No plan to change currency structure

The manufacturers have told me and they are penetrating Latin America with the exchange rate at the current rate,” Imbert told reporters yesterday after the Trinidad and Tobago Chamber of Industry and Commerce’s annual post-budget review at the Hyatt Regency, Port-of-Spain.

Imbert said there were no plans at all to change the current structure of the country’s foreign exchange system, “which has served us well” since its introduction in 1994. “We are an open economy and our currency is affected by the rest of the world and therefore we need to manage our exchange rate,” he said drawing comparisons to other Caricom nations like Jamaica and Guyana who have a more liberal floating exchange rates and have since seen the value of their currencies spiral downward.

Imbert said that in the current economic climate— particularly considering the outstanding wage bills the Government still needs to settle— the Ministry of Finance preferred to manage inflation through managing the exchange rate. Thus, as it settles wages, it will raise revenue through divestment rather than let the exchange rate slide and risk “massive inflation.” He noted that in his midyear review of the economy in April, he said the Government intends to let the exchange rate move to about seven percent for the year.

It’s moved about 6.5 percent so far, and by the end of the year, Imbert estimated the exchange rate would be about TT$6.81 or TT$6.82 per US$1.

RBC (Caribbean) Ltd group economist Marka Dukharan questioned the rationale for keeping the exchange rate at what is effectively a subsidized level, resulting in TT’s currency being the most overvalued in the region. The International Monetary Fund (IMF) has estimated that the TT dollar is 21 to 50 percent overvalued, Dukharan said, meaning it should be trading at TT$8 to TT$10 per US$1. “The rate in the cambio at the airport is just over TT$8 to US$1 so it’s not unreasonable to think,” she said.

The over valuation of the Trinidad and Tobago dollar is in effect the Central Bank subsidising imports and making exports more expensive, Dukharan said. “Is it any wonder that our consumption habits are so import dependent? And why should the citizens of Trinidad and Tobago be blamed for the demand of US dollars being so high when we are selling US currency for a price that is in effect cheaper than it could be selling,” she asked.