00:00Speaking at the Forex Matters Forum on Wednesday 17th hosted by Maritime Capital Limited at
00:06the TNT Chamber of Industry and Commerce in Westmoreland, economist Dr Valmiki Arjun weighed
00:12in on the ongoing foreign exchange challenge TNT is facing.
00:15He suggested that the government should consider accessing a liquidity swapline as it involves
00:20contacting the Federal Reserve at the U.S. Central Bank and exchanging or swapping a
00:25portion of our local currency for U.S. currency.
00:28During COVID, several countries utilized this tool known as a liquidity swapline.
00:37Now, a liquidity swap is not debt.
00:40How it works, let's assume we want to raise a billion U.S. dollars, right?
00:46At that point in time, for simplicity's sake, let's assume the exchange rate, the prevailing
00:51rate on that day is 7 to 1.
00:54So, a billion U.S. will be 7 billion T.T. dollars, right?
00:59If we want to raise 7 billion U.S., we can go to the Federal Reserve and simply swap
01:05the currency, provide them 7 billion T.T., they provide us with 1 billion U.S., and we
01:12have, we've raised effectively 1 billion U.S. extra to utilize for whatever we need to utilize
01:18it for.
01:19He also made mention of other avenues the government can explore in order to raise foreign
01:23exchange.
01:24We could also do a swap where we could explore the possibility of doing a swap with the People's
01:28Bank of China.
01:29The exchange rate is more or less on par, so it's more or less 1 to 1.
01:34So, let's say we want, we could raise about 2 billion Chinese renminbi by exchanging,
01:40doing a swap for 2 billion T.T.
01:42So, we have the renminbi, and that allows us to pay our Chinese suppliers in their own
01:48currency.
01:49Dr. Arjun also made mention of the black market.
01:52It still does, one, it still doesn't improve the supply problem, the supply situation,
01:56and two, what is going to happen, let's say the black market rate is about 8 to 1, right?
02:02The bank will then start selling for 8 to 1.
02:04Well, guess what?
02:05The black market rate will just go up, right?
02:08Because you're not, what incentive do they have to bring it to the banking system when
02:13they can just continue selling in the black market, because the demand for foreign exchange
02:16is still going to be high, which means that when you go to the bank and you can't get
02:20foreign exchange there, you go right back to the black market.
02:22And if the banking rate now is 8 to 1, the black market is just going to charge you maybe
02:278.50 or 9 to 1.
02:29The reality, the economist said, is that this country does not have much capacity to switch
02:34to local commodities because TNT does not produce much of what it consumes.
02:39Sharla Kisto, TV6 News.
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