The global financial crisis has had little impact on the remittances received here but the situation is being closely monitored, several stakeholders in the business have said.
Whether this trend will continue is the million-dollar question as fears deepen over a possible global recession. The crisis, centred in the US, has seen the economies of several major countries slipping into recession. In Guyana, there are fears about the impact that the meltdown would have on remittances, which accounted last year for some US$424M, representing 43% of the country’s Gross National Product.
However, Minister of Finance, Dr Ashni Singh told Stabroek News that there had been no significant change in the level of remittances sent to the country. He said that the ministry monitored this on an ongoing basis and had not observed a noticeable change in the level of remittances.
Two of the three major money transfer agencies operating in Guyana also told this newspaper that the global financial crisis had had little impact on remittances received via their companies. The major share of the local remittances originate in the US and according to representatives of Western Union and Laparkan Financial Services Limited, the impact of the crisis so far has been “minimal” and the level of money being sent to Guyana was consistent with last year.
Minister Singh said that ultimately how remittances were affected would depend on several factors, including how the communities in which the diaspora lives were affected by the financial crisis. He further stated that some people had argued that the crisis would not have a negative impact on a country such as Guyana, but rather there would be positive developments.
He explained that those in the more developed countries, where financial institutions would have been badly affected, would move larger parts of their savings into safer markets. He said that there was the possibility too of higher private flows of capital and so there would not necessarily be a decline.
“There is no cause for worry, but we need to be vigilant,” said Dr Singh. On Thursday at the opening of the Guyana Bank for Trade and Industry branch at Grove, East Bank Demerara, he stated that while the local financial system was strong, given the financial crisis, small economies such as Guyana’s could not possibly be immune and there would be effects including on remittances. He said that policymakers must be vigilant in monitoring the financial happenings in the world.
Meantime, a senior representative of money transfer company, Western Union, told Stabroek News last week that up to October 27, market share and transaction volume for the entity had been consistent with last year. The Western Union Company, in its latest quarterly report said that third quarter revenue had gone up 10%. The Americas region, which represented 33% of total revenue, however, reported revenue flat compared to last year’s third quarter, with 1% transaction growth. Guyana is included in the Americas region. “Results in this region continue to be impacted by the challenging U.S. economy,” the report stated. The local representative said that for now, transactions at local agencies were the same as last year.
An official of Laparkan reported that the company had not seen a significant decline in the level of transactions but it was monitoring the situation. According to the official, who asked not to be named, there was a “minimal fall” of about 2% to 3% in October but the company was “more or less on track” for the year. It was explained that this would have little impact on the overall yearly level of transactions.
Asked whether the trend was expected to continue, the representative responded, “That is anybody’s guess,” adding that there were several variables to be considered. It was pointed out that the impact on remittances would depend on which sectors of the US economy were affected, and whether these were where persons were being laid off or whether they had more than one job. The representative was of the view that since members of the diaspora were aware that the money being sent back “fulfils an actual need,” the flow would likely continue even if it was in a reduced amount.
Despite repeated calls, the manager of the other major money transfer company operating in Guyana, Moneygram International Money Transfer, was not available. However, several weeks ago, Deo Persaud, Head of the Neal and Massy Group of Companies, parent company of Moneygram, had told the Stabroek Business that the company had seen a reduction in remittances to Guyana.
With regards to banks, one banker told this newspaper that in dealing with foreign currency, banks usually have their core and loyal customers, mainly corporate businesses. The banker, who asked not to be named, said that his organization’s dealings with these businesses had not changed and there had been no fundamental shift in the volumes transacted.
Meanwhile, it has been noted that exchange rates have remained relatively stable, with the US dollar not experiencing much volatility. The euro, pound sterling and Canadian dollar had earlier experienced a fairly high degree of volatility and according to the Larparkan representative this was owing to the feeling that despite the problems being encountered by the US economy, the other economies were perceived to be in even worse shape. The banker said that market supply conditions determined the rates and that based on current volume, the rate for the US dollar would likely remain stable but with possible shifts “on the increase side.”
Some cambio dealers had earlier this month told this newspaper that the amount of foreign currency being changed at their businesses had dropped and they felt that the supply of the US dollar was tightening. When contacted this week, one dealer said that this was still the case. The Bank of Guyana website listed the US dollar as being bought for $203 and sold for $205. This is within the range for some cambios with the US dollar also being bought for $200 and $201.
Since the beginning of the financial crisis, many persons have expressed concern about the impact it would have on remittances and on Guyana, given the large role that remittances play in the economy. The Caribbean Community Secretariat economic advisor, Dr Maurice Odle, at a recent forum expressed concern over a likely contraction in the flow of remittances to Guyana arising out of the current crisis. Noting that most of the US$424M in remittances to Guyana last year had come from the United States, Dr Odle considered that the likely reduction in remittance flows was a further factor that could impact on the Guyana economy. “Since remittances are primarily out of income earned, the severe downturn centering around the USA, the main destination of the diaspora, will have an almost immediate impact and is likely to persist beyond the period of the recession until asset items foregone are acquired by the metropolitan-based remitters,” he said.
Earlier last month, the Inter-American Development Bank (IDB) produced a report which suggested that the impact of remittances on the economies of Latin America and the Caribbean could decline to its lowest levels in a decade.
The remittance forecast, undertaken by the IDB’s Multilateral Investment Fund (MIF) and published last month projected that while remittances to countries in the hemisphere could increase by US$1B from the last year’s US$66B, higher inflation levels were likely to reduce the real value of those remittances by around 1.7 per cent this year.
