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shaneelal wrote:Seems FCB now has $1k limit on new customer credit cards.
paid_influencer wrote:shaneelal wrote:Seems FCB now has $1k limit on new customer credit cards.
man nearly give me a heart attack there
but it sux for ppl who now coming up... no credit card to buy anything big.. everything hadda pass through a local middle man who has access to the forex that you personally don't
Forex fundamentals
by
Economist Mariano Browne
We have noted previously that continuous fiscal deficits fuel the demand for foreign exchange (forex), thereby depleting T&T’s foreign exchange reserves. The new administration’s initial comments suggest that there is little appetite for spending cuts on the scale required to limit the fiscal deficit and no appetite for tax increases. The prime minister’s scathing rebuttal of the property tax demonstrates this intent.
T&T is a small country with a correspondingly small population and cannot be self-sufficient. It must trade with the rest of the world to buy what citizens require to survive.
Imported products are ubiquitous as we import everything: food, fuel, cars, trucks, spare parts, fertiliser, paper, pens, software, internet services, televisions, movies, cable offerings, and even foreign performers. The country obtains forex to pay for these imports by exporting.
T&T is an open economy, as international trade (imports and exports) accounts for a significant percentage of the economy. In 2023, the total value of goods exported and imported accounted for approximately 62.86 per cent of the Gross Domestic Product (GDP).
Trade in services contributed about 12.14 per cent to the GDP during the same period. Combining these figures, international trade (goods and services) constituted roughly 75 per cent of T&T’s GDP in 2023.
This high trade-to-GDP ratio underscores the country’s openness to global markets and highlights the critical importance of trade to its economic structure.
In an open economy, the exchange rate, the number of TT dollars required to buy a unit of a foreign currency, is probably the most important economic variable as it underpins every area of economic activity.
Theoretically, many variables can influence a country’s exchange rate. These include commodity prices (especially oil and gas in T&T’s case), productivity changes, inflation, interest rates, capital flows/foreign investment, central bank policies, and political and economic stability.
In the T&T, natural gas, its energy derivatives and crude oil generate approximately 80 per cent of the country’s foreign exchange earnings. Therefore, changes in energy export prices or volumes have a dominant impact on the exchange rate in an open (free) market.
In economic jargon, a change in the terms of trade (the ratio of export prices to import prices) can significantly impact the exchange rate. If exports become more competitive (higher production with the same input) or prices rise, then the currency should appreciate. Conversely, when volumes fall or prices decline (the terms of trade decline), the exchange rate should depreciate.
T&T has oscillated through many periods when export volumes and prices have risen and then declined. Theoretically, the exchange rate should have appreciated during those periods and depreciated when export volumes or prices fell.
In a free market, this would have been reflected by exchange rate fluctuations.
For example, energy exports increased sharply during the period 1999-2008 and again during the period 2011-14. Yet the exchange rate remained relatively constant, hovering between a narrow band around the $6.4 to USD 1 mark.
Similarly, during the period of economic depression from 2015 to 2022, the TT/USD rate ought to have declined to reflect the decline in energy export volumes and prices. Whilst there was some shift in the USD/ TT rate from $6.4 to $6.87, the magnitude of that decline does not reflect the proportionate decline in export earnings. This is one reason why many commentators have argued that the TT dollar is overvalued relative to T&T’s terms of trade.
This fluctuation within a narrow band has been a matter of conscious government policy to either defend the foreign exchange reserves or “the standard of Living”. This approach conflicts with the underlying economic theory and the inherent automatic stabilisation caused by market-driven exchange rate changes.
When the terms of trade decline, the exchange rate should depreciate, thus reducing import demand because imports would have become more expensive.
This does not happen, because the Central Bank sets the exchange rate through the commercial banks. The contradiction occurs because public policy conflicts with real-world outcomes.
Readers should note that the exchange rate is only fixed to the USD, the currency of T&T’s most important trading partner. Since the USD floats against other currencies internationally, the T&T exchange rate for other currencies fluctuates daily.
In good times, not allowing the exchange rate to appreciate with the improvement in the terms of trade is meant to defend the foreign reserves. If the rate were allowed to appreciate, it is assumed that import demand would expand as imports would be cheaper, thus depleting the reserves.
Conversely, when energy prices decline (the terms of trade decline) the exchange should depreciate (ie, more TT per USD). This depreciation is not allowed to happen to keep the cost of living lower than it would be if the exchange rate were allowed to depreciate.
Keeping the exchange rate fixed rather than allowing it to float with the movement in the terms of trade has consequences.
First, the economy loses competitiveness by avoiding the adjustment and the incentive necessary to find alternative or new exports, ie diversification. Second, it leaves the demand for forex unaltered. Third, it encourages a black market in times of scarcity. Fourth, it encourages reliance on external loans to meet forex demand rather than encouraging ingenuity to displace imports.
Next week, we will examine how to calculate an exchange rate.
Mariano Browne is the Chief Executive Officer of the UWI Arthur Lok Jack Global School Of Business.
What bout the skybox ppl who does checkout in USD on their app?Chimera wrote:Allyuh call uwi and inform them that requiring payment in USD is illegal please. Thanks.
But u take it at ur parlorMaxPower wrote:I am not paying ANY business in T&T in USD.
pugboy wrote:amy list knows if paying ttec online uses a foreign credit card processor ie usd billing
With all these issues they have with forex in TT and they still keeping four stores open here. Seems the market to important for themhover11 wrote:Facing a tight foreign exchange market, PriceSmart’s Trinidad businesses have turned to the Jamaican capital markets and Trinidadian banks to source up to US$65 million for the construction of its distribution centre and settlement of its outstanding payables.
For more: https://www.guardian.co.tt/business/pri ... 1e00e8e799
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