[www.inewsguyana.com] – Former President of the Georgetown Chamber of Commerce and Industry (GCCI), Clinton Urling says the Private Sector Commission (PSC) should not asked the government not to withdraw funds from commercial banks.
The PSC in a statement on Tuesday August 04, warned against the withdrawal of the funds, stating that it could have some dangerous ramifications for Guyana’s economy.
“The PSC is concerned that the current situation can lead to a high level of non-performing loans and is extremely concerned about the intended removal of over $60 billion in Government funds that are deposited at the Commercial Banks. There is an increased level of defaulting loans being recorded in some sectors of the Economy,” a release stated.
However, Urling, in a statement on Wednesday, said that the PSC cited no proper reasons for its position hence it can be inferred “that what the PSC seems to be saying is that our commercial banks are dependent on government deposits to maintain their successful operations.”
“If government deposits into a commercial bank, it is the same as any private individual or company doing so: they can withdraw their deposits at any time. Commercial Banks must cater for this reality at all times. Moreover, the Central Bank caters for this through the application of a statutory reserve requirement (a percentage of transaction deposits and other liabilities) for commercial banks,” said the Former GCCI President.
He however admitted that the economy is at a troublesome and worrying place currently but there is no reason why the PSC would advise against government withdrawing its own money from the highly profitable commercial banks.
“Worst-case scenario, government can act as a lender of last resort, through the central bank, to the commercial banks if those banks face any threat of bankruptcy as a result of the large withdrawal.If the $60 billion figure is accurate, it then raises another question of the opportunity cost of government leaving all that liquidity dormant. This money could have been invested into many different development programmes generating higher financial and social returns,” Urling pointed out.
“The more that money is out there, it means the private sector would have increased opportunities to access more available cash in the economy, thus improving their bottom-line. If the $60 billion stays dormant in commercial banks, I don’t see how that helps anyone but the rich banks,” said Urling.