Rates are determined by market, not Govt – Ali

Exchange rates regulations

…”they want to run the economy as Burnham did” – economist

Opposition Member of Parliament (MP) Irfaan Ali has joined in condemning a recent move by the Central Bank to regulate exchange rates on foreign currencies by cambio dealers and commercial banks, saying that Government has acted

Opposition Member of Parliament (MP) Irfaan Ali
Opposition Member of Parliament (MP) Irfaan Ali

illegally by doing so.

“It is illegal, the rates are supposed to be market-determined,” Ali stated.

He further pointed out that in the laws governing the operations of these institutions, that is, the Dealers in Foreign Currency (Licencing) Act 1989, there is also a provision which states that cambios cannot be forced to trade.

Ali pointed out that these provisions were inserted to remove Government control, something which this Administration failed to take into account when instructing the Bank of Guyana to implement these new measures.

“But they are interfering, and reversing over two decades of financial reforms. The Government is overstepping its boundary and threatening the stability of the most important market in Guyana,” he posited, while adding that such interference

Economist, Dr Peter Ramsaroop
Economist,
Dr Peter Ramsaroop

would not be taken lightly by the International Monetary Fund (IMF) and that a reaction should be expected.

According to the circular seen by Guyana Times, non-bank cambios must reduce the spread between the buying and selling rates on foreign currency transactions to no more than G$3. This means that if a cambio dealer purchases currency at G$210, then the dealer cannot sell it for more than G$213.

The Bank of Guyana, in the circular signed by Governor, Dr Gobind Ganga, outlined that this new measure is in accordance with Section 7 of the Dealers in Foreign Currency (Licencing) Act and is expected to “improve the efficiency, depth and liquidity of the foreign exchange market.”

However, Section 7 (1) provides: “Every licence shall be subject to the provisions of this Act, and as such conditions may, from time to time, be prescribed or specified in the licence.” Meanwhile, Section 7 (2) states: “The conditions as to the furnishing as security by the licensee, the amount and forfeiture thereof and the owner of the bank to vary the amount of the security from time to time.”

It was explained by former Attorney General Anil Nandlall that those “new conditions” referred to in the laws cannot be unilaterally imposed upon the licensee, expo facto, the grant of the licence.

Nandlall had also cited Section 9 (3) of the same Act which states: “The price at which a licensee may buy or sell any foreign currency shall be determined by the licensee and shall be displayed at a prominent place on the licenced premises.”

Meanwhile, the tightening of the regulations governing the trade of foreign currency is anticipated to have deleterious effects, lead to even more tightening of the money in circulation and will also trigger hoarding.

This most recent warning was sounded by economist, Dr Peter Ramsaroop.

Dr Ramsaroop has since posited that it is in the area of economics and the effective management of the nation’s finances where “the ‘out of touch’ President (David) Granger and his team keeps getting it totally wrong… They want to control the economy as Burnham did in the 1970s/80s, resulting in the massive collapse of our exchange rate and economy.”

According to Dr Ramsaroop, the coalition A Partnership for National Unity/Alliance For Change (APNU/AFC) Government seems “on track to repeating these failures again.”

He is adamant that “this is an area that does not need regulation at this time,” and suggests that the move is in fact just another indicator of the poor management of our economy, which is causing a rippling effect on businesses.”

“We should not simply follow a contractionary monetary policy… Why would anyone want to leave their money in Guyana, knowing the possibility and being fearful of Government’s seizure of assets, basically, by regulating our exchange rate convertibility? It will certainly add a new layer of uncertainty and bureaucracy to the trading process.”

The economist observed in his arguments that the Administration continues to tax “us to death, with over 200 plus new taxes and new ways, such as parking meters, to get at our hard-earned dollars and even allowing their pals in the Georgetown City Council to start adding additional fees when you are buried in taxes.”

“Even the sleeping AFC has finally come out against the parking meters, only because both the [People’s Progressive Party] PPP and citizens have expressed their outrage at the draconic measures presented by the [People’s National Congress] PNC-run City Council.”

According to Dr Ramsaroop, it is incumbent on the citizenry to “make this APNU Administration ‘less’ than a one-term Government… We cannot afford the failures to continue.”

Recently, Opposition Leader Bharrat Jagdeo had similarly cautioned that Government’s intention to tighten “foreign currency trade” will have destructive consequences on trade and commerce in Guyana.