access to foreign exchange again permeated national discourse. Among those weighing in on the issue was economist and former People's National Movement minister in the Ministry of Finance Mariano Browne.

He told the Sunday Newsday that foreign exchange should be treated like any other commodity, with prices to access it increasing or decreasing based on supply and demand. In other terms, allow it to "float."

Browne is not unique in this belief as the editorial of another local paper argued for this arrangement. However, in responding to the editorial, again on X.com, Imbert dismissed the idea.

"Today, the (newspaper named) recommended that we 'float' the TTD, ie DEVALUE the TTD, as a solution to the demand for USD. However, this helps no one except those hoarding USD to make a quick profit. It will not generate any extra USD for businesses and will just cause hardship and pain."

Imbert's assertion was shared by economists and the business chambers.

Senior lecturer and head of UWI's economics department Dr Daren Conrad said such a move would be disastrous to the country because of inflation.

"If we were to do something like that, we would quickly move from moderate growth to absolutely no growth, social unrest, a significantly marginalised group of persons and people who would not be able to afford basic things in life."

He said TT does not have any of the economic conditions present that would make such a move feasible.

Financial economist at UWI Dr Vaalmikki Arjoon believes if the exchange rate is allowed to float, the TT dollar would depreciate significantly in the order of over $10 to US$1. Additionally, he said it would remain volatile.

"If allowing supply and demand forces to strictly dictate the currency value were a straightforward solution to economic challenges, then why didn’t countries like Jamaica experience significant economic prosperity since 1991, when their exchange rate depreciated to J$18 per US$1 in the first month? This move ended up fuelling more poverty in Jamaica."

The Chaguanas Chamber head also believed such a move would lead to businesses securing their assets in stronger currencies, placing further pressure on forex reserves.

While Arjoon believed the floating rate could work to decrease demand, as Browne said, he believes efforts would be better placed on increasing the supply through "enhanced private sector productivity and competitiveness, which will increase exports and forex inflows."

"This requires removing business obstacles to boost private sector investment, such as improving SME (small and medium enterprise) financing, reducing port/customs delays, mitigating crime and promoting special economic zones for greater FDI (foreign direct investment). This is the sustainable solution to increase production of the private sector, leading to increased exports and forex earnings."

In addressing the shortage, Conrad suggested: "Focus more on fiscal consolidation, focus more on targeted subsidies, focus more on reducing wastage, focus some efforts on increasing efficiency...in the public sector (including state enterprises), focus on things we need to do in terms of the legislative framework in order to take care of some of our own issues."

Describing the country's forex status as "fragile," TT Chamber of Industry and Commerce president Kiran Maharaj acknowledged there was no "one solution" to the problem.

"There must be several strategies - short-, medium- and long-term. It’s a fragile situation and a difficult balancing act and all stakeholders, inclusive of the Central Bank, Ministry of Finance, BATT (Bankers Association of TT), and heads of BSOs (business service organisations), need to have a roundtable collaborative discussion where we talk to each other and not at each other."

She suggested investments and incentives in the agricultural sector to get food imports down and focusing on SMEs with the potential to scale and export would be key to solving the issue.

"These are sectors that the TT Chamber has on its priority list.
"There is no overnight fix. We need to devise a series of plausible solutions to avoid a downward spiral."