DOOKERAN SUGGESTS CURRENCY SWAPS FOR FOREX

CCNTV6

A former Finance Minister is suggesting that, in his words, currency swaps could be a solution to the ongoing foreign exchange scarcity in this country.  But what about a devaluation of the TT dollar which the Government says it will not be doing?  The former Minister gave his answer on the TV6 Morning Edition. Juhel Browne reports.

Transcript

00:00So the question of currency swaps I think is something should be explored to

00:05advance the supply of foreign exchange in moments of financial difficulty.

00:13Former Finance Minister Winston Ducaran on the TV6 Morning Edition program

00:17as he weighed in on the ongoing challenge with foreign exchange in

00:21Trinidad and Tobago. Let's say we do one with the Federal Reserve. The Federal Reserve

00:27gives us four US dollars and we give them TT dollars. They hold it for a certain

00:34period of time and we agree to pay it to them at some time. It could go on for a year,

00:41could go on for two years, could go on for 18 months. These are negotiable issues.

00:45On its website the US Federal Reserve said it has entered into agreements to establish

00:50what it called the central bank liquidity swap lines with a number of

00:55foreign central banks, none of which were identified to be those in small island states.

01:01They do it all the time with Canada, they do it all the time with a lot of the major

01:06countries in Europe and as I said it would be something new for small development.

01:12But what is this going to cost us? Is it going to cost the taxpayer?

01:15Usually, usually it is an arrangement in which the interest rate is minimal or none.

01:23It's really a facility to encourage stability in the market because it's a benefit of the

01:30other country to make sure that you have the foreign exchange to carry on your trade and payments.

01:37On Monday, Prime Minister Dr Keith Rowley told the House of Representatives there's

01:41clearly an increased demand for foreign exchange this year due to the growth in the economy,

01:47an increase in a taste for foreign goods and online purchases. The Prime Minister

01:53said it's a management situation.

01:55I think quick fix solutions like devaluation, what's called devaluation, which I don't understand

02:01because devaluation will only happen when you have fixed rates, but we're technically on a managed float.

02:07So that won't work in the short term and create more problems, ripple effects then it will solve.

02:17The interviewed Mr Lukeran was taped last week before Prime Minister Rowley said his

02:22administration will not bow to what he called special interest pressure.

02:27As he declared, there will be no devaluation of the Trinidad and Tobago currency.

02:32So I think we have to agree that our system, a foreign exchange regime of a managed float

02:38is a very, very good one that has served us well. But we may need to try and look at the

02:46regime itself to see whether demand could be expanded, widened and whether or not foreign trade,

02:56foreign markets could be developed. I do not have the answers to that.

03:01Mr Lukeran said it might even be necessary to look at a new Foreign Exchange Management Act.

03:08Jule Brown, TV6 News.

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