The government should consider a temporary ban on certain imports

Mar 25, 2017 Features / Columnists, Peeping Tom

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The Guyana dollar is sliding. The slide is as a result of the unavailability of foreign currency.
The government is denying that there is a shortage. It has been denying this for some time now but it is, also contradicting this position by contending that the foreign exchange market is being manipulated.
The government while denying that there is a shortage was forced to pass regulations limiting the spread between the buying and selling rates of banks and cambios.
The spread is now a maximum of $3. It means that the banks and cambios cannot sell currency for more than $3 higher than their existing buying rate.
Unfortunately, this measure is not working to reduce the decline in the Guyana dollar. In fact, things have gotten worse.
The government continues to deny that there is a shortage of foreign exchange. It says that the US$1 – G$230 is the rate which is being used for a small fraction of commercial banking transactions such as credit card payments. The fact remains, however, that this rate should not be high. It shows that there is a problem.
Whatever the causes, the fact exists that people who want foreign exchange to buy from the banks cannot get it readily and therefore this mere fact alone will tend to put pressure on the rate.
The government is trying to avoid panic in the market which can lead to a further deterioration.
Both the government and consumers need to take action to arrest this slide. If this does not happen, the situation will get worse.
The government needs to pump more foreign currency into the system. The government should maintain international reserves at a mere three months of imports. This will free up foreign exchange which can be injected into the local foreign exchange market to stem the currency slide.
Everyone is going to be hurt if the value of the Guyana dollar, relative to the US dollar declines further.
The government should also decide whether it will allow the market to “right” itself, which will mean devaluation or it will intervene to ensure that the public interest in preserved and the Guyana dollar appreciates.
The priority of the government should be stabilization, not total control of the foreign exchange market. It should implement measures over the next six months to ensure stability in the local foreign exchange market.
The government should identity non-essential imports on which restrictions can be placed for the next six months. This would curb demand. One of those areas is the importation of motor vehicles. A temporary six-month ban on the importation of motor vehicles would help to reduce the need for foreign currency. It will however hurt government revenues but the government can afford this hit.
The government should also cut back on its investment programme. The government should establish a team to go through all the projects which are being executed and determine which of these require significant imports. Those identified should then be prioritized to determine which can be deferred for six months so as to reduce the need for foreign currency for these projects.
The government should also demand that foreign gold companies repatriate through the banking system a minimum of 10% of their exports. This should be a temporary measure for a mere six months.
The Guyanese people have power to help. They can reverse this slide of the Guyana dollars by doing a few things.
The basic principle involved is to reduce the purchase and consumption of foreign items and to reduce energy consumption.
The first is to dedicate one day of the week to not using or buying any imported item. Guyanese consumers should try not to use any imported item, even if it is oil you need to cook. Go out and get some local vegetable oil. Use only local foods on that day.
They should also not buy imported items on that day. In this way, they will reduce demand and this will eventually, over a few weeks, feed right back into the system by reducing imports and the need for foreign currency to fund these imports.
Second, Guyanese should imitate what other countries are doing. They should turn off all of their lights and electrical appliances for one hour on a specified date and time, each week. This will mean that the country will require less fossil fuel for importation and therefore less need for foreign exchange.
Third, Guyanese should walk a little more. If there is a journey which you can undertake once a week which can be done by walking, then do so. This too will result in less fuel consumption and when aggregated across the whole country will allow for reduction in fossil fuel use. So try walking to the supermarket, shops and stores at least once a week.

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