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OPINION: Foreign exchange rate spike exposes so much that is wrong here

by GHK Lall

The Demerara Waves Online News article dated October 9 titled, “Bank of Guyana probe uncovering reasons for US notes shortage at cambios covered a lot of territory. In many respects, it has been fiercely contested territory.

The focus and thrust of the Demerara Waves item were on the role of nonbank cambios in the ongoing foreign currency shortage on the street. It looks confirming of suspicions and damning in implications. In real terms, the calculating, unscrupulous street governs; the commercial banks are either followers or passive or negligible in dictating what should prevail as to rates. 

But my emphasis is not on nonbank cambios. Rather, I point to this extract from Wednesday evening’s press briefing attended by the Honorable Minister of Finance and the Governor of the Bank of Guyana: “the Finance Ministry and the Bank of Guyana had observed that licensed gold exporters had not been injecting their foreign earning back into the local economy.” That was supposedly a year ago. Truth be told, matters may be the same as before, or not much different from what they were in 2018.

In the clearest possible wording, I seek to expand what “licensed gold exporters had not been injecting” means. This means that they have NOT been repatriating the gold monies; NOT been bringing back some of the foreign exchange returns from gold exports back to the Central Bank. Some of the gold proceeds may mean any substantial percentage and going to the heights. The foreign exchange money may be coming back to Guyana, but the Bank of Guyana is saying that it is not coming to us, at least, not a year ago. Now the onus is on all of the responsible state financial institutions to track and ascertain if the monies are coming back, then how, and to where. And if not to the Bank of Guyana, why not? And if elsewhere, why?

I submit this because the official assertion was made more than once inside the GGB, and at other forums, that the foreign exchange returns were not coming back to Guyana in any recognizable form or substance. This was strenuously objected to on every occasion. This contention was shared with other involved government agencies. There matters rested, until now. It is enlightening to hear publicly (and at long last) a definitive statement that it is indeed not as represented by the gold dealers authorized to export gold.

The insistent representation was that “100%” of the foreign exchange from gold exports were coming back to the Central Bank. Well, if my understanding of the English Language holds, then the Central Bank just shattered that concoction and illusion and misrepresentation. I submit that it could have been innocent misrepresentation. Innocent because even a senior official of a private financial institution went to great lengths to go on record and attest that “100” of the foreign exchange proceeds make their way back into Guyana, that such is traceable, that such is accounted for, and that such has always been the case. I do not think that that was what was articulated in the most unambiguous and authoritative of terms before the media on Wednesday evening. Today, I read something different from that “100% (mis)representation; maybe even the opposite.

Now, we are all human. Mistakes are known to be made, incompetence flourishes, and memories fade. In the rush of commerce, things and times get tangled. I can make allowance for all that, but I cannot do so when that takes bread out of the reach of the poor. That includes me. I cannot pretend at ignorance, or offer the mitigation of understanding and compassion, when the handiwork of the conscientious is undermined and negated. That extends way beyond any single individual.

For when there is shortage and spikes in rates, then there is a corresponding strike at the cost of things once at the financial fingertip. Shortages and spikes in rates bring squeeze and pain. Perhaps, it is intended. To play the money markets may be permissible here, but only if done within the bounds allowed. I think I read of a maximum spread of $3 between the bid and offer. Somebody must mind that store. People can play at politics also, they are entitled to that and are good at it here. Well, so they believe, and that nobody can detect the farce of the games being played, and the toying with truth to rearrange reality, economic reality. Politicians offer the solace of silence. Economists bury head in sand. This is reality.

To give an idea of what is involved here, I tender the following for consideration. Over 500,000 Troy ounces of gold was exported in 2018. Using an average price – which is generous – of US$1,200 translates to a lot of American dollars. Well, it should be in the vicinity of over half a billion (repeat: billion) of ‘In God We Trust’. It seems that Guyana is still operating on the old ‘trust’ system, which makes for so many bad friends. Bad friends are always short: short of foreign currency supply, short of appreciation, short of reciprocation for the considerations extended.

I think that now that this is in the public domain, it is imperative that all state authorities go to work to determine where things stand. When the foreign exchange supply is withheld, tampered with, toyed with, then a line must be drawn, many of them. Because when those sabotaging actions take place, then the peoples of this country are held to ransom and made to feel pain.