The December 23 termination of the appointment of Jwala Rambarran as the Governor of the Central Bank has been criticised by many commentators, among whom are those who justify his disclosure of confidential information on the sale of foreign exchange by T&T’s commercial banks on the basis that “the country’s foreign exchange holdings are a vital national resource” that are on the same level as its mineral deposits
That notion, expressed by Michael Harris on December 14, is partly based on a concept that the former governor himself placed into the public space when, in his December 8 statement, he attempted to rationalise his disclosure of confidential information by arguing that he did so after weighing competing interests.
“This balancing exercise involved the weighing of the public’s right to be duly informed of the use of a limited national financial resource against private sector interests, desirous of privacy in such matters.”
Later in the statement, the former governor argues: “The Central Bank is of the considered view that the use of the country’s precious foreign exchange reserves, which come from finite and non-renewable oil and gas resources, is an issue of public concern and justifies the dissemination of the identity of the main recipients to whom such reserves are distributed.”
The former governor is arguing here that T&T’s foreign reserves are “limited,” “precious,” and constitute a “national financial resource,” and that the use of those reserves is “an issue of public concern” that “justifies the dissemination of the identity of the main recipients to whom such reserves are distributed.”
The former governor’s statement leads to the following question: Are the country’s foreign reserves a national financial resource?
To answer that question the following facts need to be understood:
• Most of the country’s foreign reserves come from the payment of taxes by T&T’s energy companies
• The taxes are paid in US dollars and are deposited into a government account at the Central Bank
• The Government sells the Central Bank its US-dollar energy taxes and uses the TT-dollar equivalent to run the country: pay public servants; fund transfers and subsidies; buy goods and services etc
• The Central Bank is the agent of the Government and therefore makes all of the central government’s foreign payments, including debt service, acquisition of foreign assets etc by debiting government accounts
• The US dollars held by the Central Bank constitute T&T’s foreign reserves.
It can be argued, therefore, that the stock of foreign reserves held by the Central Bank constitute part of the nation’s savings and that how those savings are used is generally a matter of the public concern, as are other national savings such as the Government’s Treasury deposits at the Central Bank, the Green Fund, the Unemployment Fund, the overdraft at the Central Bank that constitutes 15 per cent of government annual revenue etc.
But only about one-quarter of the foreign exchange sold by commercial banks to the population of T&T in the last three years comes from the Central Bank selling foreign exchange to commercial bank:
• According to a Republic Bank statement issued on December 7, between January 2013 and December 2015, the Central Bank sold US$5.575 billion to the banking system, which would be the authorised dealers of foreign exchange
• Between January 2013 and December 2015, the T&T public sold US$15.826 billion to the banking system.
There are four important points that need to be made about the information in the two bullet points above:
1) That between January 2013 and December 2015, the banking system purchased at least US$21.401 billion from the Central Bank and the public of T&T
2) Of the US$21.401 billion purchased by the banking system, only 26 per cent (some US$5.575 billion) came from the Central Bank with 74 per cent coming from the public
3) The banking system (or authorised forex dealers) PURCHASES foreign exchange from the Central Bank in commercial transactions, with the Central Bank depositing mostly US dollars into the accounts of commercial banks and receiving TT dollars from them
4) If commercial banks PURCHASE foreign exchange from the Central Bank, the ownership of that money is transferred from the Central Bank to the commercial banks
Therefore, it seems to me, the public’s right to know ends the second that foreign exchange is sold to the commercial banks. The foreign exchange then becomes the property of the commercial banks, for them to decide who they sell it to, but not, as yet, at what price they sell it.
If the authorised forex dealers take possession of foreign exchange in a legal transaction, it is for them to decide whether they choose to disclose their customers’ information—not the Central Bank.
To argue otherwise would be akin to saying that someone named Michael Harris, Hamid Ghany, Bhoe Tewarie or Ralph Maraj can sell an asset such as a house, car, land, painting, shares in a company or a company itself for due consideration, but retain some kind of ownership right in the asset.
Surely, logic would dictate that once the asset has legally changed hands, the property rights of the seller have come to an end.
I know of no special provision underlying the sale of foreign exchange by the Central Bank to commercial banks and it is therefore absurd, in my opinion, to attempt to sustain an argument that the public has an interest in an asset that has been sold.
Of course, the Central Bank has an absolute right to disclose that it is selling US$50 million to the authorised dealers and Bank A received US$12.5 million, Bank B US$5 million and so on. The sale of foreign exchange to authorised dealers is governed by a formula that has been in place since April 1993.
But, it seems to me, once the foreign exchange leaves the Central Bank account, it would be a breach of the confidentiality provisions of the Central Bank Act and the Financial Institutions Act to disclose to whom the authorised dealers are selling the foreign exchange.
What transpired in this case is that the Central Bank imposed its regulatory right to collect information on foreign exchange sales from the commercial banks but then breached the confidentiality laws that govern that relationship.
The above points only refer to 26 per cent of the total foreign exchange purchased by commercial banks in the last three years.
Some 74 per cent of the foreign exchange purchased by T&T’s commercial banks, some US$15.826 billion, is bought from the public, which refers mostly to energy companies selling US dollars to the banking system and using the TT dollars to pay their wages and salaries, leases and rentals, equipment purchases etc.
But the public refers as well to T&T exporting companies that need to pay local commitments such as wages and salaries, leases and rentals, equipment purchases and debt servicing.
The public also refers to visitors and tourists who may wish to convert their US dollars, euro and pounds to TT dollars.
If the public’s right to be informed about what transpires with foreign reserves ends when those reserves are sold to the commercial banks, one wonders what those who argue that the former governor was right to disclose the main users of T&T’s foreign exchange would say about foreign exchange that does not even pass through the Central Bank.
Maybe the argument is that those energy companies are exploiting assets that “belong” to the people of T&T and therefore that public has a right to know how those companies spend every dollar they earn by exploiting T&T assets.
Or maybe those who seek to challenge the property rights argument would claim that energy companies are exploiting depleting resources, which somehow elevates public’s right to know to some special place.
We’ll see.
