The International Monetary Fund (IMF) has pointed out that there is a great need for more transparency within the inter-bank foreign exchange market.
This statement was made as the IMF commented on the recent increase in Guyana’s US foreign exchange rate which now stands at $230 to US$1.
The international body said that the “inter-bank foreign exchange market appears segmented and illiquid.” This is to suggest that the banks did not collectively decide on an exchange rate. The IMF said that the inter-bank foreign exchange market can be further developed, “including by enhancing the transparency of market activity.”
The mission recommends that any official foreign exchange purchases and sales use a market mechanism similar to the one used for auctioning treasury bills.
Treasury bills have a face value of a certain amount, which is what they are actually worth. But they are sold for less. For example, a bill may be worth $10,000, but you would buy it for $9,600. Every bill has a specified maturity date, which is when you receive money back.
On issue day, Treasury delivers securities to bidders who were awarded securities in a particular auction. In exchange, Treasury charges the accounts of those bidders for payment of the securities.
The IMF also said that the “recent increase in exchange rate flexibility, should facilitate adjustment to external developments, and safeguard reserves.”
There has been much concern being expressed over the recent hike in foreign exchange. Opposition Leader, Bharrat Jagdeo had been very gloomy in his predictions. He said that if the situation is not dealt with in the right manner and soon, Guyanese will experience increased cost of living, a parallel market will be established and there will be a reemergence of the underground economy.
Jagdeo said that the Government of Guyana could have contained this situation, but either its incapability to do so or its lack of interest is to be blamed for what is to unfold, said Jagdeo.
He said that the projections for what is likely to unfold are “unbelievable.”
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