IMF recommends Guyana review its foreign exchange rate framework

– to mitigate medium-term financial risks

Given the 38 per cent economic growth Guyana is projected to achieve this year, the International Monetary Fund (IMF) has recommended that this country review its exchange rate framework and continue monitoring the financial sector to mitigate monetary risks.
The IMF recently completed its 2023 Article IV consultations, noting that Guyana’s Gross Domestic Product (GDP) will grow by 38 per cent in 2023. Last year, Guyana recorded real GDP growth of 62.3 per cent – the highest in the world. And according to the Fund, public investment had a major role to play in non-oil economic growth.

According to the IMF, there are medium-term risks of inflation and real exchange rate appreciation. As such, the team recommended continued focus on maintaining macroeconomic stability and close monitoring of economic indicators. In the medium term, the IMF also recommended a review of the exchange rate framework.
“Given the medium-term risks of inflationary pressures and real exchange rate appreciation beyond the level implied by a balanced expansion of the economy, staff recommend a continued focus on maintaining macroeconomic stability through an appropriate policy mix. Staff welcomes the policies to sustain growth into the longer term while maintaining debt sustainability and a balanced growth path,” the Fund said.
“Staff recommend continuing close monitoring of macroeconomic and financial indicators, tightening monetary policy stance and using macroprudential tools as needed (eg, loan-to-value ratio or debt-to-income requirements). In the medium term, staff recommends a review of the exchange rate framework to ensure that it best serves the economy.”
The Government has been playing an integral role in maintaining financial stability, especially as concerns have been raised by some about foreign currency shortages. However, it has been explained by the Government that there was, in fact, no foreign currency shortage.
During a recent press conference, President Dr Irfaan Ali had announced that Finance Minister, Dr Ashni Singh would meet with stakeholders on Monday to discuss the availability of foreign currency on the market and other related concerns. That meeting has since been held.
“I’ve seen a lot of debate in relation to the foreign exchange rate and availability of foreign currency. It is important for us to understand that the foreign exchange market and the rate on the foreign exchange market is no longer determined by the Government, but, to a large extent, by market forces or demand and supply,” he had underlined.
A statistical review was done and based on numbers provided by the Bank of Guyana (BoG), Ali positioned that Guyana has sufficient foreign currency for existing demand and this issue has been heavily surveilled.
“When I reviewed the statistics from the Bank of Guyana and cambios, and listening to the Governor of the central bank and the technical team, they’re of the opinion – based on the data – that they have sufficient foreign currency to satisfy the existing demand and there is continuous surveillance of this. There are daily reporting mechanisms on the clearing of the market by the central bank.”
In the first quarter of 2023, the local Private Sector and the BoG got into a public debate over the availability of foreign currency, United States dollars in particular. During that time, there had been conflicting reports from both sides on this issue after several companies and businessmen complained about a shortage of US dollars in Guyana.
While the Georgetown Chamber of Commerce and Industry (GCCI) was claiming a shortage of foreign currency, this was dismissed by the BoG Governor, Dr Gobind Ganga, who contended that there was enough money in the local market.
The BoG had noted that there was enough foreign currency to cover the cash flow needs of transactions arising from businesses in Guyana, but Dr Ganga had previously indicated that some banks could be “hoarding” their foreign currency which could have been the cause for the apparent “shortage”. (G-3)