Last Updated on Thursday, 23 March 2017, 17:45 by Denis Chabrol
The Bank of Guyana (BOG) on Thursday accused exporters of causing a slide in the Guyana dollar by locking off foreign exchange in their accounts while at the same time buying currencies on the open market.
“The BOG noted 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.
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 Central Bank said in a statement.
This is the second time in several months that the BOG has offered major reasons for the plummeting exchange rate; the first having been that persons had been coming to Guyana with large quantities of Trinidad and Tobago, and Barbados dollars and selling them on the Guyanese market. In turn, they had been using Guyana dollars to buy and take out large amounts of United States (US) dollars.
The Central Bank at that time had been forced to stop buying Barbados, and Trinidad and Tobago dollars. However, the depreciation of the exchange rate continued, again prompting the BoG to set a three Guyana dollar spread between the buying and selling rates.
The rate has since slipped from GYD$210 – GYD$213 at non-bank Cambios to GYD$215 – GYD$218, but foreign currency traders said if large amounts of US dollars in US$100 or US$50 dollar bills are being traded, the rate can be high as GYD$220 for US$1.00.
Expressing concern about the Guyana Manufacturers Association’s (GMSA) concern that the effective exchange rate has slipped to GYD$230, the BOG said that is a misleading account of the situation and that is helping to fuel rising speculation and destabilization in the foreign exchange market “all of which could be harmful to the economy.
“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 represent a very small share of the cambio market transactions,” the BOG said.
The GMSA has warned that companies would be adversely affected and workers could soon lose jobs if the Central Bank does not intervene in the market to arrest the devaluation.
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 was US$40.0 million, said the monetary authority in its statement. The BOG added that purchases and sales at the bank cambios were US$19.6 million and US$20.4 million respectively.
The BOG added : “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 % or US$4.5 million of the total working balance. Demand at the end of the week was US$8.0 million, with two banks accounting for the bulk of the demand.
The Bank of Guyana advised businesses not to depend solely on one bank, but to pursue other banks to meet their demands for foreign currency at a competitive rate.
The Central Bank used the opportunity to reassure Guyanese that there is no shortage of foreign currency and urged players in the market to stop speculative activities. “The BOG continues to reiterate that there is sufficient foreign currency in the market to meet legitimate demand. The patience and co-operation of stakeholders are needed, therefore, to ensure that there is no undue speculation and further deterioration in the rate.:
Travel agents on Thursday expressed concern that Roraima Airways issued a formal notice that Dynamic Airlines’ tickets would be calculated at GYD$250 with immediate effect, up from GYD$230.
TravelSpan has also told agents that they should now sell tickets at a rate of GYD$220 instead of GYD$216. Caribbean Airlines is the only one, sources said, is using the Bank of Guyana’s posted rate of GYD$208.44
Demerara Waves Online News also checked the exchange rate being used by a number of shipping and courier companies. Only DHL is using a rate of GYD$200, while La Parkan is pegging its transactions at GYD$218, Fedex at GYD$221 and PasPak at GYD$240.