…as entity reportedly remitted over US$100m to foreign accounts
The Bank of Guyana has come up with a series of new regulations to closely monitor the local foreign exchange markets, following reports of shortages in the market and allegations of foreign currency hoarding.
Inews understands that some overseas based entities are remitting large amounts of foreign currency to their foreign accounts, with reports suggesting one entity remitting over US$100M.
Speaking at the post Cabinet press briefing on Thursday, Minister of State Joseph Harmon told reporters that the entity in question will be “sanctioned.”
He noted that his Cabinet was assured by Finance Minister Winston Jordan that while there was no shortage in the country’s foreign exchange, there is a market ‘disequilibrium’.Harmon explained 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.
“The Bank of Guyana is therefore expected to issue a number of guidelines with regards to the new regulations and monitoring,” he said. Harmon added that these will include ensuring that exporters repatriate their export earnings at the banking system as is required and conducting close monitoring and examination of bank and non-bank cambios to maintain orderly market behaviour and stability.
According to the State Minister, measures were also taken to ensure that all foreign loans and grants issued are disbursed on time so as to increase the flow of foreign currency in the country.
Meanwhile, addressing reports of commercial banks syphoning foreign exchange to selective clients, the State Minister posited that these new guidelines are aimed at preventing such practices. He noted that before, Central Bank could not have stopped this practice because of the quality of oversight it had then; however, he noted that this situation will soon be reversed.
“I think what the (Finance) Minister has recommended here and what the (Central) Bank will do is that it will strengthen its monitoring capacity and ensure that rules and regulations by which these banks operate that they hold them on a much closer and tighter leash,” the Minister of State asserted.
Nevertheless, Minister Harmon pointed out that there are foreign currency issues in countries across the Caribbean, where banking companies take advantage of loopholes in the market, which Guyana will be zeroing in on.
“… yes there are some companies that have been sending large amounts of foreign currency abroad but when you examine the situation all around us in the entire region, you have foreign currency issues in all of those countries… to the extent of which persons find the soft stop where they can access it… and this is what these measures by the Minister of Finance and the Bank of Guyana are meant to tighten up on,” he pointed out.
Last month, Minister Jordan had warned of attempts by exporters, who are hoarding foreign currency, to lower the value of domestic currency by exporters. This practice, he said, has the potential to destabilise Guyana’s economy.
The Finance Minister, who was at the time speaking at the opening of Citizens’ Bank Limited new Head Office building, explained that some exporters and importers are conducting mutual foreign exchange transactions, outside of the exchange market structure.
“Some companies have been seeking to pay for export and repatriate profits earlier than required in the business cycle, thus creating a demand for foreign currency. Aggravating this untenable situation is the action of some net foreign exchange earners, who are demanding foreign currency from the market, while hoarding their foreign currency holdings,” the Minister stated.
He continued that, “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.”
Nevertheless, Jordan went on to assure the public that foreign exchange demands can currently be met with what is in the system. He was adamant that this was the case, despite the reduction in export earnings from sugar, rice and timber.
According to the Minister, the foreign reserves of commercial banks totalled US$315 million at the end of 2016. This is roughly the same level as in 2015. Jordan noted that in 2016, the Bank of Guyana had sold approximately US$30 million to commercial banks to smooth out spikes during seasonal demand.
“Indeed, for the period November to 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.”
Jordan also called on those involved in the practice; exporters, importers and cambios, to be responsible and heed the entreaties of the Government. He also had an ominous warning; failure to do so would result in the Government taking decisive action.