Guyana tightens foreign exchange trading; Central Bank ready to intervene when necessary – officials

Last Updated on Thursday, 31 October 2024, 14:51 by Writer

Though many non-bank cambios are selling United States dollars at a rate of GY$219 for US$1, Guyanese are being assured that there is sufficient foreign exchange in the l0cal market and there are new rules governing currency trading.

“Most of the banks are comfortable but when they have this money, they just give it out to make profit so we review and we ensure that everybody gets their money,” an official said.

A senior financial institution official said commercial banks were told by the Bank of Guyana not to sell US dollars for more than GY$216.25 or US$216.50 and that each individual was now entitled to a maximum of US$1,500 cash. “You don’t want the exploitation of people going and buy it there and you can’t go steady and buy too and you must go to your bank so if you want to go overseas you get some cash at a very reasonable rate,” the source said.

The source also said commercial banks were told not to entertain lumpsum multi-million Guyana dollar purchases of foreign exchange say, as a result of property sales. The banks were further instructed to small amounts for such transactions when there is excess foreign exchange. Indications are that the banks must sell foreign exchange to importers of food and other vitally important supplies rather than investing abroad.

Vice President Bharrat Jagdeo on Wednesday said “we’re carefully monitoring the market” to avoid the strengthening of the Guyana dollar too much and prevent the onset the Dutch disease or weakening too much. He observed that over the years the rate has been moving around 212 to 222 and declines when there is an injection of currency into foreign exchange (forex) market. Economists say that the Dutch disease can be tackled by holding inflation and increasing productivity.

The Bank of Guyana recently released almost US$100 million into the forex market, and Mr Jagdeo said government was ready to pump more into the system. “Our reserves now will allow us to intervene at any time. We have enough reserves to do that but it has to be not only if one person moves the system. It has to be when we assess that the aggregate demand is exceeding aggregate supply to the market,” he said.

The banking sector was also said to be keeping a watchful eye on a number of Trinidadian companies operating here that might also be purchasing goods for their Trinidad operations through Guyana’s foreign exchange market. Trinidad and Tobago is experiencing a severe foreign currency shortage. Mr Jagdeo said the total forex flow is matching the total demand, but there were actors in the market who were grabbing chunks of foreign exchange. He said part of the demand was being driven by the upcoming Christmas season importation of goods, capital works, and economic expansion. “If we believe its speculative, and we believe that there is some of that with some Trinidadian companies paying for their goods from here directly because they have foreign exchange control, they don’t have foreign currency there, but outside of that we believe a lot of it is driven by the real demands here,” he said.

If there is an oversupply of foreign exchange, he said the Bank of Guyana would buy back from the market to ensure evenness.