Apr 2009 Financial News

'No need for devaluation'

Apr 24, 2009

Trinidad and Tobago's foreign reserve is sufficient to prevent the devaluation of the local currency, according to Independent Senator Subhas Ramkelawan.

Addressing members of the San Fernando Business Association at Soongs Great Wall Restaurant in San Fernando yesterday, the stockbroker said, "There is sufficient currency in the local reserve and the need for a devaluation does not arise."

He said what was needed at this time was for Government to consider floating our currency within a wider band.

He noted that Government was the main recipient of US dollars, and at present the country has a reserve for 11 months.

He said, however, that there should be no shortage of US dollars, but "what is happening is that some people are hoarding and this has caused the banks to institute a system of rationing".

"In that scenario, manufactures are benefiting and the individuals who are requesting small sums are suffering," he added. He warned, however, that "if Trinidad and Tobago is to maintain its present standard of living, it should not cut expenditure if it will bring about higher inflation".

He said Trinidad and Tobago needs to look more closely at its gas sales to determine a bench mark figure for the annual budget.

"Gas makes up 80 per cent of our foreign reserves and it has surpassed oil as a world commodity," he said, adding that with the fluctuation in the price of oil, government is expected to lose some $600 million in earnings from the energy sector.

Ramkelawan said the decision of government to go the way of deficit financing was a sound one, but he envisaged that the deficit could be much greater than anticipated.

He described the economy as being in good standing, to the extent that enough money is being raised on the local market. He predicted that soon prices of foreign commodities would be coming down and this would also bring down the level of inflation in the country.

And in addition to a drop in inflation, he observed that "interest charges are also dropping and already the commercial banks are complaining about a reduction in the loans portfolio".

He said at this time there is no need for a fiscal stimulus "so long as government continues to maintain its expenditure at $42 billion".


Source:
Louis B Homer South Bureau
Trinidad Express
Thursday, April 23rd 2009

http://www.trinidadexpress.com/index.pl/article_business?id=161468283