‘Forex crisis caused by mismanagement’

FORMER finance minister Karen Nunez-Tesheira says she agrees with the Prime Minister that there should be no devaluation of the TT dollar. However she says the ongoing foreign exchange crisis is the result of mismanagement of the economy and the failure to diversify. She was responding on Tuesday to statements made by the Prime Minister in the House of Representatives on Monday on the forex issue.

She said in a phone interview that although the TT dollar was overvalued, devaluation would cause inflation and would also increase the black market for foreign exchange because the problem is one of scarcity “because we need foreign exchange to buy everything because we import everything in this country”. She said the country was in this position because the Government has not put any restraint on consumer spending. “How many cars do we need to import? How many different types of food do we need to import?” she asked.



“Why are there so many franchises being allowed to operate in this country?” Nunez-Tesheira said these are the questions the Prime Minister should be asking instead of seeking to place the blame on the public. “The PM needs to look at how many licences that his Government is granting through the Ministry of Trade to allow all these franchises into the country which are low-paying jobs and are consumers of foreign exchange and not earners of foreign exchange. She said when you go into any of the major supermarkets, one is taken back at the number of choices of cheese, yoghurt, cereals and other products.

“Even if we devalue to (TT)$10 to (US)$1, the black market would go to (TT)$12 because there is a shortage of forex,” she said. She asked if there were 13 authorised dealers who are buying US dollars at $6.80 and the rest of the country buying at $8, $9, $10 to 1, isn’t it possible that the businesses who buy at $6.

80 would use $10 as the starting point for the pricing of their goods? She said that this situation added to income inequality. She said the fiscal deficit, and the failure to develop other avenues including in the service industries, have all contributed to the forex crisis. The forex situation was also partly due to the fact that there has been a downturn in the energy sector in every area — be it LNG, natural gas, petrochemicals — which is where the country got most of its foreign exchange, Nunez-Tesheira said.

She said the fiscal deficit, and the failure to develop other avenues of foreign exchange including in the service industries have all contributed to the foreign exchange crisis. “Foreign exchange situation has become what it is because of our over-dependence on the energy sector with all its volatility,” Nunez-Tesheira said. “Where we are now is a consequence of a mismanagement of the economy and a failure to develop diversification.

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