IMF calls again for removal of Trinidad foreign exchange restrictions

(Trinidad Guardian) A staff mission from the International Monetary Fund (IMF) yesterday said it again “encourages” the Ministry of Finance and the Central Bank to remove all restrictions on current international transactions as a means of creating a more investmentfriendly business environment that would drive the diversification of the T&T economy.

The advice of the IMF team is that T&T should remove foreign exchange restrictions while providing enough foreign exchange to meet the demand for all current international transactions.

The IMF’s encouragement came in its concluding statement following the international financial institution’s Article IV consultations with T&T authorities (Ministry of Finance and the Central Bank). Those consultations lasted from March 1-14. In the report, the IMF staff said a more efficient foreign exchange infrastructure would help eliminate foreign exchange shortfalls.

“It would also help create a more conducive business environment for the private sector to invest and diversify the economy. Over the medium term, greater exchange rate flexibility would reduce the need for fiscal policy adjustments to restore external balance and create room for more counter-cyclical monetary policy (which would stimulate a slowing economy and slow an expanding one),” IMF staff said.

“IMF staff encourages the authorities to remove all restrictions on current international transactions, while providing sufficient foreign exchange to meet demand for all current international transactions.”

Among the current restrictions of T&T’s foreign exchange regime include the limitation in the movement of T&T’s main exchange rate, the US to TT, to a narrow band in which the selling rate is not allowed to go beyond the ceiling of US$1 to TT$6.7997.

The authorities also limit the amount of foreign exchange that is sold to the authorised dealers. That has led local commercial banks, who are among T&T’s authorised foreign exchange dealers, to restrict the amount of foreign exchange they are able to sell to customers, both companies and individuals.