Bank of Guyana pours US$$$ into banking system to stabilise foreign currency market in Guyana

Jun 07, 2024 News

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Kaieteur News – Amid complaints of the long wait to access foreign currency and suspicions of a shortage, Government has asked the Bank of Guyana to pour more US dollars into the system to stabilize the situation, Vice President, Bharrat Jagdeo has said.

Kaieteur has in the past received reports from affected businessmen who were having a difficult time sourcing US currency to pay for their goods. Those who were unable to access foreign currency ended up paying higher rates for the US dollar just to make payments on time and restock their businesses. Persons were beginning to fear that their might have been a shortage and that exchange rate would sky rocket. Kaieteur News had raised the concern with vice-president at previous press-conferences.

However, on Thursday at his weekly press conference- this time held at the Office of the President Jagdeo outlined that escalating demand for foreign currency, driven by importation and other financial transactions, had caused prolonged waiting times and a significant disparity between supply and demand within the banking sector. “We’ve seen a situation where we’ve had a short-term mismatch and we’ve asked the central bank…to make a major injection in the foreign currency market and this morning most people said that the market is entirely cleared,” he said.

He emphasised the government’s vigilant oversight of the banking sector, underscoring its readiness to intervene when necessary. Addressing the timing of the intervention, Jagdeo clarified, “Previously, we had seen that overall, the market was clearing itself. Although there was a wait list for… number of importers, the market was clearing itself because on a daily basis, we watch the aggregate foreign currency available to the bank and their aggregate demand. We don’t want the rate to appreciate too much because that will lead to another set of problems, but we don’t want the rate to depreciate too much.” Notably, Guyana’s import expenditure for 2024 has surpassed $5 billion, with a significant portion originating from the United States. In the latest exchange rate update provided by the Central Bank, the buying price for USD stands at $207.98, with a selling price of $210.45. Additionally, the buying and selling prices for Canadian dollars are listed at $152 and $152.76, respectively. EURO’s exchange rate is reported at a buying price of $225.89 and a selling price of $228.79.

Back in April this newspaper had reported that despite numerous complaints of long waiting time at local banks to access foreign currency Jagdeo was adamant that there was no sustained shortage of the US dollar in Guyana and his government has not seen anything to indicate such. He said back then that the administration receives daily reports from the Central Bank and no shortage had been reported. At his Thursday April 4^th 2024 press conference at Freedom House, the VP was asked by Kaieteur News to comment on the US dollar going scarce and the exchange rate rising over GYD$220. He said that, “The moment we believe that there is a sustained shortage… because we get daily reports from the central bank on these matters. If we believe there is a sustained shortage then we can inject large amounts. We have the capacity to do that. That’s what central banks are for…to smooth out markets and we wouldn’t hesitate to use the Central Bank to smooth out the market.”

Jagdeo explained that the administration believes that it is, “the choppiness of demand when you look at the entire market on aggregate supply and aggregate demand it should even itself out at a rate that doesn’t seem massive.” The government’s current interest is keeping the currency around the historic range. “So what happens is that some banks have more foreign currency because they have more customers and suppliers of foreign currency than other banks and they don’t share their currency so if you’re dealing with one bank etc,” he added.

For its part the Bank of Guyana (BOG) also in April had reported that the country’s banking system had a total of 52M USD available for transactions to be done, even as it sought to debunk claims that there was a shortage of foreign currency. “BOG would like to inform the public that while the available funds are not evenly distributed among the banks, and there may be a short waiting period for the transfer of funds, there is enough to cover the cash flow needs of transactions arising from businesses in Guyana,” they said. Further, “BOG has also been injecting US dollars into the banking system and will continue to do so as is necessary. The BOG would like to reiterate that the banking system with an average monthly turnover in excess of USD 500 million, has an adequate supply of US dollars to meet the demand.” The statement further explained that the, “Bank of Guyana is aware that some businesses are seeking funds to meet the same payments from more than one bank and also there is a speculative queue for foreign currency because of a perception that there is a shortage of foreign currency.

Additionally, there is some hesitancy by commercial banks to submit invoices as required by the BOG which is used to monitor the legitimate use of funds.” “Cash flowing to the banks is cyclical, as such there will be periods of excess liquidity and periods of limited supply. The Bank continues to monitor the foreign currency position in Guyana to ensure there is no disruption nor adverse impact on economic activities.”

The Bank of Guyana comments had come a day after the Georgetown Chamber of Commerce and Industry (GCCI) said it was dissatisfied with the central bank’s lack of action, vision and modern financial policies to improve access to financing for local businesses. In a sharp statement the GCCI said then that the country’s economy is one of the fastest-growing in the world, with oil revenues generating hundreds of millions of US dollars annually. The business body said according to its own statistics, the Bank of Guyana has failed to intervene in the ongoing foreign currency shortage issue, despite the Private Sector complaining of a lack of US dollars since 2019. “Therefore, the Chamber views the Central Bank’s inaction to activate mitigating strategies to address the foreign currency situation as a disregard for business. The GCCI will continue to advocate this cause in hopes that a thorough, independent investigation is conducted in order to uncover the root cause. An independent intervention is needed since the GCCI has lost confidence in the leadership of the Bank of Guyana or its capacity to implement policies that will guide Guyana’s financial sector to support growth being experienced in the real sector,” the statement read.

 

 

 

 

 

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• Bharrat Jagdeo, Central, foreign currency market., Vice President

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