Responding to extensive reporting in the media on the existence of a foreign currency shortage in the
local market, Finance Minister Winston Jordan, assured Guyanese that there is an adequate level of foreign currency in the market to meet demands.
Jordan was at the time addressing the recent opening of a new Citizen’s Bank branch at the corner of Camp Street and South Road, Georgetown. The Minister said that the foreign exchange market in Guyana functions in a liberalized environment, with free currency in the market.
“The main intermediaries encompass six banks, 13 non-bank cambios and the Bank of Guyana. Exporters, importers and other participants in the foreign exchange market conduct business with the commercial bank or cambio of their choice.
“The structure, conduct and performance of the foreign exchange market have provided for a relatively stable rate of the Guyana dollar.”
He said that recent reporting in the media of a foreign currency shortage created a climate of speculation and hysteria that has been cultivated by some market participants which led to some unwelcomed developments.
“As an example, some major companies have been seeking to pay for imports and repatriate profits earlier than required in the usual business cycle. This has created a surge in demand for foreign currency, thereby clogging the market. On the supply side, some exporters are withholding sales of foreign currency to the system, quite possibly in the hope of provoking a depreciation of the domestic currency so as to maximize their Guyana dollar profits.”
Further, the Minister said that the situation has been aggravated by the action of some net foreign exchange earners who are demanding foreign currency from the market while hoarding their foreign currency holdings.
“Some companies are even purchasing foreign exchange to facilitate trade for their counterparts outside of Guyana, while a few exporters and importers are conducting foreign exchange transactions bilaterally, outside of the foreign exchange market.”
Jordan added that large spreads between the buying and selling rates for foreign currency, particularly by bigger banks, have led to some level of disintermediation. He said that these banks act as the pacesetters in the pricing of foreign currency and interest rates.
“They have great influence in creating uneven competition for smaller banks. These developments have artificially stressed the foreign exchange market. They have the potential of destabilizing Guyana’s fragile economy that is finally recovering from the post General Elections stress of 2015.”
The demand for foreign currency, according to the Minister, can be met with the level of foreign exchange in the system. He said this is so even with the fall-off in export earnings of sugar, rice and timber. He reported that the foreign exchange reserves of the Bank of Guyana have increased to US$616M at December 31, 2016 from US$598M at the end of 2015.
Additionally, he said that the foreign reserves in commercial banks stand at US$315M at the end of 2016, roughly the same level as in 2015.
“Last year, the Bank of Guyana sold approximately US$30 million to commercial banks to smooth out spikes during seasonal demand. Indeed, for the period November – December 2016, the Central Bank sold some US$12 million to the bank cambios to ensure adequate flows of foreign exchange to the market. The Bank of Guyana will continue its interventions in the market as warranted.”
To guarantee that the situation does not get out of hand, Jordan said that despite efforts of commercial bank cambios to ensure orderly market behaviour; other main stakeholders such as non-bank cambios, exporters and importers also have a responsibility to ensure their conduct does not have a negative impact on the foreign exchange market and the macro economy.
He said that in a market with limited players in which one or two are dominant, it is incumbent on all to act responsibly to avoid disintermediation and interruption of orderly flows of foreign exchange. Jordan assured that his government continues to stand ready to act decisively if current appeals fail.
Meanwhile, this publication was informed by a number of commercial banks that they are not able to service certain transactions. When the Camp Street branch of Republic Bank was questioned Kaieteur News was told that a transaction of US$30,000 or even US$2,000 could not be done.
A supervisor subsequently said that there is a shortage and that checks should be made at the Republic Bank branch at Water Street; but this too proved futile. Representatives at the branch stated that the amount was not available and that there seems to be a shortage for quite a while.
At other banks, it was stated that customers would have to be placed on a waiting list and the time to facilitate requests is not guaranteed to be completed within two or three days.
Central Bank Governor, Gobind Ganga, recently insisted that there is no shortage. “I don’t know what they are going on with, but there is no shortage. All the banks have money. What is happening is that some of them are just holding on to their money. The foreign currency situation has even improved significantly from last year to now!”
As a result of the conflicting reports, members of the private sector, specifically the Georgetown Chamber of Commerce raised concerns about the shortage claims being made by commercial banks and had agreed to meet with the Banking Association on the matter.
Following a meeting with the GCCI’s Executive Management Committee (EMC) and representatives of the Bank of Guyana, the Chamber reported that the Central Bank has assured them that there is no shortage of foreign currency and produced evidence that the foreign reserves of commercial banks and central bank remain relatively unchanged.
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