The comings and goings of a Central Bank Governor

After weeks of tension between Rambarran and the newly elected government, the Governor was given his walking papers just days before Christmas and replaced by one of his former deputies, Dr Alvin Hillaire, described by Finance Minister Colm Imbert as “a distinguished economist.”

In a statement issued by the Ministry of Finance explaining the reasons for Rambarran’s dismissal as Central Bank Governor, Imbert said the decision to dismiss the Governor “was based primarily on legal advice from both internal and external counsel, including senior counsel, who advised that the disclosure by the former Governor of the names of the largest users of foreign exchange in Trinidad and Tobago and the amounts of foreign exchange that they used was a breach of section 56 of the Central Bank Act and section 8 of the Financial Institutions Act.”

Section 56 of the Central Bank Act deals with preserving the secrecy of matters related to the affairs of the bank. According to this section, any member of the bank who breaches this section is liable on summary conviction to a fine of $6,000 and to imprisonment for two years. Section 8 of the Financial Institutions Act, deals with granting a licence to a foreign financial institution to carry on banking business or business of a financial nature in TT on a branch basis.

Imbert explained that the decision was made at about 1 pm at a Cabinet meeting two days before Christmas “after long and careful deliberation”. He said the Governor was removed in accordance with sections 12(e) and 12(g) of the Central Bank Act. Section 12 (e) gives the president the authority to dismiss the Governor if he is “guilty of misconduct in relation to his duties” and Section 12 (g) permits his dismissal if he or she, “fails to carry out any of the duties or functions conferred or imposed on him under this Act.”

The Finance Minister said the Cabinet Minute, the necessary instruments and other legal documents were sent to President’s House just after 2 pm on Wednesday, December 23, for the consideration of the Acting President, Her Excellency Christine Kangaloo. He said she signed the instrument of revocation of the Governor’s appointment and the instrument appointing his successor at 7pm, “or about four to five hours after the documents were sent to President’s House.” Hilaire was appointed for a five-year term effective December 23, 2015.

However, Rambarran declared he intended to challenge the government’s action in the High Court. In a statement, the former Central Bank Governor argued that due process of law was not followed in his dismissal. He complained that he only became aware that he had been fired from an online media report on Wednesday night, stating that up to that point “I had not received the courtesy or formality of being officially informed that the acting president was supposedly considering my removal from office; of any purported reason or rationale for my removal from office and that the referral of such a complaint was even being contemplated by Cabinet.”

According to Rambarran, “At no point in time did the president and/or acting president, who is entrusted with the sole discretion to effect the termination of my appointment as Governor, contact me to solicit my views on any purported allegations or complaints.” He added that up to the time of writing his statement he was still not aware of the contents of the Cabinet documents and supporting material which were sent to the acting president and got him fired. He said that as a result any decision taken by the acting president resulting in his removal “has been taken without my participation and to my complete exclusion, thereby depriving me of a fair, reasonable or any opportunity to make representations to correct or contradict any purported allegations against me.”

He said he met with Imbert on Tuesday December 22, 2015 at 2:30 pm at which time Imbert had “ample opportunity to raise such issues.” He said if the Finance Minister had brought up his concerns, he would have shown him a legal opinion “by eminent Queen’s Counsel.” presumably supporting his action.

Among the issues causing discord between the government and the Governor of the Central Bank was his declaration during his Fifth Monetary Policy Forum held at the Hyatt Regency on December 4, 2015 that after four consecutive quarters of decline in the country’s real Gross Domestic Product (GDP) Trinidad and Tobago was in recession.

Irritated by Rambarran’s announcement, Imbert hit the governor for making such a far-reaching revelation without prior consultation with the Ministry of Finance. In a statement in the Senate on December 8, Imbert said it had been the practice for the Central Bank to send an embargoed copy of the Governor’s speech to the Ministry of Finance in advance but this was not done in this instance. Furthermore, Imbert said that, aware of the practice, the ministry had requested the advance copy from the Central Bank but its request had been rejected. “Obviously the request was denied because of the contents of the statement.” Imbert said. Furthermore, Imbert disputed the Governor’s announcement that the country was in recession, saying that Rambarran had not presented any statistics to back up his claim and he would ask the Central Statistical Office (CSO) to confirm it. Answering questions in Parliament on December 11, Prime Minister Dr Keith Rowley had also questioned the basis for Rambarran’s statement, also saying the CSO had not produced any statistics indicating that the country was in recession, although Dr Rowley said the Government would have no problem acknowledging it if that were in fact the case.

