UNC Senator Damian Lyder said it could be a dark and dreary Christmas for many businesses and, in turn, employees, as the country’s foreign exchange crisis was being exacerbated by the Government’s actions.
He said with a decline in gas production and issues surrounding VAT refunds, there was a perfect storm for a foreign exchange crisis.
He claimed the Government’s decision to start to pay out $3 billion in bonds for VAT refunds from May had effectively reduced the availability of foreign exchange in the banks.
“More than 70 per cent of that (the bonds) is to be paid out to the energy companies. This means these energy companies will have somewhere around $2.1 billion—around May or June or somewhere around there. This means these companies receive a wash of TT dollars and given that these energy companies would normally have to convert their US dollar reserves, the revenues that they get to TT dollars to pay for their local expenditure—rent, employees, manufacturing—they no longer have to convert into US dollars because they are awash with TT dollars. So you are removing a significant amount of US dollars from the commercial banks, all in one shot,” he said.
“The crisis is that you’ve removed these US dollars from the system for what would be almost a 6-8 month period for revenues coming in from these revenues…This potentially means that energy companies have 6-8 months of TT cover when it comes to paying their operational expenditure in this country. Therefore, we could see this crisis going all the way to December…from May to December. An already existing foreign exchange crisis will be exacerbated for the upcoming months.”
According to Lyder, small, medium and micro businesses will suffer the most as a consequence. He said, after all, it was owners of those types of businesses who were struggling to get US dollars to purchase retail products to sell. He believes the Government should have anticipated the impact of the bonds and released more US dollars to banks from the Central Bank.
He also called on the Government to state how much money was owed to businesses in VAT refunds and urged the Finance Minister to pay the refunds as soon as possible.