Falling dollar — a bad omen

The rate of exchange has fluctuated over the years, but any shift, any rise and fall in the exchange rate have always been within the $6.30 comfort zone

There is still need to exercise caution as Trinidad and Tobago’s fairly high import bill, exacerbated by today’s sharp rise in imports of construction materials, continues to make increasing demands on our foreign exchange earnings. Indeed, the pressure on the TT dollar has been provoked by the unusually great desire for United States dollars as a result of the abnormal level of construction in both the private and public sectors competing for foreign exchange with traditional Christmas imports.

But the quantum of foreign exchange currently needed for the imports has been influenced not solely by a question of volume, but rather by that of increased prices for goods whose costs have been and continue to be dictated by the high demand in China and India, for example, for crude oil and steel for both of which there has been an explosive growth in prices. This, in turn, has had a domino effect on prices internationally.

There is yet another factor which has impacted negatively on prices — natural disasters. The tsunami which damaged several countries in the Far East and this year’s increase in the number and intensity of hurricanes in the Caribbean and massive floodings in India, and China have triggered shortages of food, heightening demand and reducing supply.

Minister in the Ministry of Finance, Conrad Enill, has commented that Trinidad and Tobago has a floating foreign exchange rate determined by the country’s levels of imports/exports and the levels of foreign exchange in the system, adding there was nothing about which to worry as TT had at least eight to nine months of import cover — some US$4.1 billion in reserves.

But while all of this is of some comfort, the situation would be far better with respect to demand and supply of foreign exchange if the Government should insist on both a fuller and more frequent repatriation of foreign earnings by companies registered in Trinidad and Tobago. We are referring not merely to companies in which there is a significantly large degree of foreign investment or even private sector companies registered on TTSE but to public sector companies as well.

Whatever the level of public concern at the breaking of the psychological barrier, today’s TT$6.32 to US$1 position is, nevertheless, of a great deal more than passing interest to exporters and importers. Exporters, who would have entered into formal arrangements to provide Trinidad and Tobago manufactured and/or produced goods at pre-arranged, set prices, may be on the losing end.