However, Rambarran said that his declaration would not have come as a big surprise since prolonged supply disruptions in the energy sector in 2015 continued to result in sharp shortfalls of natural gas production which, in turn, adversely affected output of liquefied natural gas (LNG) and petrochemicals (methanol, ammonia, urea and iron and steel).

“Lower energy prices also negatively impacted the domestic energy sector. This has already been reflected in job losses at some energy companies. The decision by Arcelor Mittal to idle its steel plant will not only affect energy output but also jobs,” the Central Bank head said. Rambarran added that the non-energy sector which had given some support to the economy over the past few years, appeared to have lost its momentum.

Rambarran’s disclosure of the names of the largest users of foreign exchange was the Governor’s response to the persistent complaints of the business community about the shortage of foreign exchange throughout the year a situation for which the bank had been blamed. The local business sector had been complaining for months that since the Central Bank Governor changed the distribution system they had been having problems to get adequate amounts of US dollars to pay their foreign suppliers. The situation only eased slightly despite the regular sale of large amounts of US dollars into the banking system by the Central Bank.

Indeed, in presenting the Government’s 2015/2016 Budget, Imbert would ask the Central Bank to re-establish the foreign exchange distribution system which was in place before 2014 as part of efforts to restore confidence in the country’s foreign exchange system. “The current situation is untenable and has contributed to great uncertainty and capital flight.” He added that the Central Bank would also be requested to clear the backlog of arrears of foreign exchange demand and ensure that legitimate demands for foreign exchange were met, as well as ensure the stability of the exchange rate.” He said that, “As a Government, we are committed to ensuring an adequate and efficient supply of foreign exchange to our manufacturers and importers and to the citizenry at large and we also intend to take the necessary steps to protect our exchange rate from external pressures.

On October 30, responding to special directives from Imbert, the Central Bank restored the foreign exchange distribution system and released US$500 million into the financial system to clear all requests for US dollars. However, the money seemed to disappear almost overnight, leading to continued complaints and questions about where that money went.

In its 2015/2016 Budget, Government projected total spending in the 2016 fiscal year of $63.048 billion and total revenue of $60.287 billion comprised of non-oil revenue of $54.838 billion and oil revenue of $5.449 billion. Imbert said the budget was based on a price of US$45.00 per barrel for West Texas Intermediate crude oil and a mix of gas prices including Henry Hub of US$2.75 per million metric British thermal units (mmBtu) and Indonesia of US$8.00 per mmBtu. He said the US$45.00 price was really the price for the mix of crudes produced in Trinidad and Tobago which actually worked out at $42. Imbert said the price was chosen in the context of projections by the International Monetary Fund (IMF) and the US Energy Information Administration (EIA) that oil prices would range between US$50.40 and US$53.57 per barrel in 2016. He said the price included a “reasonable cushion” of US$5.00 - US$8.00 a barrel in case there was another oil price shock. However, with oil prices falling steadily, the Finance Minister said the situation would be looked at during the Government’s Mid- Year Review in March 2016.

In December, the Minister of Finance requested that the House of Representatives raise the country’s borrowing limits by $50 billion saying that the previous government had almost exhausted the existing authorised borrowing limits. He asked that borrowing limits under the Development Loans Act be increased from $30 billion to $45 billion; under the External Loans Act from $15 billion to $30 billion and under the Guarantee of Loans (Companies) Act from $25 billion to $45 billion. In moving the motion, Imbert said that if the motion was approved it would raise the country’s total cumulative borrowing limit to $120 billion.

At a Post Budget Analysis organised by the Trinidad and Tobago Chamber of Industry and Commerce the next day, Imbert gave some insight into the urgency of the request, explaining that within a week of taking up his post as Minister of Finance he received a visit from the Governor of the Central Bank who told him that the overdraft was dangerously close to the limit and that if the government did not inject funds into the system “he would turn off the tap within the next few days.” He said after consulting with officials of the Ministry of Finance he found that the Government’s overdraft of $9 billion had reached $8.7 billion, leaving the Government about $300 million left to run the country. He said that amount would have lasted two days. “We had been living on overdraft for several years,” he said, telling the largely business audience that they knew they could not run their businesses on overdraft.

