In a move to stabilise the foreign exchange market, the Bank of Guyana yesterday announced that it was temporarily halting the purchase of Trinidad and Barbados dollars from local cambios.
“We have temporarily stopped buying Trinidad and Tobago as well as Barbadian currency from cambios,” Central Bank Governor Dr Gobind Ganga told a press conference yesterday.
“However, individuals can still come to the Central Bank with legitimate transactions for these currencies,” he was quick to add.
Ganga called the press conference in the wake of recent Kaieteur News reports about a foreign currency shortage here.
Disputing the reports, Ganga said there was no chronic shortage of United States dollars. Instead, he said it “is a temporary situation” which he believes was “being sensationalised.”
“We have dealt with situations where we have dealt with intermittent shortages or seasonal shortages of foreign exchange in the financial system. We are currently working with the commercial banks to ensure that there is adequate amounts of foreign currency to meet legitimate demand,” he said.
He pointed out that the Bank of Guyana has conducted a market analysis, which substantiates his position that there is no reason for panic. “We have conducted, as of today, a market analysis and find that immediate demand is at a maximum of about six million dollars. This has moved from a working bank balance, excluding commitment, from US $10.7million on Monday… requests for foreign currency at that time was almost nothing. They had a surplus of $8.3 million,” he said.
“After this story would have broken, we would have had a number of requests, and as a result, you would find that not all of these requests would have been legitimate demands. We had requested from the commercial banks invoices for this demand and all you would have seen is some letters,” he added.
Central Bank also has evidence that persons from Trinidad and Tobago, Barbados and in some cases Suriname, are buying large amounts of US dollars here. This situation, Ganga explained, was as a direct result of the economic circumstances in those countries.
Making reference to comparative statistics, Ganga explained that figures show that TT dollars in circulation here significantly rose from about $9.1M in 2014 to $38M today. Circulation figures for Barbados dollars currently peg it to about $13M, up from $8M in 2014.
Ganga also pointed to the Banks DIH purchase of 150.1m common shares held in its issued share capital by Banks Holdings Limited (BHL) of Barbados at a price equivalent to about US$25M.
“There was a situation where Banks DIH purchased some shares abroad and there was indeed purchases in the foreign exchange market to satisfy the purchase in terms of provision currency to buy those shares and it is not different from the current legitimate demand,” he explained.
‘Warning’
Saying that the local economy was a “solid” one, Ganga lauded the works of the commercial banks in satisfying local demand for foreign currency.
However, the banks have been warned about the amounts of TT currency they have been buying.
“The commercial banks have made great strides and success in terms of satisfying most of the demand. At the maximum, we are seeing legitimate demand of no more than (US)$6M. We don’t expect that this continuation, in terms of sensationalising that we do have a situation, [a] chronic foreign exchange problem. It is not so. This is something that occurs on a regular basis. From time to time, you will have these seasonal shortages but we do work with the commercial banks and the non-bank cambios to resolve any excess demand, but at this time there is no chronic situation out there,” Ganga noted.
“The commercial banks are dealing with this situation as we speak. Some of them will be bringing back some foreign currencies they had elsewhere to address some of the demand. The banks obviously would like to satisfy the demand… they do have a spread and that spread is monies that will be made in terms of earning from the foreign exchange transactions…. A lot of people would have gone to the commercial banks and to the cambios requesting foreign exchange for speculative purposes and it is very easy. For example, I will go to the bank and take out my credit card and say, ‘Hey, I want to put in four or five thousand US and I will go to Trinidad and will sell that US and will get $4,500 or $5,000. We have asked the bank to always be careful because otherwise we will end up like Trinidad, where Trinidad can’t pay GuySuCo for sugar that was bought over one month ago… it is just US$1M or a rice exporter about $670,000 can’t get paid from Trinidad. It is now reflecting in our system, their problem,” he added.
‘Legitimate demand’
Stressing the point that the Bank of Guyana to date has never refused a request from any commercial bank for foreign currency, he assured that “small individuals travelling” and other persons needing legitimate amounts will be able to get those monies from their local banks.
“I am telling you, they have never come to us and was turned back for foreign currency…the Bank of Guyana and the local banks would have all come to us, whenever, and receive local currency… none of these banks would have approached us for currency and we would have turned them back… Every one of the commercial banks would have received currency if they demanded,” he asserted.
And while many persons over the past few days have rushed to buy US from the local banks, Ganga said that in many of those cases persons have not shown legitimate cause for the monies needed.
“We had requested from the commercial banks invoices to substantiate some of these requests. All that we received were some letters requesting a certain amount sent to a commercial bank, or an email or a verbal request. Obviously, if there is a legitimate demand, you would have an invoice accompanying it. You go in there and make a request via letter or verbal or email but you are not able to provide an invoice that here it is legitimate demand. Take, for example, Demerara Bank, you can’t just walk into Demerara Bank and request half a million or $10,000 or whatever without a legitimate invoice. We just can’t go out there and provide the foreign currencies for reasons that we believe are not legitimate,” he said.
“We have seen (as at today) that there is a demand for about (US)$6M, no more. I mean legitimate demand and we are working with the commercial banks, that is of today, and I have indicated to you that situation arose on Monday out of this panic. Because on Monday morning … there was a situation where the net balance was eight plus million US dollars,” he added.
The Central Bank says that while the current requests stands at about US$6M, “The demand is really no demand. (US$) Six million is really no demand.”
But the bank would not just saturate the market with its reserves as Ganga explained, “You won’t like me to go selling our reserves so that we have a situation in Guyana where we don’t even have enough to buy our basic commodities.”
