Govt wins support on managing exchange rate
Friday, October 13 2017 @ 12:00 AM AST
Contributed by: AleemKhan
"We cannot handle it," said UWI Financial Economics lecturer Dr Vaalmikki Arjoon. He said devaluation would have benefited T&T if the country had a diversified production structure, which is does not. As the country is now, he said devaluation would leave a long trail of collateral damage including inflation, small business closures, and weakened company balance sheets.
Panelists said T&T people do not have the maturity to refrain from rushing to purchase US dollars if freely floated and the TT dollar will weaken to unimaginable depths. Panelists called on the population to reconsider spending forex unwittingly too, which adds to the shortage, like buying from foreign coffee shops.
Also against TT dollar depreciation, Chaguanas Chamber Director Billy Ali asked why demand for forex is going up if official consumption of foreign goods is going down, as a result of government fiscal demand suppression. Ali asked what currency drugs and ammunition entering the country have to be paid in and wondered if that is where the money is going. He said US dollar leakage has to be plugged first before floating the TT dollar.
Financial consultant Ved Seereeram yesterday in an email said: "Some argue for a floating rate in order for the market to set the exchange rate. This is foolhardy and ignores the fact that in a shallow market the rate could slide uncontrollably since devaluation generates its own demand and the fear factor creates further demand devaluing the rate further. Another point to note is that a free exchange rate would create hoarding, in which only the rich can engage. This will further dry up supply furthering the devaluation and a further polarizing of the poor and the rich at the expense of the middle class."
Ali said most of the problems T&T has stem from corruption and attracted a comment from a returning government scholar, Rudy Hanamji. He said he was amazed at the level of corruption in government during a previous time when he ventured into "political circles." Hanamji told the audience corruption is so endemic, he was offered to create a company to build box drains, no experience necessary, charge the government a 20 per cent premium on the fair price, and split the earnings between himself and the party.
He said people from his generation with willingness and enthusiasm to effect change and improve the country usually get shot down by the generation of the panelists.
Hanamji also called for a discussion on marijuana as a source of tax revenue. He said, by his estimate, 85 per cent of young people use marijuana now, and argued that they use it more responsibly than their parents' generation use the legal drug alcohol.
Responding to more complaints of corruption from the floor, Ali said: "In spite of the people who we have put to run the country for 60 years, we need to have hope."