Trinidad and Tobago scored a major milestone in January 2015 when it was promoted to compliant country status in the Extractive Industries Transparency Initiative (EITI) a global movement aimed at fostering transparency and accountability in the extractive (oil, gas, mining) industries by disclosing to citizens of a country the payments made by companies to host governments reconciled with the amounts declared by governments as receipts. Highlighting the importance of the accomplishment, the chair of the EITI International Board herself, Clare Short, came to this country to make the announcement, indicating that the achievement established T&T as a leader in the region with a responsibility to spread the EITI message within CARICOM and the Americas.

And in October the third report of the Trinidad and Tobago Extractive Industries Transparency International (TTEITI) for 2013 was launched at the EITI Secretariat at the International Waterfront Centre showing that all the money paid to the Government as revenue from the energy sector had been accounted for.

A copy of the report was presented to the chairman of the local TTEITI Steering Committee, Victor Hart by Riaz Ali of the local accounting firm BDO Trinity Limited, one of the companies which jointly with the British firm, Hart Nurse Limited had audited the report. Victor Hart then formally presented a copy to Minister of Energy and Energy Industries, Nicole Olivierre.

Olivierre said it was noteworthy that the report covered more than 99 percent of all the revenue earned in the oil and gas sector of Trinidad and Tobago for fiscal 2013.

She said the Ministry of Energy and Energy Affairs and the government of Trinidad and Tobago reaffirmed its commitment to the ideals and principles of the TTEITI in accounting for the country’s energy sector revenues. “Our energy sector is the pillar of our economy and the requisite transparency that the EITI brings should give comfort to citizens and investors alike that we are willing and able to disclose crucial information related to energy sector revenues. In this regard, government, companies and civil society all benefit from this initiative. Government benefits from following an internationally recognised transparency standard, one that demonstrates commitment to reform, reduces corruption and leads to improvement in the tax collection process.”

Hart said next year the EITI Secretariat would produce reports for 2014 and 2015 to bring its reporting up to date and would begin reporting on the mining sector once that sector completes training intended to raise its management and accounting to a level that satisfies the EITI world standards. He added that the secretariat would continue working with midstream and downstream companies to have them join the reporting process and would be working with the Ministry of Energy and Energy Industries to advance the EITI draft bill which he hoped would be enacted into law before the release of next year’s report. Olivierre promised that once she had a chance to review the EITI Bill she would support it “as it is very important to institutionalise the EITI as the premier system of good governance and transparency in the extractive sector in Trinidad and Tobago.”

As persistent as the complaints over the shortage of US dollars was the complaint from the business sector over the shortage of labour to keep their operations going. In fact, at a forum on the subject organised by the Trinidad and Tobago Manufacturers’ Association (TTMA) businessman Arthur Lok Jack, chairman of Associated Brands Industries Limited, said the major problem for manufacturing was labour and the problem was crippling the sector just at the time it needed to produce more. “The problem is a labour problem that we have at the moment. I do not believe that we have a labour skill problem, what I believe is that we need labour,” he said. And not just labour but productivity. In fact, Lok Jack said the business community had decided to hire more women than men in an effort to beat the labour shortage. He said while male workers had proven unreliable, the women were coming out to work. “They have to work, they have to mind their children, and they have to run their households. The men are the ones we’re having some problems with.”

The continuing collapse of oil and natural gas prices saw the international rating agency Standard and Poor’s revise its rating on Trinidad and Tobago. On Dec 24, 2015, Standard & Poor’s Ratings Services affirmed its ‘A/A-1’ long-and short-term sovereign credit ratings on the country, at the same time, revising the outlook on the long-term ratings to negative from stable. “Our ‘AA’ transfer and convertibility assessment for T&T is unchanged,” the agency said.

Explaining the reason for the revision the agency said, “The change in outlook to negative from stable reflects an at least one-in-three chance that prolonged low energy prices and potentially poor GDP growth prospects could result in a steadily rising debt burden, leading to a downgrade in the next two years.

“T&T’s public finances are vulnerable to a prolonged and substantial drop in energy revenues. The energy sector contributed around half of total government revenues during the recent boom years, but may contribute less than 20 per cent of total government revenues in fiscal year 2015-2016 (ending Sept 30, 2016).”

Arthur Lok Jack2