Trinidad and Tobago’s Finance Minister Colm Imbert has dismissed suggestions by the main opposition United National Congress (UNC) for a devaluation of the local currency based on what it claimed to have been a report by the International Monetary Fund (IMF).
Opposition chief whip in the Senate, Wade Mark had asked Imbert to outline action to be taken to address the findings of the IMF in its latest report on the twin-island republic “in which it is stated that the country’s effective real exchange rate was overvalued by some 20.4 percent.”
Imbert told the Senate that if Mark read the report properly, he would not have been engaging in scare mongering and that nowhere in the report the basis of his question could be found.
Imbert said the question provides an insight into the future policies of the UNC, should it form the next government, adding “It is obvious if the UNC if they ever get into government…might want to devalue the currency.
“That’s obvious, there is no other reason for such a question. But it is important that persons such as Honorable Senator Mark read the entire report,” Imbert said.
He said following the Article Four Consultation with the IMF on the issue of “Monetary and Exchange Rate Policy,” the report clearly indicates that “the authorities prefer to maintain the status quo on the exchange rate regime.
“So, if Senator Mark had seen that he would not have asked this question. We intend to maintain the status quo with respect to our exchange rate regime, we do not intend to devaluate the currency.
“There is absolutely no reason to do so. We do not have any of the situations that would lead to a currency crisis such as balance of payments problems, deficit in our current account or any of the other issues. We have adequate foreign reserves, the IMF has said so, so I would ask Senator Mark to stop trying to scare people with this type of nonsense,” Imbert said.
The Trinidad Express newspaper reported earlier this week that the real effective exchange rate (REER) of the Trinidad and Tobago dollar implies that it is overvalued by 20.4 percent, according to one of two models used by the IMF to assess the competitiveness of the domestic currency.
It said the real effective exchange rate is a measure of the value of a currency against a weighted average of several foreign currencies divided by a price deflator or index of costs.
According to the newspaper, the IMF had indicated that the country’s real effective exchange rate depreciated by 7.2 percent between March 2020 and June 2021 due to a 3.7 percent depreciation in the nominal effective exchange rate and a 3.5 percent decrease in the relative price index.
The Trinidad and Tobago dollar exchanges at 0.16 cents to the US dollar.
/CMC
