Bank of Guyana (Amendment) Bill passed amid war of words

– as Govt hauled over coals for state of economy

The Bank of Guyana Amendment Bill of 2018 was passed in the National Assembly late on Friday night with a war of words between the two opposing sides regarding specific concerns surrounding the new law.
Opposition Member of Parliament Irfaan Ali noted the prevailing economic climate. He pointed to sugar, which he noted contracted by $16.6 billion; rice, $3.9 billion; forestry, $16.3 billion; and bauxite, $9.9 billion. According to Ali, the Government’s handling of the economy has contributed to the loss of $36.1 billion in stimulus.
“The proposed amendment is intended to provide a band-aid solution to a problem that is much deeper and systemic. A problem that the Government is either unwilling or unable of solving. The problem is the underperformance of the export

sector, which has contributed to shortages of foreign currency. This amendment will not solve the problems that exist today – the problem of underperformance in key sectors.”
“It has to do with shortages in foreign currency and depreciation in the exchange rate. When compared to 2016, total foreign currency transactions of local banks declined by US$28 million … total foreign currency transactions of non-bank cambios declined by US$0.7 million. In the first quarter of 2018, total foreign currency transactions declined by US$84 million. These are the issues we have to address.”
Meanwhile, former Attorney General Anil Nandlall noted the inherent danger of giving the Finance Minister power to arrange bailouts for commercial banks. According to Nandlall, this gives the Government unhealthy oversight over the financial sector and the fate of commercial banks.
“These interventions and the conferring of powers radically alter the playing field and gives the commercial bank a competitor. The central bank remains an advisor to Government in financial matters. Now the central bank is entering the fray. The other worrying feature of this bill is the role of the Minister of Finance.”
“The Minister of Finance becomes a player in a field that is supposed to be (protected). The financial sector is supposed to be insulated from the intervention of politicians. But the Bill, clause 41 (b), speaks to the central bank being allowed to bail out commercial banks if they experience problems But the central bank must first get a guarantee from the Minister of Finance. Why is that necessary?”
However, Finance Minister Winston Jordan, in a heated rebuttal to the Opposition, noted that he already exercised control over the central bank. He pointed to his

powers to appoint the bank’s Board of Governors.
“It is best you have in place, now, so we can be equipped in the unlikely event that x, y and z happens; this is what we must be prepared to do. You don’t wait until something happens … these are safeguards in the unlikely event that such a situation (financial crisis) happens, we would not be panicking.”
The Bill, which will allow the central bank to provide temporary liquidity assistance to deposit-taking institutions, was ultimately passed in the House on the heels of the passage of the National Payment System Bill 2018. It also follows the passage of the Financial Institutions (Amendment) Bill the previous day. The Bill is one of several bills the parliamentary Opposition had accused the Government of passing as conditions for a recent loan from the World Bank.
Only recently, this US$35 million loan was approved by the World Bank to support Guyana’s efforts to strengthen the financial sector and fiscal management, but more importantly, to better prepare the country to benefit from its newly-discovered oil and gas reserves.
Finance Minister Jordan has said that the financing would provide critical support to Guyana’s reform agenda and efforts to strengthen institutions and build a resilient economy that was capable of withstanding both external and domestic shocks. These reforms, he said, will be key to guide the management of oil revenues for the benefit of present and future generations.
Following the disbursement of the loan, World Bank Country Director for the Caribbean, Tahseen Sayed said that Guyana was making important strides to promote financial resilience and improve fiscal management, and has embarked on a broad-based reform programme.
“These reforms will be key to build a strong economy that is underpinned by a strategic management of public resources for the benefit of the Guyanese people,” Sayed said.
The financing focuses on strengthening financial stability and enabling sound financial development to promote macroeconomic stability and long-term growth. In particular, it will support banking reforms and depositor protection, the establishment of a deposit insurance scheme, implementation of a new insurance law, and the country’s anti-money laundering efforts.
This Development Policy Credit, the first of a series of two programmatic financial and fiscal development policy credits, is financed by the International Development Association (IDA).