Government is mulling a day-to-day reporting system for foreign currency at commercial banks, Vice President Bharrat Jagdeo said yesterday, in order to have an understanding behind the alleged short-age. The private sector has been complaining of its members being unable to access foreign currency at some local banks.
“We have been exploring something,” Jagdeo said. “I was thinking about this and would have to discuss it with the Finance Minister that maybe we need a daily balance reported to the central bank of currencies purchased and sold, and the daily balance at all the institutions and then the list of demands…”
He said that while there are some measures that can be put in place, the conversation should be between the Georgetown Chamber of Commerce and Industry (GCCI), the Private Sector Commission and the Bankers Association on ways they can make the market work more efficiently.
Echoing sentiments expressed by Bank of Guyana Governor Dr Gobind Ganga, he said, “We can’t be pandering every time the Georgetown Chamber of Com-merce wants to issue a statement… We have to look at the macroeconomic objective.”
Jagdeo also stressed that the reserves had an adequate supply of foreign currency and should the need arise through continuous shortage, currency will be released into the market. He cautioned that any hasty release would cripple the manufacturing and exporting sectors as the cost for those services would increase.
“The importers, and many are in the chamber, prefer a US dollar rate that is appreciating so they pay less Guyana dollars for the exchange to the US dollar. And often, when we look at it, it’s not passed on in final prices. So, what they finally get, because they get the exchange rate that is cheaper, is foreign currency that is cheaper; they end up with bigger margins,” he added.
He went on to state that while there is an aggregate market, the cambios operate like mini markets, truncating the supply and demand of foreign currency. He pointed out that if some banks did not keep currency for their customers, people would have been able to go to other banks and complete their business transactions.
In this regard, he said, there needs to be better promotion of exchanges between banks and the use of the intermarket option.
The Vice President noted that the central bank’s objective was to focus on the macroeconomics of the country and that the chamber needed to iron out the issues being faced with the bankers association.
On Thursday the BoG had reprimanded the GCCI for labouring under the mistaken impression that the central banks existed to ensure that foreign currency was available to its members at the times and prices they demanded.
According to the BoG, the GCCI’s view of the open market, “is simply not how an open market economy operates, and is simply not how foreign currency availability and pricing are determined where floating currencies are concerned.”
It suggested the GCCI’s “energies would be better spent engaging either the banks or the bankers association, who are also members of the private sector, with a view to better understanding the factors that influence the availability and pricing of foreign currency in the domestic market.”
The GCCI’s statement had called for an independent intervention as it had lost “confidence in the leadership of the Bank of Guyana or its capacity to implement policies that will guide Guyana’s financial sector to support growth being experienc-ed in the real sector”.
It added, “According to its own statistics, the Bank of Guyana has failed to intervene in the ongoing foreign currency shortage issue, despite the private sector complaining of a lack of US dollars since 2019. Therefore, the Chamber views the central bank’s inaction to activate mitigating strategies to address the foreign currency situation as a disregard for business.”
The GCCI stated that it was dissatisfied with the BoG’s lack of action, vision, and modern financial policies to improve access to financing for local businesses. It added that the country’s economy was one of the fastest-growing in the world, with oil revenues generating hundreds of millions of US dollars annually.
The BoG went on to explain in its response that it was an independent central bank with a clear mandate defined by law and in keeping with international norms and standards for central banking. Its objectives include fostering domestic price stability through the promotion of stable credit and exchange conditions.
“The law establishing the BoG also stipulates that the Guyana dollar is a freely floating currency, traded in a market whose prices are determined by prevailing market conditions, that is to say demand and supply,” it stated, adding that it remained committed to discharging its mandate and engaging with the private sector on matters of concern in a mutually respectful manner.
Several businessmen have complained of experiencing a shortage of foreign currency at local banks. However, the BoG informed that as of February 22, 2023, the banking system had US$99.5 million available for transactions. It stated that while “the available funds are not evenly distributed among the banks, there is enough to cover the cash flow needs of transactions arising from businesses in Guyana.”
The BoG also explained that cash flowing to the banks was cyclical, and as such there would be periods of excess liquidity and periods when there would be a limited supply. It asserted that it was continuing to monitor the foreign currency position in Guyana to ensure there was no disruption nor adverse impact on economic activities.
Analysts have pointed out that there are clear imperfections in the foreign currency market here and as such, greater interventions by the central bank may be needed.
