Private Sector against tougher foreign exchange monitoring

Feb 04, 2017 News

One day after Government announced plans to tighten foreign currency trade to ensure a stable market, the Private Sector Commission (PSC) is resisting any such moves.

The Private Sector Commission is resisting moves by Government to introduce tougher monitoring, saying it could reduce the country’s attraction to investments.

The commission, in a strongly worded statement, said that it read with consternation the pronouncements of the Minister of State to the introduction of stricter regulations and closer monitoring of the foreign exchange market in Guyana.
“The Private Sector Commission strongly condemns this move by the Government which would have certain effect of accelerating the capital flight which has already begun with the erosion of confidence in the economy.
PSC also warned 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 business advocacy body said.
However, Government has not said it is stopping transfers (repatriation).
Rather, on Thursday, speaking at post-Cabinet press briefing, Minister of State Joseph Harmon
disclosed that Cabinet was briefed on Tuesday, on the foreign exchange situation and was assured by Finance Minister, Winston Jordan, that there is no shortage.
It was disclosed that Bank of Guyana, as the regulatory body for financial institutions and non-bank cambios, has been told to respond to the situation with stricter regulations and closer monitoring.
Central Bank is expected to issue a number of guidelines, with regards to the new regulations and monitoring, Minister Harmon said.
These would include ensuring that exporters repatriate their export earnings to the banking systems as is required and conducting close monitoring and examinations of bank and non-bank cambios to maintain market stability.
Measures will also be taken to ensure that all foreign loans and grants are disbursed on time so as to increase the flow of funds currency to the country.
According to Harmon, Government is cognizant of the currency shortages in Suriname, Trinidad, Barbados, Venezuela and Brazil and that operators would have capitalized on opportunities in Guyana.
Yesterday, PSC said that it is reminding the Government that the country has gone down the path before of restrictions with disastrous consequences to the economy.
“The Guyana economy can ill afford the certain deleterious effects of history repeating itself.”
Central Bank has been finding evidence that a number of large companies have been buying up US dollars, more than normal, in some cases duplicating transactions at the different banks.
With neighbouring countries facing a shortage of foreign currencies, Guyana with its more stable situation has been experiencing increasing demands.
The US dollar exchange rate has crept up to $215 to $1, from a stable $205 early 2016.
Last week, Central Bank censured a money transfer service that is associated with multi-national company.
The money transfer service had reportedly withheld over US$50M from commercial bank, instead selling it to other subsidiaries. It helped created a little more hardship for the market.
Government has denied that there is a shortage of foreign currencies, insisting that none of the commercial banks have been requesting.
Harmon admitted Thursday that Cabinet has been briefed about a foreign company withholding its money and not selling to the local banks.
A number of large companies which had been remitting profits abroad have not been helping the situation. These include phone companies.
A recent purchase by Banks DIH of shares from a Barbados company to the tune of US$25M also left a void in the supply.
Lower world prices for commodities, including oil and rice, have created major problems for countries in the region.
Guyana’s saving grace has been gold which has touched record production levels.

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