Foreign currency clampdown… Cambios ordered to reduce spread between buying and selling rates to $3

Feb 09, 2017 News

By Leonard Gildarie

The board rates at two city cambios yesterday reflecting the new guidelines

Days after announcing tougher checks on cambios as part of the measures to help stabilize the exchange rate for foreign currency, authorities have ordered operators not to allow the spread between the buying and selling rate to be more than $3.
Already, the US selling rate has dropped, but cambio operators are unhappy over the scrutiny by Central Bank, complaining yesterday that it will only serve to drive businesses to deal with illegal money-changers on the streets.
Yesterday, the board rates of non-bank cambios reflected the new “guidelines” which were sent out Monday to operators.
Inspectors from Central Bank were reportedly stepping up checks at the operations of a number of the city cambios, with visits starting on Monday and continuing yesterday.
Central Bank in a circular Monday told the cambios that the idea was to improve the “efficiency, depth and liquidity” of the foreign exchange market.
Central Bank also quoted the law saying the guidelines was in accordance with Section 7 of the Dealers in Foreign Currency (Licensing Act) 1989.
As of Monday, all non-bank cambios “must reduce the spread between the buying and selling rates on foreign currency transactions to no more than $3,” according to the correspondence seen by Kaieteur News.
Central Bank also made it clear that the selling rates of all foreign currencies must reflect the board rates displayed by the cambio.
It was signed by Dr. Gobind Ganga, Governor for Central Bank.
At Gobind’s Cambio, Regent Street, the selling rates of $215 to US$1 last week was down to US$211 yesterday. They were buying US for $208.
L. Mahabeer and Son, a stone’s throw away from Gobind’s, was buying at $210 and selling at $213.
Kaieteur News was told that Central Bank inspectors, after an initial visit on Monday, were back at it yesterday.
The tougher measures would come after Government denied there is a foreign currency shortage on the market. No banks had applied to Central Bank for the release of foreign currency, media was told.
However, Central Bank’s investigations found that a number of things were happening to the market, which for about almost three decades now had been liberalized, with few restrictions.
It was discovered that some customers were making large requests for money transfers at the banks while others were approaching several banks and making multiple applications. In one case, a large transaction to the tune of US$25M used by Banks DIH to buy out its shares from a Bajan partner, help placed a major dent on the trade.
Other challenges included an increase in “traders” from the region, including from Trinidad, Suriname and Barbados, travelling to Guyana to take back much-needed foreign currency.
Central Bank recently warned a popular money transfer service that is part of a multi-national company to sell its moneys to the commercial bank. It was reported that the money transfer service last year failed to sell the foreign currency to the banks, as was expected, further exacerbating the situation.
At the end of last year, there were 19 cambio dealers, including 13 non-bank operators, in Guyana.
Last week Tuesday, Minister of State Joseph Harmon reported that Finance Minister Winston Jordan briefed Cabinet on the foreign exchange situation. He insisted that there was no shortage.
Harmon 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. He said that Central Bank is expected to issue a number of guidelines, with regards to the new regulations and monitoring.
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 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.
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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