A Very Strange Editorial Indeed On Friday June 20th, the Editorial in the Trinidad Express sought to describe what it called “the poor handling of US dollar problem”. The editorial piece starts from the assumption that the “unavailability of foreign exchange appear to have finally been relieved”. It then goes on to appropriately lay blame for the unwarranted shortage of US dollars on the change in the allocation system adopted by the Central Bank on April 1st 2014. They also reminded us that, during the period of high public anxiety, “The utterances from Central Bank Governor Jwala Rambarran were patently unable to calm public distress”. Continuing its broad sweep, it then refers to a very weak response from the Minister of Finance and even went on to accuse bankers of not being transparent enough with the public in terms of explaining where the money went. As if that was not the end of it, suddenly and inexplicable the Express editorial turned its guns on the PNM Political Leader, Dr. Keith Rowley, with the politically charged reference to him as “Mr. Rowley”. The PNM Leader was basically accused of undermining confidence in the sacred institution of the Central Bank and by extension the financial system. We find this attack on Dr. Rowley and the opposition to be completely baseless, biased, and very strange. It showed a lack of understanding of the foreign exchange “crisis” and, in particular, the role of the opposition. This is so for several reasons: 1. The issue of the change in the allocation system was first raised in the Parliament by the PNM on April 8th 2014, almost 2 months before it became a major issue in the public domain. The issue was first raised in the Senate when I warned the population that the changes in the system were flawed and the detrimental impact it could have on our exchange rate and the economy! In fact, I referred to it as a “hair-brain” decision. 2. Upon hearing the cries of the public and especially small businesses, the Opposition responded with a Press Conference held on Tuesday May 20th. We outlined to the nation that the source of the their inability to get US dollars emanated from the foolish decision of the Central Bank Governor to change the allocation system and to bring in several dealers who did not have the capacity or interest in servicing the a large customer base. We also noted that: a) The new system disrupted something that had worked well for 21 years b) The decision to implement the new system was taken without any consultation with the main commercial banks, the business community, and apparently with none of the senior managers at the Central Bank. Therefore it was a unilateral decision by the Governor himself. The Minister of Finance appeared to be just another spectator on this issue. c) We also raised questions as to why was the system changed and who were to be the main beneficiaries of this change d) Some facets of the new system, in the absence of any recent tweaking, was to have 10 percent of all Central Bank injections given out evenly among all 12 dealers and then they bid for the remaining 90 percent. Large FX earners like, state owned NGC, for example, can now give 25 percent of their injections to whoever they wish and then divide to rest up evenly among the other 11 dealers. The list of authorized foreign exchange dealers with equal access to US dollar injections into the system was expanded to include as listed below: Full List of FX Dealers 1. RBC Royal Bank 2. Republic Bank 3. Citibank 4. Scotiabank 5. First Citizens Bank 6. Intercommercial Bank 7. Bank of Baroda 8. CIBC FirstCaribbean 9. Ansa Merchant Bank 10. General Finance Corporation 11. Development Finance Limited 12. AIC Financial The above list shows that the last six, four of them being non-banks, were added to have privileged (first-tier) access to FX injections by the Central Bank and major energy companies. From the outset, we voiced our legitimate concerns about the new system. Ansa Merchant Bank and General Finance Corporation are part of major conglomerates that are in need of large amounts of US dollars and is therefore unlikely to engage in trading on the market. So any increased allocation to them is “lost” to the market, they are not commercial banks. DFL is roughly 50 % owned by Maritime Group and 50% by the Ministry of Finance. It is more than likely that their holdings of US dollars would have increased substantially due to the new arrangement. If nothing else they can now trade larger amounts of US dollars and make money of the spread. We also note with concern that the large state energy companies have boards of directors that answer directly to the Government and therefore can be instructed as to where to put their injections of US dollars! Given the track record of this government, we find this a very disturbing developing. This opens the door for at least the perception of bias as to who may be the government’s favoured bankers. The chaos and damage to our economy that has already occurred from this ill-advised own goal on the part of the Governor of the Central Bank is something that will continue to affect us all in the months ahead. The exchange rate instability that we avoided since floatation of the TT dollar in 1993 may be here upon us even while we still have the US dollar reserves to prevent this. It is unfortunate that rather than highlighting that fact that this issue was the sole creation of the Governor of the Central Bank, The Express sought to play the political blame game. The PNM political leader was alerting the nation to the source of the problem and reminded the population that we had questioned the appointment of the said Governor from the outset. We warned the country that this was another possible “Reshmi” appointment because Mr. Rambarran had neither the training nor experience to make an effective Central Bank Governor. The fact that his words during this crisis were “unable to calm public distress”, shows that he lacks the respect that is necessary for such a position. In fact, it was only after the May 20th press conference, at Dr. Rowley’s office, that the Central Bank and the government began to show any appreciable response to the cries of the businesses and small people that were seriously affected by the change in the system. It is the duty of the PNM Opposition to expose the excessive corruption, mismanagement and poor governance of the UNC for all to see. In four years they have shown an unflinching commitment to bad governance. This US dollar fiasco, created via another poor appointment, is just the latest manifestation of their incompetence to manage the affairs of this country.
Posted on: Mon, 23 Jun 2014 14:12:05 +0000
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