Introduction to the Central Bank Governor’s Media Conference
The Central Bank Governor, Larry Howai, held his first media conference on September 4, two months into his tenure. This conference was an opportunity for Mr. Howai to showcase his understanding of the economy and his plans to address the current issues, particularly the forex shortage.
Initial Impressions and Expectations
Mr. Howai’s presentation style and demeanor were quite different from his previous stint as Minister of Finance under the UNC/People’s Partnership from 2012-2015. On the Central Bank podium, he seemed more at ease, answering questions and presenting his views on the economy with confidence.
Analysis of the Forex Issue
The Central Bank Governor identified the mismatch between demand and supply as the primary cause of the US dollar crunch. He suggested that encouraging fund repatriation could be part of the solution. However, these observations were not new and had been discussed previously. The governor also pointed out that consumption patterns may need to be addressed, citing the significant increase in credit card usage from US$766 million in 2015 to US$2.3 billion in 2024.
Shifting Spending Habits
Mr. Howai noted that retail and distribution usage had declined from $1.7 billion to $861 million during the same period. This shift in spending habits can be attributed to the rise of online shopping, which offers higher quality, discounts, customer service, and access. In a free market, asking people to curb their buying habits can penalize the ordinary population while allowing larger players to go unscathed.
Calls for Local Agriculture and Higher Interest Rates
The governor’s call for more local agriculture was not a new suggestion, but his proposal for higher interest rates to encourage local savings was a fresh idea. He also acknowledged the impact of geopolitical developments, such as tariffs, on economic planning. This contrasted with the Prime Minister’s dismissal of concerns about Donald Trump’s tariffs on August 7.
Statistics and Transparency
The statistics presented by Mr. Howai showed that credit card holders are the largest pool of forex users, and the automobile industry is the fourth largest user, with US$300 million in forex usage. The public holds more forex than the bank, which suggests that the problem is not a secret "cartel." The governor emphasized that sometimes reserves are diverted to cover essential services such as operating hospitals and utilities.
Promised Report on Forex Distribution Cartel
On May 15, Ms. Persad-Bissessar promised a report on a "forex distribution cartel and conspiracy between certain operatives and businesses." This report is eagerly awaited, but for now, the governor has highlighted the lack of transparency as a significant issue.
Conclusion
The Central Bank Governor’s presentation was notable for its open-minded and nimble approach to addressing the economic challenges. Mr. Howai’s admission that the measures put in place may not be perfect initially and that adjustments will be needed along the way was a wise acknowledgment of the complexity of the issues. As the country navigates these challenges, it is essential to prioritize transparency and adaptability in economic planning.
