THE Bank of Guyana (BoG) has been instructed by Finance Minister, Winston Jordan, to implement stricter regulations and closely monitor the foreign exchange market amid concerns that some exporters are withholding sales of foreign currency. The BoG is the regulatory body for local banks and non-banks cambios.
Cabinet has been briefed on the matter by Minister Jordan who explained that there was some disequilibrium (imbalance) in the foreign exchange market, giving the impression that there was a shortage of foreign currency.
Minister of State, Joseph Harmon, told a post-Cabinet media briefing Thursday that Central Bank is expected to issue a number of guidelines with regards to the new regulations and monitoring.
These includes ensuring that exporters repatriate their export earnings to the banking system as is required and conducting close monitoring and examination of bank and non-bank cambios in order to maintain orderly behaviour.
“Measures will also be taken to ensure that all foreign loans and grants that are issued are disbursed on time so as to increase the flow of foreign currency to the country,” Minister Harmon told reporters.
Even though the Bank of Guyana maintains that there is no shortage, some commercial banks have stated otherwise. There is a belief that the commercial banks are siphoning foreign exchange to selected customers and clients.
When asked how BoG will deal with this, Minister Harmon said more oversight will be required.
“It is the quality of the oversight which the Central Bank has been engaging in over the operations of these banks and non-bank cambios. I think what the Minister has recommended is that the bank strengthen its monitoring capacity and ensure that the rules and regulations by which these banks operate, that they hold them on a much closer, tighter leash.”
He added: “The fact of the matter is, yes, there are some companies that have actually been sending large amounts of foreign currency abroad because when you examine the situation all around us, in the entire region, you have foreign currency issues in Suriname, in Trinidad, in Barbados, in Venezuela, in Brazil.”
Over the past few weeks, it has been reported that there is a shortage of foreign currency, specifically US dollars here, but BoG Governor, Dr Gobind Ganga has said Central Bank is not aware of such a situation.
Minister Jordan had 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.
He had 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.
He had said that the level of foreign exchange in the system indicates that the current demand can be adequately met without speculation.
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.