It is almost a month since the Bank of Guyana (BoG) implemented a limit of $3 on the spread of the buying and selling rates for foreign currency and several cambio dealers say they are recording a slight decrease in business and still believe the decision should be rescinded.
Last month, Stabroek News had reported that several circulars from the BoG, which were issued to currency traders on February 2, stated that they had to fix the spread between the buying and selling rates to no more than $3, which observers felt constituted the biggest rollback in the free trade of foreign exchange in decades.
The three circulars which were issued to bank cambios, non-bank cambios and money transfer agencies likely signaled concern over weeks of stress on the foreign currency market. Businesspersons and citizens had been complaining that their applications for foreign currency were being met with delays and were being placed on waiting lists. Concerns were mounting that the distensions in the market may have signaled a lack of confidence in the economy, and led to incidents of capital flight.
This week, some businessmen have reported being offered US$ at up to 219 to 1 which would represent a significant weakening of the local currency.
Each of the circulars said that the Bank of Guyana was taking steps 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”.
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 were 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 were also to be reported to the Bank of Guyana.
When Stabroek News visited several Cambio Dealers and Banks around the city yesterday, all of them were adhering to the spread, except for Scotia Bank. Republic Bank and Guyana Bank for Trade and Industry were buying the US dollar at $207, and selling at $210, Demerara Bank was buying the US dollar at $202 and selling at $204, while the Scotia Bank branch on Robb Street was buying the US dollar at $199 and selling at $210.
However, while most of the Cambio Dealers were reluctant to comment on the situation, for fear of being victimized, one of them explained that since the implementation, he has recorded a slight drop in his business. He said since the spread was enforced last month, he has seen less customers come to do business at his cambio. He expressed the opinion that more persons are being pushed towards the money changers on the street.
He noted that he is still against the change and is still pleading with the officials at the BoG to rescind their decision, and to let the currency trading market flow on its own. He argued that just like any other good, the price of currency depends on the supply and demand rule.
“Just like a store selling goods, you can’t tell the store how much to sell the product for. You can’t look at how much they paid for it and then say that they can only sell it back for a specific amount, it doesn’t make any sense,” the man said.
He further emphasized that the supply and demand drastically affects the price at which currencies are bought and sold for. He said that whenever there is a surplus of currency and the demand is down, the cambios voluntarily drop their prices without any intervention from the BoG, and as such, the traders should be able to freely control the flexibility of their spread.
Another explained that since the currency market in the country runs parallel with the international one, the money could drop any day, and because of the restrictions of the spread, they would lose money.
Stabroek News also spoke to several of the money changers around America Street who explained that business was normal for them. However, they pointed out that they were not being guided by any spread, and their price varies on a daily basis.
