Govt mulls daily reporting mechanism to monitor flow of foreign currency – Jagdeo

Vice President Dr Bharrat Jagdeo

In light of reports of an alleged shortage of United States dollars in the country, the Guyana Government is going to consider the implementation of a daily reporting system to monitor the flow of foreign currency.

“We’ve been exploring something. I was thinking about this and we have to discuss it with the Finance Minister, that maybe we need a daily balance reported to the Central Bank of currencies purchased and sold, and the daily balance at all the institutions, and then the list of demands. And you will see in most cases, that they are clear [of any shortages], but it’s just that [the US dollars] exist in different institutions,” Vice President Bharrat Jagdeo explained during a press conference on Friday.

Over the past few weeks, several private sector players have been complaining of a shortage of US dollars and recently the Bank of Guyana (BoG) was called out for its inaction on the matter.

However, the Central Bank is contending that there is no shortage and that there is enough currency at the various banking institutions – something which the Vice President reiterated. He noted that there needs be a system in place as well to promote the exchange of foreign currency among the commercial banks.

“You have not one market, not an aggregate market but every Cambio in this country operates like a mini market within the aggregate market. So, it truncates the supply and demand for currency. So, one bank… they would have an abundance of supply, but maybe some other bank may not have the same amount of [foreign] currency at that same time.

“But if you had an interbank market and they share or people don’t keep money only for their customers like some of the banks do then people would be able to go to another bank and get the currency. So, we have to now work at promoting greater exchanges,” Jagdeo stated.

According to the Vice President, the foreign currency market in Guyana always has seasonal variations such as around the Christmas holidays when visitors come in and there is more foreign currency circulating. Likewise, he pointed out, there are low periods and it is during this time that more foreign currency will have to be supplied to the market.

Supplying market

Nevertheless, VP Jagdeo stated that in the event of an actual shortage in Guyana, there is sufficient foreign currency at the State level to supply the local market.

“If we believe that there is a sustained shortage, we have the means to supply the market… but we don’t want to supply the market so that the rate appreciates so a few people can get cheaper foreign currency. We can’t do that. It will go against the macroeconomic objective [of the country],” he outlined.

Public disagreement

The local private sector and the Central Bank got into a public spat on Thursday over the availability of foreign currency, US dollars in particular, in Guyana.

Over the past few weeks, there have been conflicting reports from both sides on this issue.
Several companies and businessmen have been complaining about a shortage of US dollars in Guyana.

Among those who have been vocal about the issue is President of the Georgetown Chamber of Commerce and Industry (GCCI), Timothy Tucker.

On Thursday, the GCCI expressed its dissatisfaction with the BoG’s “lack of action, vision and modern financial policies to improve access to financing for local businesses”.

It said that the Central Bank has failed to intervene in the ongoing foreign currency shortage issue, despite the private sector complaining of a lack of US dollars since 2019. The GCCI also called for an independent investigation into the root cause of the shortage, indicating its loss of confidence in the BoG.

However, in response to the Chamber, the Central Bank on Thursday reminded of its core mandate, noting that “The GCCI appears to be of the mistaken impression that the BoG exists to ensure that foreign currency is available to their membership at the times that they demand and at prices that they demand. This is simply not how an open market economy operates, and is simply not how foreign currency availability and pricing are determined where floating currencies are concerned.”

“Who will suffer”

On Friday, Tucker responded to the BoG, dismissing the Central Bank’s justification on the matter, arguing that “when the private sector businesses can’t pay or have to pay more for money to buy for imports, who will suffer??”

In a social media post, Tucker further posited that “the mere fact that agents for shipping companies have to open USD accounts at local banks, force local businesses to pay their freight in USD in country, shows there’s a major problem, several things will happen… prices will go up, USD shortage will get worst, it will become more difficult to do business in Guyana.”

Only recently, Attorney General and Legal Affairs Minister Anil Nandlall, SC, stated that companies or individuals cannot force anyone to pay for transactions done in Guyana in foreign currency unless special permission is granted by the Finance Ministry for them to trade using solely foreign currency.

Last month, the BOG had disclosed that the local banking system, with an average monthly turnover in excess of US$500 million, has an adequate supply of US dollars to meet demand.

In fact, it was noted that as of February 22, 2023, the banking system had US$99.5 million available for transactions. While the available funds are not evenly distributed among the banks, the BoG has noted that there is enough to cover the cash flow needs of transactions arising from businesses in Guyana.

Moreover, Dr Ganga had previously indicated that some banks could be “hoarding” their foreign currency which could be the cause for the apparent “shortage”.

As a result, key private sector players have since indicated that they wrote the Guyana Association of Bankers Inc (GABI) to discuss this matter. That meeting is likely to take place sometime next week.