Former Attorney General Anil Nandlall says that circulars from the Bank of Guyana (BOG) on February 2nd to cambios fixing the spread between buying and selling rates is ultra vires of the law.
The BOG wrote both bank and non-bank cambios fixing the spread between the buying and selling rates at no more than $3. The BOG in the circular said it was taking this action to “improve the efficiency, depth and liquidity of the foreign exchange market and in accordance with section 7 of the Dealers in Foreign Currency (Licensing Act) 1989”.
In a statement yesterday, Nandlall said that this action by the Central Bank is beyond the powers set out in the Dealers in Foreign Currency (Licensing Act) 1989.
He argued that Section 9 (3) of the Act provides that:
9(3)?The price at which a licensee may buy or sell any foreign currency shall be determined by the licensee and shall be displayed at a prominent place on the licenced premises.
“To my mind, Section 9 is quite clear in its language and spirit. It harbours no room for ambiguity or equivocation. It is the licensee and no one else who shall determine the selling price of foreign currency sold by that licensee. The Central Bank can lawfully play no part in fixing or influencing those prices.
“In the circumstances, it is my considered view that the guideline issued by the Central Bank in so far as they seek to influence the price at which foreign currency is sold by a licensee, is ultra vires, the Dealers in Foreign Currency (Licensing) Act, Chapter 87:01, and unlawful.”
He also posited that Section 7 of the Dealers in Foreign Currency (Licensing) Act, Chapter 87:01 which was cited by the BOG in the setting of the spread was not applicable.
This Section provides that:
7 (1) ?Every licence shall be subject to the provisions of this Act, and as such conditions may, from time to time, prescribed or specified in the licence.
(7(2) ?The conditions as to the furnishing as security by the licensee, the amount and forfeiture thereof and the owner of the bank to vary the amount of the security from time to time.
“It is clear that this Section does not empower the Central Bank to issue the type of guidelines which touch and concern the rate at which foreign currency can be sold by a licensee. Moreover, new conditions cannot be unilaterally imposed upon the licensee, expo facto, the grant of the licence; and perhaps of greater significance, conditions and guidelines cannot be issued which are in breach of the Act, or indeed, with any other law”, Nandlall asserted.
The three circulars issued to bank cambios, non-bank cambios and money transfer agencies likely signal concern over weeks of stress on the foreign currency market with businesspersons and citizens complaining that their applications for foreign currency have been met with delays and placement on waiting lists.
The circular to commercial banks on the operation of bank cambios stated that they must reduce the spread between the buying and selling rates “to no more than G$3, and no more than G$1.50 in wire transfers”.
Further, the circular said that sales of foreign currency to large importers by commercial bank cambios should only be countenanced upon the presentation of a valid import invoice.
The circular added that credit cards issued by commercial banks are only to be used for the purchase of goods and services for non-commercial purposes and not business activities.
The circular to non-bank cambios stated that they must also reduce the spread between the buying and selling rates to no more than $3 and that the selling rate of all foreign currencies must reflect the board rates displayed by the cambio.
In their circular, money transfer agencies were told that they “shall sell their monthly net inflows to licensed bank cambios with a maximum of 25 percent of such inflows being sold to any one of such cambios”.
All daily sales must also be reported to the Bank of Guyana.
On February 2nd, the same day the circulars were issued, Minister of State Joseph Harmon had signalled tighter monitoring of the foreign exchange market. He told a post-Cabinet briefing that commercial banks and non-bank cambios will be subjected to much closer scrutiny by the Bank of Guyana as government strives to address unease over the availability of foreign currency.
Harmon said that one of the first to feel the effects of the stricter regulations will be an unnamed overseas-based company, operating locally, which has remitted more than US$100M to its foreign accounts.
On the very day, the Private Sector Commission (PSC) condemned Harmon’s remarks.
“The Private Sector Commission …warns against the stated intention of Government to introduce restrictions preventing the unfettered repatriation of earnings of foreign companies operating in Guyana. Foreign direct investment in the economy has already slowed and a policy which prevents the repatriation of the earnings of these companies has the potential to move the influx of investment from a trickle to a halt.
“The Private Sector Commission wishes to remind Government that the country has gone down this path before with disastrous consequences to the economy. The Guyana economy can ill afford the certain deleterious effects of history repeating itself”, the PSC said.
