GOVERNOR of the Bank of Guyana (BoG), Dr Gobind Ganga, has given the assurance that there will be no tightening up of the foreign currency business, but instead a move to upgrade guidelines which govern the practice.During a telephone interview with the Guyana Chronicle on Monday, the bank’s Governor refuted accusations by the People’s Progressive Party/Civic (PPP/C) that tightening foreign currency trading would be counter-productive and would lead to increased capital flight.
“There will be no tightening of [the] foreign currency trade…we will be upgrading the guidelines to ensure that there is no exploitation by the key players in the market,” said Ganga. He said in essence, the bank has developed new regulations to monitor the local foreign exchange markets, so as to ensure that there are no shortages and foreign-currency hoarding.
The measures, if not put in place, will result in investors taking advantage of the market and monopolising the trade, said the BoG Governor.
However, in a statement on Monday, the PPP/C warned against any attempt to control the flow of foreign currency in the economy, stating that “it will have devastating consequences.”
It was highlighted that any such measure will be counter-productive and will lead to increased capital flight, greater hoarding of foreign exchange and even less foreign and local investments. The party contradicted the potentially new measures by highlighting the fact that the economy grew and how the private sector rapidly expanded in an environment of economic liberalisation and free trade.
The Private Sector Commission (PSC) also last week said it had read with consternation the pronouncements of the Minister of State, Joseph Harmon, regarding the introduction of stricter regulations and closer monitoring of the foreign-exchange market in Guyana.
In a release, the PSC “strongly condemned the move by the Government, which it said would effect the acceleration of capital flight which has already begun with the erosion of confidence in the economy. “The Private Sector Commission also warns against the stated intention of Government to introduce restrictions preventing the unfettered repatriation of earnings of foreign companies operating in Guyana. Foreign direct investment in the economy has already slowed and a policy which prevents the repatriation of the earnings of these companies has the potential to move the influx of investment from a trickle to a halt. The Private Sector Commission wishes to remind Government that the country has gone down this path before with disastrous consequences to the economy. The Guyana economy can ill afford the certain deleterious effects of history repeating itself,” the PSC said.
Last Thursday, Harmon told a post-Cabinet media briefing that Central Bank is expected to issue a number of guidelines with regard to the new regulations and monitoring. These include 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 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 has been maintaining 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 the 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.”