Although T&T used up half of a billion dollars of foreign reserves over the past six months and is likely to use more for the rest of the year, the country should not be worried, Central Bank Governor Alvin Hilaire said yesterday.
“At the end of 2017, the international reserves were $8.4 billion, which is about nine months of import cover and in mid-June it was $7.9 billion which is about nine months of import cover, so we have lost about $500 million in official reserves which is not insubstantial. The fact is that we do have a substantial stock of reserves by any metric,” he said at the release of the Central Bank’s 2017 Financial Stability Report.
“At this pace, other things being equal, probably we could lose another $500 million the rest of this year, so it would be a billion dollars for this year which would take us to $7.4 billion in reserves. Again this would still be comfortable.”
Hilaire warned, however, that the country should not be complacent as an imbalance still exists.
He said: “Restoring balance in the foreign exchange market requires an important combination of fiscal, structural and monetary policies. Despite the recent improvement in the inflows there will be some imbalance in the foreign exchange market and it is likely to persist over the third quarter as the economy continues in adjustment mode.”
He said this is not the first time T&T is in such a situation since its economy is heavily based on one commodity.
“We go through cycles and this is just another cycle. We could certainly get through it but I think it is important not only to get through it but to come out in a stronger way so that the next time it happens we are ready for anything that is not in our control,” he said.
Hilaire said he is optimistic about T&T’s ability to rebuild its international reserves.
“Why would we be worried? We, at the Central Bank, are never worried, we are always aware of things. We look at it clinically and we want to ensure that policies are done that would be able to rebuild those buffers in a short a time as possible,” he said.
He added that the energy sector is improving and he is confident in the short-term future of the economy.
“We have seen the numbers. Gas production since 2017 has been up and it is a solid increase which will persist for a while. Crude oil production has not been taking off as much. It is a little more jerky. We are still in a situation where the energy sector is a big part of the economy, so once the energy sector does well it affects other parts of the economy,” he said.
Source: www.guardian.co.tt (Raphael John-Lall)