FCB loan of US dollars to Barbados alarming

When questioned last Friday, TT ’s Minister of Finance Colm Imbert responded that the Central Bank does not direct individual transactions by authorised dealers or specify the sector, institution or individual transactions by which authorised dealers should sell foreign currency.

While this is technically correct, it glosses over the fact that the reason for the Exchange Control Act of TT is to control the flow of foreign exchange in and out of the country. This is especially important now, as Trinidad is seeing a record low in foreign exchange availability.

The minister also failed to address the fact that First Citizens is a State-owned bank, of which the Minister of Finance has oversight.

In fact, section 5(2) of the Exchange Control Act allows for the Central Bank to vary, suspend in whole or in part operations of authorised dealers where the circumstances in the opinion of the Central Bank require suspension of the authorisation.

While it is indeed impractical for the Central Bank to monitor every single transaction carried out by local banks, it is unusual and alarming that First Citizens would be allowed to loan US dollars to Barbados at a time when Trinidadian citizens are unable to get US dollars from the bank themselves.

We are all aware that we must line up daily to get as little as US$200 for holidays abroad. Local businesses are currently experiencing great difficulty in getting US dollars to pay their suppliers for goods needed for the local markets.

There needs to be a balance when it comes to assisting our Caribbean neighbours. We cannot give when we do not have. We should instead advise Barbados to seek a loan from the World Bank, which typically charges a much lower rate of interest than what a relatively small banking institution such as First Citizens can offer.

Surely the actions of First Citizens Bank under the circumstances warrant investigation and, in any event, immediate action by the Central Bank.

This loan to Barbados is likely to amount to tens, if not hundreds, of millions of US dollars, therefore it warrants direction by the Central Bank.

If the Central Bank does nothing about this, the Minister of Finance is well within his right to use the discretionary powers granted to him under the Exchange Control Act to give specific directions to the Central Bank in relation to this matter.

One has to wonder who is truly benefiting from this loan. What are the “administrative fees,” if any? Who stands to benefit from this money leaving our country?

Martha Ramtahal via email