GEORGETOWN, Guyana, CMC-Guyana’s Vice President Bharrat Jagdeo says Trinidad and Tobago businesses have found a solution to the prolonged foreign exchange shortage in their homeland by buying their imports through Guyana and shipping them to the neighboring Caribbean Community (CARICOM) country.
“We notice a trend here is that some Trinidadian companies are procuring large quantities of goods for their businesses in Guyana and Trinidad and making payments from here to their suppliers, so they are utilizing our foreign currency to make those payments,” Jagdeo told a news conference.
Trinidad and Tobago has experienced a chronic shortage of foreign exchange since 2014, with Finance Minister Colm Imbert saying recently that the oil-rich twin island republic is experiencing a foreign exchange shortage, not a crisis.
Earlier this year, a staff mission from the International Monetary Fund (IMF) said it was encouraging the Ministry of Finance and the Central Bank to remove all restrictions on current international transactions as a means of creating a more investment-friendly business environment that would drive the diversification of the Trinidad and Tobago economy.
“It would also help create a more conducive business environment for the private sector to invest and diversify the economy. Over the medium term, greater exchange rate flexibility would reduce the need for fiscal policy adjustments to restore external balance and create room for more counter-cyclical monetary policy (which would stimulate a slowing economy and slow an expanding one),” IMF staff said.
“IMF staff encourages the authorities to remove all restrictions on current international transactions while providing sufficient foreign exchange to meet the demand for all current international transactions.”
Among the current restrictions of Trinidad and Tobago’s foreign exchange regime include the limitation in the movement of the country’s primary exchange rate, the US to TT, to a narrow band in which the selling rate is not allowed to go beyond the ceiling of US$1 to TT$6.7997.
Jagdeo said the move by Trinidadian businesses to purchase goods through Guyana might be one of the reasons for the selling rate of the US dollars being as much as GUY$220 for US$1.00.
“We have to examine those requesting the foreign currency at some point to see if there are unusual spikes from some people based on what we have observed- this payment of goods for another country,” Jagdeo told reporters.
On Monday, he told reporters that one commercial bank showed higher requests and the availability of foreign exchange (forex), and several banks had significantly more forex than their requests.
Jagdeo said a possible solution should be an interbank foreign exchange market rather than individual banks keeping their foreign exchange for their customers.
“If the interbank market were working, those who had surplus would sell to those who have demand and then the aggregate market, the national market clears across the board, but that doesn’t happen,” adding that results in multiple requests at different banks.
Jagdeo said keeping the exchange rate in that vicinity is essential to prevent the Guyana dollar from strengthening against its US counterpart, assuring that the government was on standby to put more foreign currency in the market if needed.
‘We are constantly watching this. We are watching the daily movement of balances and all of that and, if necessary, the government will intervene to smooth out the market,” said Jagdeo,
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