2 weeks Ago By Dr Indera Sagewan
BUSINESSES that import the most basic food items (onion, garlic, potatoes, grains), which make up the bulk of the food basket for lower- to average-income earners, are seriously challenged by the ongoing foreign exchange (forex) shortage. These items (none of which we produce or can produce at scale and cost) should be classified as essential, with a designated US dollar facility made available along the lines of the EXIM Bank initiative for exporting companies. Clear accountability, of course, should be its cornerstone.
T&T is not an island unto itself. We need forex to access what we can’t produce but still require. It is therefore essential to prioritise the allocation of this scarce resource.
Basic import needs and forex earning schemes must be top of the list. The Government has attempted to address the earning imperative by providing a line of forex accessible through the EXIM Bank, but only for exporting businesses. A report of the performance of this fund would be nice.
Alas, wishful hoping. Otherwise, it is left to the banking sector to decide who receives the limited forex. It is evident, however, that the banks’ allocation process is less than equitable, with individuals standing last in line.
The distribution conglomerates appear insulated, as their shelves are well-stocked with non-essentials such as high-end furniture, appliances, and Halloween pumpkins. Also, the franchises continue to multiply, importing most items, earning no forex, repatriating on sales (not profits), and expressing no complaints about forex scarcity. For some time, I have been perplexed as to why the black-market rate for forex has not exceeded TT$8 to US$1.
All the signs suggest that it should. Demand continues to grow, even though the Government has imposed a tax on online US dollar purchases and banks have continuously reduced the US dollar spending limit per cycle on credit cards. Our high propensity to consume imported goods and services continues unchecked.
This is reflected, for example, in a food import bill that has grown from about US$750 million to over US$1 billion annually over the last few years. Juxtaposed with the fact that the country’s fastest-growing economic sector is trade and repairs—retail being the major driver—is the reality that the country’s major forex earner (energy) is rapidly declining. Adding to this is the peak Christmas buying period, yet the black-market rate is not rising.
I have been told that this situation is explained by the narcotics industry laundering US dollars through legitimate businesses. And while many businesses will not succumb, others find themselves in a do-or-die trap. Anecdotally, this suggests that T&T is host to a very a sizeable underground economy, which, in fact, is greasing the import engine of this economy.
We’re in a scary place. Covid-19 and the Ukraine/Russian war sprung leaks in the pockets of the average Trinbagonian with shortages of basic food items coupled with unchecked inflation. How many lower- to average-income households would even think about buying a Halloween pumpkin? Since Covid-19, how many can afford processed foods? But onions, garlic, potatoes, and grains are basic items without which many families would starve.
The majority cannot afford meat with every meal or cornflakes or bagels with cream cheese. The bottom line is that basic foods, which form the mainstay of the average meal, face a litany of challenges to reach our kitchens regularly and affordably. According to the largest importers of these basic food items, and contrary to the official inflation rate of 0.
04%, the prices of basic foods have started to rise and will continue to do so over the next few months. Scarce forex means supply curtailment, and with demand remaining the same, this translates to higher prices. But that’s not all.
In addition to having to access forex on the black market, these businesses are also helpless victims of port inefficiencies. Because we can’t resolve the worker strikes at the port, shipping lines are bypassing Trinidad and offloading containers in other countries—yes, including those destined for T&T. These containers must then wait for feeder boats to return them to T&T.
And then, it’s the luck of the draw that determines which containers make it on the boats. There are two negative consequences here. Firstly, the shelf life of perishable goods is shortened, sometimes being compromised by the time they arrive in T&T.
Secondly, planned imports based on knowledge of country demand are negatively affected, as containers targeted for different arrival dates can end up agglomerating. The result is gluts and shortages. Already this has resulted in a 12% increase in the retail prices of these items, with expectations worsening.
Add the fact that freight charges have started to increase and are expected to continue rising into 2025 due to capacity shortages, rerouting costs from geopolitical risks, and high demand for services on certain routes; the picture is clear. Businesses are calling for the port to be deemed an essential service, much like health care and security services. While there may be merit in this, it is not commonplace.
Maybe instead it is time to privatise port services and allow competitiveness to be the guiding operating principle..
