Central Bank Governor says routine opening of foreign exchange accounts too risky

Last Updated on Tuesday, 26 November 2024, 21:39 by Denis Chabrol

Governor of the Bank of Guyana, Dr Gobind Ganga.

Governor of the Bank of Guyana, Dr Gobind Ganga on Tuesday virtually ruled out allowing the routine opening of United States (US)-dollar accounts at commercial banks here by anyone, saying that could put the country’s foreign reserves at risk.

Told that the Jamaica Central Bank on Monday hailed the fact that people there were being allowed to freely opening of foreign exchange accounts, he said Guyana’s geographical proximity to neighbouring countries across land and river boundaries makes this country vulnerable to financial crimes.

“You are living in a country that obviously has neighbours who are also demanding quite a lot of foreign exchange so we have to be very careful what we are extending ourselves into in terms of foreign exchange accounts. Those have to be taken by its merit.

We have to be very careful; we are not Jamaica. We are Guyana; we are surrounded by land. We have neighbours easy to reach, easy to transact certain types of business and we’re talking about money laundering here obviously. There are a lot of ways and means of shifting money so we have to be very careful what we’re doing as opposed to an island which you can monitor by just standing up on some pole or somewhere,” he told a forum titled “Banking Made Easier”, that was organised by World Trade Center Guyana and Demerara Bank Limited.

Currently, foreigners are allowed to open foreign exchange accounts at local banks to facilitate foreign deposits from exports and foreign transfers rather than buying cash locally and depositing it.

The Central Bank Governor did not name any country, but both neighbouring Suriname and Venezuela have been suffering from prolonged shortages of foreign exchange. Trinidad and Tobago, a twin-island nation separated from Guyana by sea, has been using this country’s foreign exchange market because of a US dollar shortage there.

He said millions of US dollars were being “moved out” of Guyana. “We have to be very careful. There was one instance where a major company…that was involved in the same type of business you’re seeing and sending money out,” he said. The Bank of Guyana has reportedly issued strict directives on forex trading including only for food, manufacturing and pharmaceutical imports along with guarantees of US$1,500 for personal travel.

Responding to a question from one of the participants about why small businesses were experiencing difficulty opening US dollar accounts, the Central Bank Governor questioned why she wanted a US dollar account although she was functioning in an economy whose activities are in Guyana dollars. She explained that her entity manufactures a special type furniture for a foreign niche market from which she would like to receive US dollar payments.

Meanwhile, the Central Bank Governor said if the US dollar strengthens that would have an impact on the prices of gold and oil as a store of wealth. While he said the Guyana dollar would weaken, this country’s goods would become more competitive and export more of those commodities such as oil for which “we are not price takers”. He said there were  a lot of opportunities in agriculture and the services sector fir which more Guyana  dollars could be paid. “You might be able to have much more benefit from an appreciated American dollar as opposed to that of a Guyanese dollar appreciation which could have significant trade and domestic effect on our economy,” he  said after delivering a presentation on the topic “Banking Regulations and the Anti-Money Laundering Landscape in Guyana”.

He acknowledged that Guyana was increasing its international trade, but stressed that the local dollar rather than the US dollar is the reference currency. Dr Ganga cautioned against confining the independence of the monetary policy because transacting in foreign currency would cause credit, growth and inflation problems.