Local companies reeling from US dollar shortage

Companies in all sectors of the TT economy are reeling under pressure caused by a shortage of US currency in local banks. Banks have found themselves short of US dollars and overseas suppliers are threatening to cut off supplies to local concerns.

Richard Young, president of the Bankers’ Association of Trinidad and Tobago, confirmed the shortage yesterday and said that many factors contributed to the present state of affairs. He said “things were tight,” one reason being that the energy companies which supply US currency had some months ago received their VAT refunds in TT dollars and were using their TT dollars instead of US currency. He said this year also saw a substantially greater demand generally in capital transactions, by regional governments borrowing millions of US dollars and by local entrepreneurs investing abroad. “It reflects the buoyancy of our economy,” he said, “and also this year there has been a lift in confidence compared with the past two years — 2001 when there was an election and 2002 a second election which ended in an impasse.”

He said another reason for the current shortage was hoarding. “The moment someone hears the word ‘shortage’ they begin buying more than they normally do which worsens the problem. When suppliers are kept waiting for their payments it damages the reputation of our companies.” He said this was a little disturbing as the TT dollar was strong and there was no need for panic buying. He said the Central Bank knows the position as commercial banks make daily reports. He said so far the Central Bank had injected more than US$400 million into the system this year and the figure for November alone was around US$90 million. He also mentioned as a reason for the shortage the fact that people preferred to keep their money in US currency rather than TT dollars because the difference in the interest rate was so low and suggested that the rate should be higher for the TT dollar, which would encourage people to keep their currency in TT rather than in US dollars. The Central Bank refused comment on the issue yesterday.