By Vishani Ragobeer
Guyana’s Vice President, Dr. Bharrat Jagdeo says the government can supply the market with foreign currency if there is a sustained shortage but he believes that there is enough foreign currency available.
“If we believe there is a sustained shortage, we have the means to supply the market.
“But we don’t want to supply the market so that the rate appreciates so a few people can get cheaper foreign currency,” Vice President Jagdeo said on Friday during a press conference.
Though hinting at the government’s ability to tap into foreign currency reserves to remedy money shortages, the Vice President, however, opined that there is enough foreign currency currently available.
In fact, he said the currency is spread across institutions like banks but they may be reluctant to share with each other.
“When they look at the market itself, the market in aggregate is clearing.
“… but every cambio in this country operates like a mini market within the aggregate market, so it truncates the supply and demand for foreign currency,” the Vice President said.
Further, he noted that some commercial banks may be low on foreign currency reserves on a particular day but another commercial bank may have an excess on that same day.
In simpler terms, Jagdeo’s argument is that there is enough foreign currency in the country to meet local demands. But that currency may be spread, in varying amounts, across different bodies like the banks and cambios.
So if one businessman cannot access US dollars at one bank, for example, he believes the money can be provided by another bank.
“But if you had an interbank market, or people don’t keep money only for their customers, like some of the banks do, then people would be able to go to another bank and clear and get the currency,” Dr. Jagdeo said.
Because that free flow of currency from one institution to another in cases of shortages and excesses is not happening, the Vice President said other solutions are being mulled.
One solution is a daily balance report given to the Bank of Guyana, which is Guyana’s central bank. That report, Dr. Jagdeo said would detail the daily amount of foreign currency bought and sold.
And such a report, he said, would show that there is indeed enough money throughout the country to meet demand.
A similar assertion that there is no foreign currency shortage, was made by Bank of Guyana Governor, Dr. Gobind Ganga when he spoke to the News Room days ago.
He also suggested that there may be some hoarding of foreign currency.
Still, private sector players are complaining of a shortage of foreign currency, specifically US dollars, needed to conduct transactions locally.
A greater demand for payments in US dollars is, in part, blamed for the issue.
Because of this apparent problem, the President of the Georgetown Chamber of Commerce and Industry (GCCI), Timothy Tucker is among those who called on the Bank of Guyana to intervene and help resolve the increasingly burdensome situation.
But the Central Bank, in a statement issued on Thursday, maintained that it is responsible for fostering domestic price stability through the promotion of stable credit and exchange conditions.
And it reminded private sector players that Guyana’s laws stipulate that the Guyana Dollar is a freely floating currency, traded in a market whose prices are determined by prevailing market conditions, that is to say demand and supply.
In a press release issued on Thursday, the GCCI noted that it has lost confidence in the leadership of the Central Bank and its capacity to implement policies that will guide Guyana’s financial sector to support growth being experienced in the real sector.
Because of the multiple, simultaneous issues, Dr. Jagdeo encouraged the private sector players to engage the commercial banks and the banker’s association.
He also explained that the government is maintaining its firm stance on money supply as part of the government’s monetary policy to prevent the dreaded Dutch disease that has impacted several new oil-producing nations.
For context, the Dutch disease or natural resource curse, as it may also be called, occurs when an economy experiences “distorted development” where there is a “boom” in one sector of the economy (such as the oil and gas sector) while other sectors (like agriculture and manufacturing) may be left shrunk, neglected or marginalised.
With this disease, demands from the booming sector may subtract from capital investments and labour in the other sectors, thereby making them less competitive.
Dr. Jagdeo explained that the Central Bank has to diligently control the money supply, more so now because oil and gas proceeds are flowing, so that investments in the petroleum sector do not adversely impact the non-oil sector.