Cambio dealers decry Central Bank’s imposed regulations in foreign currency circular

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Cambio dealers across the country are up in arms over Government’s strict regulations on their prices for trade, especially since there is legislation which grants them the freedom to determine their own rates.

Government, through the Central Bank, issued a circular to cambios and the local banking sector informing them of the regulated rates for foreign currency trade.

Bank of Guyana Governor, Dr Gobind Ganga
Bank of Guyana Governor, Dr Gobind Ganga

According to the circular seen by Guyana Times, non-bank cambios must reduce the spread between the buying and selling rates on foreign currency transactions to no more than G$3.

This means if a cambio dealer purchases currency at G$210, then the dealer cannot sell it for more than G$213.

The Bank of Guyana, in the circular signed by Governor, Dr Gobind Ganga, said this requirement must be applied in an effort to “improve the efficiency, depth and liquidity of the foreign exchange market.”

The Bank of Guyana outlined that this measure is in accordance with Section 7 of the Dealers in Foreign Currency (Licencing) Act.

The relevant section states that “The conditions of a licence referred to in subsection (1) may include a condition as to the furnishing of security by the licensee, the amount and forfeiture thereof and the power of the Minister to vary the amount of the security from time to time.”

But a few prominent cambio dealers who spoke to this newspaper contended that they have the right to set their own prices and this right is protected by the law.

The circular dispatched by the Bank of Guyana
The circular dispatched by the Bank of Guyana

Indeed, Section 9 of the Act confers upon those who are licenced to carry out the business of buying and selling foreign currency to determine their own prices.

According to the relevant section, “The price at which a licensee may buy or sell any foreign currency shall be determined by the licensee and shall be displayed at a prominent place on the licenced premises.”

Major losses

Several of the cambio dealers already predict major losses with the new regulations imposed by Central Bank.

One of them explained that it is unfair to restrict the trade of currency – a commodity which usually depends on world market prices.

“It’s all about demand and supply. I don’t think they (Government) understand the trade.”

Another dealer said that by imposing such a limit on the prices, cambio dealers stand to suffer significant loses when the world market prices fluctuate.

The dealer explained that if a particular foreign currency is bought for G$150 today and then tomorrow the selling price drops to G$140 on the world market, then by forcing cambios to sell the currency at the highest $143 would be detrimental to their business.

They were also concerned about the duration of this imposition and how badly it will affect their earnings in the long-term.

The law

In an invited comment, legal practitioner Anil Nandlall explained that any changes in the licence condition in accordance to Section 7 cannot interfere with the cambio dealers’ legal entitlement under Section 9.

He contended that the only body with the power to adjust that entitlement is the Parliament of Guyana.

“Central Bank is not above the law. Therefore, though the Central Bank has a regulatory role to play, it is enjoined to do so in accordance with law. It cannot purport to regulate by violating the law of the land. In so far as it does so, it would be acting unlawful,” the former Attorney General asserted.

Condemnation

Former President and Opposition Leader Dr Bharrat Jagdeo already condemned in the strongest possible terms this new foreign currency policy being implemented by the Government through the Bank of Guyana.

According to Jagdeo, such a move is “absolute madness” and will only hasten the decline of the economy.

The People’s Progressive Party (PPP) also took a swing at the Government over this move, noting that the People’s National Congress (PNC) Government in the past had embarked upon this route before and the outcomes were devastating.

An influential Private Sector operator also told <<<Guyana Times>>> that such a move would drive a lot of business underground, as already being unfolded in the mining sector with the new taxation measures.

Government has also received scathing criticisms from the Private Sector Commission (PSC) when it initially announced such an intervention.

The PSC also reminded that Guyana had gone down this path before with disastrous consequences to the economy. Minister of State Joseph Harmon, during a post-Cabinet press briefing, announced that the Bank of Guyana, as the regulatory body for banks and non-bank cambios, was instructed to respond with stricter regulations and closer monitoring of the foreign exchange market – following reports of foreign exchange, as well as foreign currency hoarding.

Dr Ganga, in another section of the media, explained that the announced measure aims to deter investors taking advantage of the market and monopolising the trade. (Guyana Times)

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