Even as it evaluates complaints that Trinidadian companies are absorbing large amounts of foreign exchange for transactions here and in the Twin-island Republic, Vice President Bharrat Jagdeo on Thursday said that government will intervene if there is a currency shortage.
While there have been persistent complaints by persons in the business community about the shortage of foreign exchange at local banks, Jagdeo said that when one considers the aggregate available this is not the case. However, because there is no inter-banking mechanism, some banks have a smaller supply, he explained.
“When I look at the aggregate amount of foreign currency, some banks have significantly more than their requests. In a foreign currency market, you should have an inter-bank market for foreign currency, and that is how systems operate in equilibrium,” he reasoned.
“What we have now is that most of the banks they keep their foreign currencies for their customers, so you don’t have an inter-bank market. If that was working here those who have surplus would sell to those who have demands and then there is equilibrium at the aggregate market”, he added.
Jagdeo was asked about the perceived foreign currency shortage locally and underscored the importance of having an inter-bank market: a global network utilised by financial institutions to trade currencies and other currency derivatives directly among themselves.
He said that from the government and Bank of Guyana assessments of the commercial banks here, the US dollar has been selling between 216 to US$1 and $220 to US$1, and has this week held steady at the $216 figure.
At cambios the US dollar has been purchased for between $204 to $206 and sold for $210 to $215 with lesser figures for US$20 and $50 notes or lower.
Jagdeo said that in many countries, foreign exchange matters are rectified through the implementation of an inter-bank market, to alleviate a shortage of foreign currency but banks here do not use it for forex matters, although it is used to meet their lending reserve needs.
This is because of the competitiveness of the local banks where every bank wants to hold on to their customers and know that they have foreign exchange when their customers come to them and simultaneously attract new customers by showing they can meet their respective foreign exchange needs.
Asked how the PPP/C administration would address complaints of a foreign currency shortage locally, Jagdeo said that cabinet is constantly assessing the situation.
“We are constantly assessing the balances to see how it is moving and if necessary, the government will intervene to smooth out the market. We have done this on several occasions before.
Private sector representatives have complained of experiencing a shortage of foreign currency at local banks and the Georgetown Chamber of Commerce & Industry (GCCI) called out the central bank for not monitoring the system.
Cordial
The Private Sector Commission (PSC) in association with the Guyana Associa-tion of Bankers Incorporated had held cordial discussions with Governor of the Bank of Guyana, Dr. Gobind Ganga with regard to ongoing challenges faced by local companies in accessing foreign exchange.
The stakeholders agreed that despite there being a shortage of foreign exchange at some banks there was no overall scarcity in Guyana given that the aggregate supply is meeting the demand and therefore the market remains in equilibrium.
The Governor of the Bank confirmed that while there is a mechanism which enables banks to share, the Central Bank must rely on moral suasion in an effort to achieve a more efficient distribution of foreign currency, while emphasizing the fact that it is the responsibility of the Central Bank to ensure that the Govern-ment meets its macro-economic objectives.
The PSC, the Bankers’ Association and the Bank of Guyana have all agreed to address the issues raised and promised to collaborate and work together for the benefit of all concerned.
Back in March of this year, Jagdeo had said that the government was mulling the adoption of a daily reporting system on foreign exchange, in order to have an understanding of the alleged shortage. He cautioned that any hasty release would cripple the manufacturing and exporting sectors as the cost for those services would increase.
He went on to state that 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.
