FINANCE Minister Winston Jordan on Friday chided the media’s reportage of the perceived shortage of foreign currency here and he said some exporters are withholding sales of foreign currency to the system, possibly with the hope of provoking a depreciation of the domestic currency so as to maximise their Guyana-dollar profits.Speaking at the opening of Citizens Bank’s $2.5B corporate headquarters and main office located at lot 231-233 Camp Street and South Road, the Finance Minister said the country’s foreign exchange market functions in a liberalised environment with free trading or intermediation of foreign currency in the market. “Unfortunately, however, recent reporting of a contrived shortage of foreign currency — largely fuelled by a small section of the print media — has created a climate of speculation and hysteria that has been cultivated by some market participants, and led to some unwelcomed developments,” said Jordan.
Over the past few weeks, it has been reported that there is a shortage of foreign currency, specifically United States dollars, here, but Governor of the Bank of Guyana (BOG), Dr Gobind Ganga, said the central bank was not aware of such a situation.
Last Monday, senior representatives of the Bank of Guyana met with the Executive Management Committee of the Georgetown Chamber of Commerce and Industry (GCCI) and the bank gave the assurance that there is no shortage foreign currency. Evidence of the non-shortage of foreign currency was produced to the representatives of the GCCI, a statement from the GCCI said on Thursday.
Minister Jordan said there are six banks, 13 non-bank cambios and the BOG and noted that there are exporters, importers and other participants in the foreign exchange market, who conduct business with commercial banks or cambios of their choice.” The structure, conduct and performance of the foreign exchange market have provided for a relatively stable rate of the Guyana dollar. As an example, some major companies have been seeking to pay for imports and repatriate profits earlier than required in the usual business cycle. This has created a surge in demand for foreign currency, thereby clogging the market.”
He said on the supply side, some exporters are withholding sales of foreign currency to the system, possibly with the hope of provoking a depreciation of the domestic currency, so as to maximise their Guyana-dollar profits.
“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. 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,” the Finance Minister stated.

Minister Jordan noted that large spreads between the buying and selling rates for foreign currency, especially in bigger banks, have led to some level of disintermediation. “These banks act as the pacesetters in the pricing of foreign currency and interest rates. They have great influence in creating uneven competition for smaller banks. These developments have artificially stressed the foreign exchange market,” he said, noting their potential to destabilise Guyana’s fragile economy.
The Finance Minister made it clear that the level of foreign exchange in the system indicates that the current demand can be adequately met without speculation. He said in spite of the fall-off in export earnings for rice, sugar and timber, the foreign exchange reserves of the Bank of Guyana have increased to US$616M at the end of December 2016 from US$598M, at the end of 2015.

The foreign reserves of commercial banks totalled US$315M, at the end of 2016, roughly the same level as in 2015 he said, while noting that in 2016 the Bank of Guyana had sold approximately US$30M to commercial banks to smooth out spikes during seasonal demand. “Indeed, for the period November – December 2016, the Central Bank sold some US$12M 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 said due to the increased speculation in foreign exchange market activities, commercial bank cambios have been charged with undertaking the necessary due diligence to ensure orderly market behaviour.
“While this is positively impacting the market, other main stakeholders such as non-bank cambios, exporters and importers also have a responsibility to ensure their conduct does not have a negative impact on the foreign exchange market and the macro economy.”
He believes that in a market with limited players, in which one or two are dominant, it is incumbent on all to act responsibly, to play by the rules, so as to avoid disintermediation and interruption of orderly flows of foreign exchange. “We will continue to use moral suasion to return the market to stability. But the Government stands ready to act decisively, if our current entreaties fail. In leaving this issue behind, the public is assured that there is an adequate level of foreign currency in the market to meet demand.”

The Finance Minister said a consensus has emerged that countries perform better under a system of financial liberation, rather than a system of financial repression. As such, the domestic financial market was liberalised in 1989 and the system of exchange control was disbanded, while bank and non- bank cambios were established. “To support the new regime, the Bank of Guyana established a system of market surveillance that guides its decision to take appropriate actions, when necessary, to correct illiquidity or other forms of disequilibrium in the foreign exchange market. These were among the many measures which were introduced to boost confidence in the new system,” said Jordan, who noted that financial stability is the bedrock of a sound and healthy economy.

Efficient financial intermediation by the main market players is the cornerstone of such stability, he said, while stating that the smooth functioning of the foreign exchange market in floating exchange rate regimes is integral to the stability of the financial system. This is especially so in small, open economies such as Guyana’s, where certainty and confidence in the market to equilibrate supply and demand cannot be underscored.
Meanwhile, in congratulating the Board of Directors of Citizens Bank for achieving such an important milestone, given the bank’s relatively young history, the Finance Minister said new edifices add to the beauty of Georgetown. With just over two decades of service to the people of Guyana, the Finance Minister said the bank has expanded immeasurably, offering an array of banking products and services, while competing effectively with older and more established banks.

“The bank has quickly become a household name in the country. This is not only testimony of your commitment to becoming an important player in the development of the local financial system, but it is also evidence of your confidence in the macro economy. In the course of your journey, you have emerged as an efficient and profitable institution. These reasons provide adequate justification for you to move to a more spacious building, in addition to better servicing the growing needs and demands of your customers. “Mr Chairman, the structure of Guyana’s banking sector has evolved over the years to accommodate changes in the economy. One of the most visible changes has been the expansion of local and foreign banks and their branches, lending credence to the view that strong institutions in a politically stable and thriving business environment can be instrumental in driving growth and facilitating economic diversification and development.”
The Finance Minister said too that the bank’s drive to expand is in pursuit of enhanced efficiency and noted that with the country being on the threshold of “massive transformation,” it is expected that the expansion will continue apace.