… BoG contends rate quoted is not uniform transaction rate
Government on Wednesday reacted to the statement released by the Guyana Manufacturing and Services Association (GMSA) on Wednesday which suggested that there has been a significant fall in Guyana’s local currency.
While Minister of State Joseph Harmon said the statement was far from reality, the Bank of Guyana (BoG) noted that the release will do nothing more than add fuel to the rising “speculative and destabilising activities in the foreign exchange market”, all of which, it said, could be harmful to the economy.
Bank of Guyana Governor, Dr Gobind Ganga
“The statement by the GMSA is inaccurate, since the $230 to $1 represent a very small representation of the financial market and had to do with the operation of debit and credit cards”. Harmon explained that the bulk of the financial market still has a weighted average of $215 to $1. “That is to say that the buying rate is $216 and the selling rate is $214,” Harmon told media operatives on Thursday.
But his pronouncement was before the Bank of Guyana Governor, Dr Gobind Ganga sent out an official release condemning the GMSA statement.
According to the BoG, the rate quoted by GMSA is not a uniform transaction rate; rather, it is the online rate charged by one of the largest commercial banks in Guyana for its credit and debit card transactions, which represents a very small share of the cambio market transactions.
It reported that for the week ending March 14-17, 2017, the weighted average buying rate was G$214 while the weighted average selling rate was G$218. The turnover for the week, it said was US$40.0 million.
The bank said total purchases and sales at the bank cambios were US$19.6 million and US$20.4 million respectively.
“The aggregate working balance at the bank cambios was US$13.7 million at the end of business on the 17th March, 2017. One bank accounted for 32.8 per cent or US$4.5 million of the total working balance,” the BoG said in a statement.
Further, the bank stated that demand at the end of the week was some US$8.0 million, with two banks accounting for the bulk of that demand. With this in mind, the BoG advised businesses against depending solely on one bank, but to rather pursue other banks to meet their demands for foreign currency at a competitive rate.
Meanwhile, the BoG also reported that there has been hoarding of foreign currency by exporters, as evidenced by the large foreign currency balances that are being held in their exporters’ retention accounts. It said instead of using these balances to complete their transactions, they have been sourcing foreign currency in the market.
“This has added further pressure on the demand for foreign currency and reduced the supply to the market. Both of these factors have contributed to the instability and depreciation of the rate,” the bank stated.
The bank reiterated that there is sufficient foreign currency in the market to meet legitimate demand, continuing that the patience and cooperation of stakeholders are needed, to ensure that there is no undue speculation and further deterioration in the rate.
The GMSA in a public statement on Wednesday estimated that the real exchange rate when available being used for the purchase of foreign exchange is $230 for the replacement of imported inputs into the sectors. It said it considered the issues affecting the manufacturing sector, including the reported deteriorating rate of the Guyana dollar and dire impacts it will have on business and employment.
As a result, the GMSA is encouraging all of the sectors to implement cost cutting exercises and have noted that some entities have started to rationalise employment.
The GMSA has also called on Finance Minister Winston Jordan to urgently hold Broad consultations on the matter and warned that failure to arrest the situation will result in devastating consequences.
