Mar 24, 2017 News
-Central Bank blames hoarding by exporters for adding pressure
Amidst confusion over what exactly is happening to the foreign exchange trade, Government
is set to meet with the Bankers’ Association as early as today to talk about availability.
The meeting would come as Central Bank yesterday said it found exporters were hoarding large sums of foreign currencies in their bank accounts and making unnecessary purchases on the market, further putting pressure on the trade.
Central Bank was responding to a statement, Wednesday, by the Guyana Manufacturing and Services Association (GMSA) which tagged the selling rate for US at an all-time high of $230 for US$1.
Yesterday, Central Bank denied that this was so and said the weighted average selling rate was $218. The $230 rate was for credit card transactions, the bank insisted.
However, yesterday, US-owned Dynamic Airways which operates flights reportedly instructed travel agents to sell tickets at a $250 rate.
On Wednesday, Republic Bank told Kaieteur News that it will be charging $230 for wiring large sums.
The exchange rates have been deeply worrying Central Bank and the administration which fear a loss of confidence could do irreparable damage to the foreign currency trade, at a time when exports have taken a dent because of lower world prices.
Finance Minister, Winston Jordan, is expected to meet with the bankers this afternoon in his Main Street boardroom to discuss matters to “promote growth in the economy”, a statement from his office said.
Jordan is expected to make statements to the media after the meeting.
Meanwhile, Central Bank in a separate statement, said it has noted with concerns a statement by GMSA which contained a number of “inaccuracies”.
“First, the claim by GMSA that the ‘‘effective rate for the US dollar is G$230’’ is not only misleading, but is of a kind that does nothing more than add fuel to the rising speculative and destabilizing activities in the foreign exchange market, all of which could be harmful to the economy.”
Central Bank stressed that the rate quoted by GMSA is not a uniform transaction rate.
Rather, “it is the online rate charged by one of the largest commercial banks in Guyana for its credit and debit card transactions, which represent a very small share of the cambio market transactions.”
Central Bank disclosed that for the week ending March 14-17, 2017 the weighted average buying rate was $214 while the weighted average selling rate was $218.
“The turnover for the week was US$40.0 million. Total purchases and sales at the bank cambios were US$19.6 million and US$20.4 million respectively.”
The aggregate working balance at the bank cambios was US$13.7 million at the end of business on the 17th March, 2017. One bank accounted for 32.8 % or US$4.5 million of the total working balance.
Demand at the end of the week was US$8M, with two banks accounting for the bulk of the demand.
Central Bank urged customers to shop around. “The Bank of Guyana wishes to advise businesses not to depend solely on one bank, but to pursue other banks to meet their demands for foreign currency at a competitive rate.”
The regulator also said it found evidence that there has been hoarding of foreign currency by exporters.
This was “evidenced by the large foreign currency balances that are being held in their exporters’ retention accounts. Instead of using these balances to complete their transactions, they have been sourcing foreign currency in the market. This has added further pressure on the demand for foreign currency and reduced the supply to the market. Both of these factors have contributed to the instability and depreciation of the rate.”
Central Bank said it will continue to reiterate that there is sufficient foreign currency in the market to meet legitimate demand.
”The patience and co-operation of stakeholders are needed, therefore, to ensure that there is no undue speculation and further deterioration in the rate.”
Meanwhile, travel agencies said that Caribbean Airlines rates were hovering around $218-$220 while Fly Jamaica is around $216.
In recent months, businesses have been complaining of finding it harder to transfer monies, with banks keeping them waiting.
Central Bank has taken the decision to halt its trading in Barbados and Trinidad dollars after it was found that traders from those countries were sopping up US dollars.
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