Credit cards grab largest  slice of usage

ANECDOTAL evidence that businessmen are depending more on their credit cards to purchase foreign goods has been borne out by a Central Bank report.

The Central Bank’s Economic Bulletin for January 2020 indicates that sales of foreign exchange to the public by authorised dealers amounted to US$5.9 billion in 2019.

“Credit cards absorbed the largest share of all sales (28.5 per cent), while retail and distribution (24.4 per cent), energy companies (11.7 per cent), manufacturing (8.2 per cent), and automobile companies (5.8 per cent) made up the bulk of the remainder. Central Bank’s support to the market amounted to $1.5 billion in 2019, the same as in 2018.

In January 2018, Finance Minister Colm Imbert said credit cards utilised a whopping US$3 billion a year of this country’s foreign exchange over a three-year period — in 2017 it was US$1.2 billion, out of a total of US$5.2 billion in foreign exchange in the banking system in 2017.

In 2017, credit card purchases used up 23 per cent of the foreign exchange available in the entire local banking system.

The Central Bank’s May 2020 Monetary Policy Report, which was published last Wednesday, shows that both the sales of foreign exchange to the public and the purchase of foreign exchange from the public have declined.

Sales of foreign exchange to the public declined by 24.1 per cent to US$1.94 billion in the first five months of 2020, compared with US$2.55 billion for the January to May period in 2019.

The report indicated that the purchases of foreign exchange from the public — mostly from T&T’s energy exports — also declined. For the period January to May 2020, authorised dealers of foreign exchange purchased US$1.49 billion from the public, which was 17.4 per cent less than the US$1.8 billion bought during the first five months of 2019.

In explaining the cause of both the lower sales and purchases of foreign exchange, the Central Bank said: “Lower energy sector conversions led to reduced purchases from the market by authorised dealers. The economic situation was also reflected in a decline in demand for foreign exchange.

“Total sales to the public by authorised dealers fell by a relatively much larger magnitude compared to overall purchases. Over the period, the Central Bank lent support to the market via sales interventions amounting to US$585 million, slightly lower when compared with the year-earlier period,” when the bank sold US$610 million.

T&T’s trade

So much depends on trade. And forex.

T&T imports about US$7.5 billion (about TT$50 billion) worth of goods a year.

In comparison, it exports over US$8 billion a year, mainly energy products.

In 2016, T&T spent US$7,911,312,460 ($53,633,160,562) on imports. In that year, it exported US$7,569,120,798 ($50,906,582,627).

In 2017, it spent US$6,893,231,085 ($46,731,281,494) on imports and exported US$8,740,723,035 ($59,255,983,674).

In 2018, it spent US$7,740,408,337 ($52,474,550,239) on imports and exported US$9,819,748,402 ($66,571,020,345).

In 2019 (for the period January-September), it spent US$4,513,928,552 ($30,601275,829) and exported US$5,520,816,335 ($37,427,270,180).

According to data from the Central Statistical Office (CSO), for the years 2016 to 2017, the biggest spend was allocated to machinery and transport equipment, which included cars.

In 2016, T&T spent $18 billion on machinery and transport equipment. In 2017 that sum was $13 billion. In 2018, it was also $13 billion and in 2019 (for the period January- September) it spent $9.2 billion.

The Sunday Express of May 31 reported that T&T spends $3 billion (US$441 million) in the purchase of new vehicles a year, which was two per cent of the country’s Gross Domestic Product (GDP) and equal to about six per cent of the country’s annual budget.

The second largest import falls under the category mineral fuels, lubricants and related material. In 2016, those imports costs $13.6 billion, in 2017 it was $11 billion, in 2018, it was $16 billion and in 2019 (for the period January-September), it was $3.6 billion.

Conversely, the exports under this category were far greater in sum: In 2016, T&T exported $16.9 billion. In 2017, it exported $27.9 billion and in 2018, $33.7 billion and in 2019 (for the period January-September), it was $14.7 billion.

Under the category “Chemicals” this trend also continued — in 2016, the amount exported was $21 billion, in 2017 it was $18.3 billion, in 2018, it was $20.2 billion and in 2019 (for the period January- September), it was $12.9 billion.

When it comes to consumables, the country imports more than it exports:

• For food and live animals, the data is in the favour of imports.

• In 2016, T&T imported the value of $5,447,480,891 in food and live animals category and exported $1.4 billion.

• In 2017, the country imported $5.6 billion and exported $1.4 billion.

• In 2018, it imported $5,678,653,958 and exported $1.5 billion.

• In 2019 (for the period January- September), it imported $4,155,840,294 and exported $1,1 billion.

T&T imports about half a billion dollars annually in beverages and tobacco:

• For 2016, T&T imported $642,981,404 in the category Beverages and Tobacco and exported $1.1 billion;

• In 2017 it imported $539,505,323 and exported $978,973,492, in 2018 it imported $513,435,059 and exported $1.1 billion.

• In 2019, (for the period January-September), it imported $372,908,809 and exported $816,169,607.

Clothing and furniture consume the same amount of forex:

• In 2016, T&T imported $387 million worth of clothes and $475 million worth of furniture.

• By 2018, the importation of clothes amounted to $389,091,686 while furniture cost $400 million.

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