Rates regulation by Central Bank unlawful – Nandlall

Former Attorney General Anil Nandlall is of the view that the Central Bank cannot lawfully control the foreign currency rates of licensed operators.

In efforts to streamline the foreign currency market, Government through the Central Bank issued a circular to cambios and the local banking sector informing them of the regulated rates for foreign currency trade.

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 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, said this requirement must be applied in an effort to “improve the efficiency, depth and liquidity of the foreign exchange market.”

Moreover, Central Bank outlined that this new measure is in accordance with Section 7 of the Dealers in Foreign Currency (Licensing) Act.

However, Nandlall in a statement to the media on Thursday pointed out that Section 7 of the Act clearly does not empower Central Bank to issue the type of guidelines which touch and concern the rates at which foreign currency can be sold by a licensee.

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.

According to the former Attorney General, “new conditions cannot be unilaterally imposed upon the licensee, expo facto, the grant of the licence; and perhaps of greater significance, conditions and guidelines cannot be issued which are in breach of the Act, or indeed, with any other law.” Moreover, he went on to cite 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.

Nandlall opined that the language and spirit of the Section is quite clear in that it harbours no room for ambiguity or equivocation. He further explained that the Section says it is the licensee and no one else who shall determine the selling price of foreign currency sold by that licensee.

“The Central Bank can lawfully play no part in fixing or influencing those prices… In the circumstances, it is my considered view that the guidelines issued by the Central Bank in so far as they seek to influence the price at which foreign currency is sold by a licensee, is ultra vires, the Dealers in Foreign Currency (Licensing) Act, Chapter 87:01, and unlawful,” Nandlall pointed out.

Following this move by Government, several of the cambio dealers have predicted major losses with the new regulations imposed by Central Bank. One of them previously explained to this newspaper that it is unfair to restrict the trade of currency – a commodity which usually depends on world market prices. “It’s all about demand and supply. I don’t think they (Government) understand the trade.”

Another dealer said that by imposing such a limit on the prices, cambio dealers stand to suffer significant loses when the world market prices fluctuate.

The dealer explained that if a particular foreign currency is bought for G$150 today and then tomorrow the selling price drops to G$140 on the world market, then by forcing cambios to sell the currency at the highest $143 would be detrimental to their business.

They were also concerned about the duration of this imposition and how badly it will affect their earnings in the long-term.