Guyana has been hit with a foreign currency crisis where supply is progressively shrinking and there is a growing demand to hoard because of the expectation that the rates will slide, according to former President Bharrat Jagdeo.
Jagdeo, during a press conference on Thursday, said Government’s lack of economic policies was to be blamed for driving the foreign currency market into panic.
Opposition Leader Bharrat Jagdeo
“What is picking up is the demand to hold foreign currency because of the expectation that the rate is sliding. If not of transactional purposes, it is because of the expectations in people’s mind that the rate is going to slide and they want to hedge,” he reasoned.
The Guyana Manu-facturing and Services Association (GMSA) reported that the exchange rate stood at G$230 to US$1, but the Central Bank has refuted these reports.
The Opposition Leader, one of the People’s Progressive Party/Civic (PPP/C) leading point men on the economy, said Government’s anti-business policies and burdensome tax regimes were most likely the root causes for the high level of uncertainty, which ignited the hoarding of foreign currency.
Jagdeo warned that the current state of affairs, if allowed to progress, would harm the future of all Guyanese as it would spark a major spike in prices of commodities with import content and “the little increases the Government boasted about” would be wiped out in real terms.
There will be increases in a wide range of goods, from household products like food and clothes to commercial items such as equipment and machinery.
“Someone who works at a pharmacy explained to me that the exchange rate moved by five per cent and the cost of (imported) drugs to drugstore went up to about five per cent; when you add the VAT, they would have to now charge people for drugs at least 20 per cent more than they were paying,” he explained.
The cost of local flights has already escalated as a result of the unstable foreign currency rate, which is compounded by the 14 per cent VAT.
Jagdeo highlighted that expensive domestic air travel went against President David Granger’s dream to connect the hinterland and the coastal regions.
“I can only urge the Government to drop the VAT on interior flights, but then I have been calling on them to drop the taxes on everything else, which is counterproductive to their own stated objectives and the calls are not falling on receptive ears,” Jagdeo stated.
Reports are that the Chief Executive Officer of the Roraima Group of Companies, Captain Gerry Gouveia has already instructed that tickets for his flights must be sold in US currency instead of Guyana dollars.
Jagdeo emphasised that Government, which he labelled as either unconcerned or incompetent, needed to shift its focus from burdening the citizens with taxes and start implementing policies which encourage production, especially in areas which generate foreign revenue like mining, forestry and agriculture.
Failure to do so, Jagdeo predicted, will result in an underground foreign currency market. In fact, he shared the view of Junior Finance Minister Jaipaul Sharma, that the black market was already in operation with cambios conducting underground deals by selling to preferred customers at rates above the market value.
“The cambios themselves will, maybe in some cases, post one rate on the receipt and people have been doing this already. So you are my preferred customer, you pay me G$225 or 230, but I will put G$215 on the receipt for the central bank purpose,” Jagdeo said, noting that this move would cause the Government to lose taxes.
Jagdeo also said he has received information that officials of Government’s “finance apparatus” have been going around to non-bank cambios, instructing them that the US dollar must not be sold for more than G$215.
“They are saying if you sell beyond G$215, it will affect your licence,” Jagdeo said.
One local cambio confirmed to Guyana Times that Government officials had indeed passed that order.
