Via Shaliza Hassanali, Trinidad Guardian —

Fear of an impending depreciation of the T&T dollar, after the Fifth Summit of the Americas, is forcing citizens to buy and hoard US currency. And this situation has created a shortfall at commercial banks in T&T during the last few weeks. While the shortage already has been causing many who depend heavily on the US dollar to reel under pressure, economist Indera Sagewan-Alli is predicting that the hoarding will intensify and the situation will only get worst.

Sagewan-Alli said sourcing US currency at local banks during the last few weeks had proven nothing short of a headache. “Three weeks ago, my husband put in a request for US currency at a bank. Just this week the bank informed him that he would get the US, but only in the form of cheques and in small increments.” The shortage, Sagewan-Alli says, stems from people buying and hoarding US dollars, based on reports that Government plans to depreciate the TT dollar after the summit.

“People fearing the devaluation are choosing to convert their TT dollars into US dollars. They are waiting for that time when they anticipate there would be a devaluation and would be able to make a capital gain.” The buying price for US$1 at commercial banks is $6.30. But Sunday Guardian was reliably informed that some people were paying black market prices—as much as $7—for US$1, because of the short supply. “Those who are hoarding the US are waiting for the best price to sell. As we speak, the hoarding is intensifying. The fear of a devaluation is there, and it’s worsening,” Sagewan-Alli explained.

Sagewan-Alli said if the Central Bank failed to inject more US currency into the economy during the coming weeks, black market prices would soar. “There are no indicators that black market prices would fall.” In light of the fears, Sagewan-Alli is calling on the Central Bank to come clean and tell the public whether the dollar will be devalued. “The Central Bank ought to put the country’s mind at rest.” Sagewan-Alli said the Central Bank’s supply was constrained by its ability to pump US dollars into the system. “Our non-energy capacity to generate foreign exchange through exports is very limited.”

She also commented on RBTT Bank’s, Republic Bank’s, First Citizens’ and the Bank of Baroda’s move to reduce their prime lending rate from 13 to 12.75 per cent in April. While RBTT stated in a published notice its changed rate was concurrent with the decrease in the Central Bank’s repo rate from 8.75 to 8.50, and in keeping with changing market conditions, Sagewan-Alli said the .25 per cent reduction was not good enough. “We need to see lending rates much like what we are seeing around the world, which is one or two per cent and in some cases even less.”

Please also see related FOREX story, ‘Standard & Poor’s: Barbados economic outlook negative, US dollar peg in jeopardy’

Ashmita Maharaj · Goa, India

Born in Trinidad and currently residing in Goa, India, Ashmita Maharaj is a controversial Trinidadian and a ‘consummate West Indian’, with a fondness of cricket, CARICOM and Caribbean culture. She is currently the project lead of a sustainable livelihood programme in Orissa, one of India's poorest states.

ashmita@antillean.org