New policies will drive away investors – Private Sector
Foreign exchange fiasco
The Private Sector Commission (PSC) has condemned the new regulations announced by the Government to stabilise the foreign exchange markets. According to the Commission, the new policies announced will only drive investors away.
According to the PSC, which made a statement on Friday, stricter regulations and closer monitoring of the exchange market are policies which affect the free flow of
PSC Chairman Edward Boyer
money and do not bode well for an already slow economy.
It expressed consternation at Minister of State Joseph Harmon’s pronouncement on Thursday at a post-Cabinet press briefing.
“The Private Sector Commission strongly condemns this move by the Government which would have the certain effect of accelerating the capital flight, which has already begun with the erosion of confidence in the economy.”
The Commission warned that the stated intentions of Government to introduce restrictions will specifically affect the repatriation of earnings of foreign companies operating in Guyana.
“Foreign direct investment in the economy has already slowed and a policy which prevents the repatriation of the earnings of these companies has the potential to move the influx of investment from a trickle to a halt.”
The PSC stated that it wishes to remind Government that the country has gone down this path before with disastrous consequences to the economy. “The Guyana economy can ill afford the certain deleterious effects of history repeating itself.”
Recently, there have been reports of a shortage of foreign currency in the system. Finance Minister Winston Jordan and Bank of Guyana Governor, Gobind Ganga, have consistently denied this.
It was at the opening of Citizens Bank on January 20 that Jordan had announced that on the supply side, some exporters have been withholding sales of foreign currency to the system.
This, he had stated, was possibly with the hope of provoking a depreciation of the domestic currency in order to maximise their Guyana-dollar profits.
“Aggravating this untenable situation is the action of some net foreign exchange earners, who are demanding foreign currency from the market, while hoarding their foreign currency holdings.
Some companies are even purchasing foreign exchange to facilitate trade for their counterparts outside of Guyana, while a few exporters and importers are conducting foreign exchange transactions bilaterally, outside of the foreign exchange market,” the Finance Minister stated.
According to Jordan, the gap between the buying and selling rates for foreign currency, especially in bigger banks, had led to some level of disintermediation.
“These banks act as the pacesetters in the pricing of foreign currency and interest rates. They have great influence in creating uneven competition for smaller banks. These developments have artificially stressed the foreign exchange market,” he said,
Jordan had then issued an ominous warning. He stated that if the Government’s entreaties to those involved did not work, then action would be taken against the guilty parties.
New measures
At the post-Cabinet press briefing on Thursday, Harmon projected the Government’s will when he announced upcoming measures aimed at ensuring that exporters repatriate their export earnings.
“The Bank of Guyana is therefore expected to issue a number of guidelines with regards to the new regulations and monitoring,” he said.
Harmon added that these will include ensuring that exporters repatriate their export earnings at the banking system as is required and conducting close monitoring and examination of bank and non-bank cambios to maintain orderly market behaviour and stability.
According to the Minister of State, measures were also taken to ensure that all foreign loans and grants issued are disbursed on time, so as to increase the flow of foreign currency in the country.
Meanwhile, addressing reports of commercial banks syphoning foreign exchange to selective clients, Harmon posited that these new guidelines are aimed at preventing such practices. He noted that previously, Central Bank could not have stopped this practice because of the quality of oversight it had then; however, he noted that this situation will soon be reversed.
