Minister of Finance Colm Imbert has requested the Central Bank inject US$50 million into the banking system on a one-off basis.
In a media release Saturday, Imbert said this was in addition to the usual fortnightly injection. His request followed Republic Bank slashing its credit card limit from US$10,000 to US$5,000. The Ministry of Finance determined that the sales by all banks of foreign exchange using credit cards for overseas transactions had reached close to US$6 million a day in September. Republic Bank was responsible for a significant percentage of the sales.
“It is noteworthy that at the rate of credit card usage that has been recorded up to the end of August 2023, it is estimated that credit card sales using foreign exchange will reach US$2 billion in 2023, which is 45 per cent higher than the pre-COVID-19 level of US$1.38 billion in credit card sales using foreign exchange in 2019,” Imbert said.
Imbert also discussed the credit card situation and foreign exchange with the Chamber of Commerce and Bankers’ Association last week on making currencies available to Small and Medium Enterprises (SMEs) to purchase materials and supplies from overseas suppliers. He expects a meaningful solution to challenges SMEs face accessing foreign exchange over the next six months.
“It must be understood that in normal circumstances, as has been the practice for the last 20 years, the management of foreign exchange is delegated by the Minister of Finance to the Central Bank and the commercial banks. The Ministry of Finance does not get deeply involved in the system unless necessary.”
Imbert said Republic Bank cut credit card limits without discussing it with him. Upon investigation, the bank advised that its credit card sales had reached an unsustainable level in September 2023, and it had no choice but to reduce the limits to stay within its own approved guidelines for what is referred to in the industry as a short position.
With the Christmas and Carnival seasons approaching, bringing an expected further surge in demand for foreign exchange, the ministry will intervene when required. Imbert said he expects prior consultation on these matters in the future rather than unilateral action.
Responding to claims that Republic Bank took action on his instruction, Imbert said they were uninformed and speculative as he does not control internal banking decisions or operations.
“Firstly, it must be made clear that the Minister of Finance was not involved in any way in this matter, and as a rule, the Minister of Finance does not interfere with the day-to-day operations and internal decisions of our commercial banks.”
Imbert said people must understand that T&T is an open economy with a free market system. T&T abolished foreign exchange controls in 1993, when it floated the currency.
“Tinkering with the system to achieve short-term results must therefore be avoided, although this is not to say that interventions should not be made by the Government when required, just that care and caution is required in any such intervention.”