By Leonard Gildarie
One day after a number of businesses and banking officials warned of an impending foreign
currency crisis, government has denied any such situation.
Yesterday, both Finance Minister, Winston Jordan, and Governor of Bank of Guyana, Dr. Gobind Ganga, assured that Central Bank is standing by to make the necessary interventions if any shortages arise.
Current jitters may be blamed on hoarding by commercial banks compounded by traders from Barbados and Trinidad who have been off-loading their currencies in Guyana and buying up US dollars. Both countries are facing shortages and have been capitalizing on the Guyana situation.
In a taped statement yesterday, the official said that yesterday’s lead headline in Kaieteur News on a looming foreign currency crisis was misleading and would come at a time when there is a budget debate and the Opposition has been attempting to scare the populace.
The “sky” is not falling, Jordan assured yesterday.
According to the Central Bank chief, Dr. Ganga, there is no major foreign exchange crisis. “It is a misleading article. Headline (is) more misleading than anything else.”
He said that there is a net supply of foreign currency in the system and as such there would be no depreciation of the currency by any significant amount.
He said that there is also no evidence of problems by businesses and citizens to remitting monies from any commercial banks in Guyana.
Banking officials and businessmen claimed Monday that a number of US correspondent banks have severed ties with Guyana with locals forced to turn to the United Kingdom to ensure they receive monies and do business with the US.
A badly performing economy and world commodity prices for sugar, forestry and rice have been seeing less foreign currency coming to Guyana.
A dent in the drug trade has also reportedly been affecting the foreign currency inflows.
Dr Ganga made it clear yesterday, that Guyana has managed to acquire at least one large correspondent bank to replace Bank of America and JP Morgan.
According to Minister Jordan, Central Bank has always helped the local financial market whenever a shortage crops up… a genuine shortage that is.
In some cases, the Central Bank has even stepped in also and mop up the excess cash. This happened earlier this year during and after the Independence celebrations when a number of visitors came. These interventions, Jordan explained, are typical of Central Bank’s operations.
The minister admitted that while sugar and rice have fallen short and therefore affecting what is coming in, Guyana’s foreign reserves at the Central Bank have improved from US$595M from end of 2015 to US$625M with considerable holdings at the commercial banks. These holdings have improved from US$955M to US$1042M.
As such, there is no shortage and no crisis.
He said that Central Bank, as regulator of financial institutions, will take all the necessary actions to protect the economy and reserves.
While not naming measures, the minister warned that Government is paying close attention to indications of traders from Trinidad and Tobago and from Barbados who have been coming to Guyana and dumping their currencies here, buying up US dollars.
The Central Bank Governor said that special attention will be paid to how foreign currencies are being off-loaded at the bank. The attention will focus on the transactions occurring at both bank and non-bank cambios.
According to figures provided by Bank of Guyana, there is evidence of “off-loading”.
In 2014, there was $9M from Trinidad and Tobago in the system. This has leap-frogged to $38M.
Barbados dollars moved from $8M in 2014 to $13M this year- indications that something is happening.
“This is crucial. It (the Kaieteur News headline) is not based on reality. There is a net supply of foreign currency- last week a net purchase.”
Ganga is hoping that instead of commercial banks depending on Central Bank for interventions to release foreign currencies when the need arises, there should be more inter-bank trading.
It is not happening now.
Meanwhile, to bolster his arguments of a tougher stance on legit traders, Minister Jordan recalled in the late 70s and in the 80s when a number of countries in the region adopted measures to ensure Guyana currencies are not flooding their territories.
He pointed out that Guyana has the right to protect itself and ensure no raid on the international reserves.
He said that there are “lots of foreign currency” in the commercial banks but what they should be doing is stop hoarding and “sell the people” at the regular rates.
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