THE lack of foreign exchange is constricting operations within the business community, growth and also leading to the closure of several businesses.
These were some of the findings of a recent survey conducted by the Trinidad and Tobago Chamber of Industry and Commerce and Trinidad and Tobago Coalition of Service Industries, along with other business stakeholders.
The survey took place from January 25 to February 1 and 204 firms across nine business organisations participated.
Among the respondents 63 per cent were forex earners while 37 per cent were importers.
The issue of foreign exchange has been a challenge over the past five years and more so given the negative impact of Covid-19.
According to the survey, which was conducted to better understand the foreign exchange demand, the majority of firms, approximately 170, or 83 per cent of those surveyed, were affected by the inability to source forex which prevented them from purchasing raw material and some finished products from external sources.
It noted that this shortage has had a drastic negative impact on sales, the inability to maintain supply chains which resulted in delays in restocking and meeting orders as well as more stringent credit terms and conditions from suppliers. All of these issues are adding to cost pressures. The survey outlined that 135 of the respondents received less than 50 per cent of their forex requirements from their local bankers in 2020.
“Subsequent to this, 147 indicated that it took longer to access funds in 2020 versus 2019, and 118 stated that it was even more difficult to do so in the latter part of 2020. This challenge of sourcing forex led to 159 companies resorting to alternative solutions which included use of personal or company credit cards,” the survey explained.
This challenge of sourcing forex has created complications such as a reduction on their US dollar credit limit, exposure to credit card fraud, credit card limits which restricted regular usage, some suppliers not accepting credit cards and the increased bank charges and onerous compliance requirements.
Due to the inability to access forex requirements in a timely manner,128 firms were forced to reduce the range of products they provide while 137 downsized their operations and 106 reduced staff.
On Thursday, the Central Bank in its Economic Bulletin for January 2021, said conditions in the foreign exchange market remained relatively tight in 2020.
Total purchase of foreign exchange by authorised dealers from the public declined by 23.0 per cent in 2020, mainly as a result of a 30.1 per cent decrease in conversions by energy companies.
The bank added that foreign exchange sales to the public authorised dealers also declined by 24.2 per cent.