T&T Finance Minister says no to devaluation and going to IMF
PORT OF SPAIN, Trinidad, CMC – The Trinidad and Tobago government Monday said it has no intention of devaluing the local currency arguing that it would lead to increased inflation and an immediate increase in imported goods.
In addition, Finance Minister Colm Imbert said that the seven-year-old Keith Rowley-led administration has no intention of going to the International Monetary Fund (IMF) for assistance to further boost the economy.
Speaking at a news conference on issues arising from the IMF's 2023 Article 1V review released last week, Imbert told reporters that any devaluation of the local currency would present hardship for the population.
From 1972 to 1976, the Trinidad and Tobago dollar was floated against the British pound sterling, however after 1976, it was pegged to the United States dollar.
The first major depreciation of the Trinidad and Tobago dollar since June 1976 occurred in December 1985, when the country's currency was devalued 50 per cent against the United States dollar.
In its latest report, the Washington-based financial institution said that it was encouraging the authorities in Trinidad to continue “maintaining sound and consistent policies to support the current exchange rate arrangement.
“The Central Bank of Trinidad and Tobago (CBTT) has maintained its repo rate at 3.5 per cent since March 2020 to support the recovery of the economy. Increasing the policy rate should be seriously considered to contain inflationary pressures and narrow the negative interest rate differentials with the US monetary policy rate,” the IMF said, adding “this would also help mitigate potential risks of capital outflows and reduce incentives for excessive risk taking that could threaten financial stability”.
Imbert told reporters that if, for example, the local currency had to be devalued at a rate of 10-to-one “which would be a 50 per cent devaluation or a 40 per cent devaluation, you would have an immediate increase in the cost of imported goods and you would have immediate demands from the labour unions, which would be very difficult to challenge, for increased wages.
“This in itself would have…a domino effect on inflation,” he said, adding “ I think any serious person would know that if we devalue the dollar there would be significant inflation and it would send our people into poverty.”
Imbert maintained that “you don't have to be a rocket scientist to figure out if you devalue the dollar significantly because we have a high import bill, because so many manufactured goods come from abroad, so much of our food comes from abroad and also you would have demands from the labour unions, that there will be an inflationary increase that will be unsustainable. I don't think we need to debate this point.”
The finance minister said that the government does not want to get into an IMF programme, given especially that the fund is the lender of last resort.
“Countries go to the IMF when they can't borrow from anybody else…so when they have nowhere else to turn, nobody will lend them money to balance their budgets and it is also a country in distress whenever a country goes to the IMF.”
He said countries with a “currency crisis” also goes to the IMF, but in the case of Trinidad with an import cover of eight months, Port of Spain does not have the problem of countries with at least one month or even a week cover.
“Some countries, I am told count the amount of money they receive every single day and then when they figure out how much money they had today they then decide what bills they pay tomorrow. We are nowhere near there.
“So we have absolutely no need to go to the International Monetary Fund. We have substantial financial buffers …we have substantial reserves, foreign currency which have stabilised at 6.8- seven million dollar range now for the last two years or so.
“Our public debt has stabilised at about $129 billion and our debt to GDP (gross domestic product), which is coming down, our current account is in surplus, our balance of payment is positive. So we don't need to go to the IMF,” Imbert said.
He recalled that Jamaica, which has an ongoing programme with the IMF, “being forced by the IMF as a conditionality to post a surplus and by posting a surplus they had to cut their expenditure and had to reduce their expenditure on social programmes.
“So one does not want to go there and we have no intention of going there,” Imbert told reporters.
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