No devlauation of T&T currency; Rowley's claim defies 'economic logic: Dookeran

Finance Minister Winston Dookeran on Wednesday dismissed claims by Opposition leader Keith Rowley that the Trinidad and Tobago dollar could be devalued.

Dookeran was emphatic that there are no such plans and said Rowley’s statement “flies in the face of common sense and elementary economic logic.” He added that the Central Bank is committed to using the stock of foreign exchange reserves to maintain exchange rate stability.

Dookeran explained that the most common reason for a country to devalue its currency is when it cannot meet its foreign exchange commitments and has limited access to foreign borrowing.

“Trinidad and Tobago’s level of foreign exchange reserves currently stand at US$9 billion,” he said. In addition, the country also has US$3.7 billion in the Heritage and Stabilisation Fund," Dookerasn said.

“Trinidad and Tobago has an investment grade rating and has unlimited access to loans from both commercial and multilateral sources...on this basis, there is no logic to the statement that the Trinidad and Tobago dollar is about to be devalued. 

"The statement flies in the face of common sense and elementary economic logic,” the minister added.

Dookeran explained further that while countries consider devaluation as a means of strengthening their export sector this cannot apply to Trinidad and Tobago since a devaluation would not help with energy exports, the country's main revenue earners.

“Exporters, as well as the IMF, support our view that the level of the exchange rate is not an obstacle to the expansion of non energy exports. Thus, there is no case for a devaluation on trade grounds,” he said.

He added that a devaluation is likely to place upward pressure on inflation and can hamper current attempts to bring the rate of inflation down in line with the level of the country’s major trading partners.

“One should also note that the country’s exchange rate system is currently based on a floating regime which means that the exchange rate can fluctuate within a narrow band in response to changes in supply and demand conditions.

"The Central Bank is committed to using the stock of foreign exchange reserves to maintain exchange rate stability,” he added.

Dookeran warned that statements about a devaluation from public figures could be dangerous to macroeconomic stability to the extent that they encourage individuals and businesses to hoard foreign exchange when this is not necessary.


Read the story: Rowley warns of devaluation of TT $$