Guyana: Central Bank defence amid US dollar shortage

Georgetown, Guyana, CMC – The Guyana government says the responsibility of the Ministry of Finance and the central bank must be viewed at a macroeconomic level, and involves fostering price stability in keeping with international norms and standards.

Vice-President Bharrat Jagdeo said that the Bank of Guyana (BoG) “has to ensure that the money supply, along with the fiscal policy are conducive to growth and, in the long run, (and) don’t cause us to suffer the dreaded Dutch disease, especially in light of the oil and gas proceeds flowing into the economy”.

Jagdeo said that given the free market structure of Guyana’s economy, the foreign currency availability and pricing fluctuate following the market conditions.

Last week, the BoG hit back at the Georgetown Chamber of Commerce and Industry (GCCI) for trying to put the blame on the central bank for the current US currency shortage.

In a statement, the BoG said that it is not responsible for ensuring GCCI members had foreign exchange whenever they wanted it, and advised the private sector body to redirect their attention.

The GCCI had in a statement  last Wednesday said that the BoG had displayed a “lack of action, vision and modern financial policies to improve access to financing for local businesses”.

“The country’s economy is one of the fastest-growing in the world, with oil revenues generating hundreds of millions of US dollars annually. According to its own statistics, the Bank of Guyana has failed to intervene in the ongoing foreign currency shortage issue, despite the private sector complaining of a lack of US dollars since 2019. Therefore, the Chamber views the Central Bank’s inaction to activate mitigating strategies to address the foreign currency situation as a disregard for business,” it added.

But Jagdeo noting the statement issued by the BoG, said that there should be an engagement between the commercial banks, the GCCI, the Private Sector Commission, and the bankers’ association regarding foreign currency concerns.

He said that seasonal variations can result in the appreciation of foreign currency rates coming to the detriment or benefit of select parties.

“We have not one aggregate market, but every cambio in this country operates like a mini market within the aggregate market. So, one bank would have an abundance of supply, but maybe, some other bank may not have the same amount of currency at that same time,” Jagdeo said, suggesting that the establishment of an inter-bank market to facilitate sharing.

He also hinted at some banks practising foreign currency hoarding.

“So, we have to now work at promoting greater exchanges. I was thinking that maybe we need a daily balance, reported to the central bank of currencies purchased and sold, and the daily balance at all the institutions and then the list of demand, and you will see in most cases that they are clear, but they exist at different institutions,” he stated.

Jagdeo said this concept will be discussed further with the Senior Finance Minister, Dr. Ashni Singh.

“The government has to ensure that aggregate demand and aggregate supply in the markets reach some equilibrium, given the objectives of the central bank and the Ministry of Finance.

“We can’t be pandering every time the Georgetown Chamber of Commerce wants to issue a statement. We can’t be pandering to that. We have to look at the macroeconomic objective. So, when we have a firm view on the macroeconomic objectives and if we believe that there is a sustained shortage, we have the means to supply the market,” Jagdeo added.

About The Author