-says can inject currency at any time
Government yesterday assured that it is monitoring the flow of United States dollars here as demand is currently up with persons stepping up their purchasing for the Christmas holiday season, and says that it has the ability to inject currency at any time.
However, it cautioned that any injection will be based on data driven necessity and increased demand and not by persons who want to manipulate the system for their own gain.
“I can assure you that we are watching it very carefully,” Vice President Bharrat Jagdeo yesterday told a press conference.
He noted that trends show that as the Christmas holiday season approaches, the demand is higher given that is the highest spending period in Guyana and government is assessing when an injection would be needed. However, he stressed that that decision will be market driven.
“I made it clear the last time we met with the bankers and we put in 100 million in the system. Our reserves now allow us to intervene at any time; we have enough reserves to do that but it must not be when one person moves the needle, but when we assess that the aggregate demand is exceeding aggregate supply to the market, that is when there is cause for intervention. I have the people looking at the market and if there is necessity, particularly as we come up to Christmas,” Jagdeo said.
“The increased demand for the procurement of Christmas things… a lot of people are now buying goods for Christmas and they have to make payments. So maybe it is time to look at evening out the market. And even if there is an oversupply in December, we can buy back from the market because that is how the Central Bank works,” he added.
The Bank of Guyana has said that total foreign exchange transactions for the first half of this year increased by 39 per cent to US$9,889.1 million compared to the first six months of last year. It has assured that the exchange rate for US dollar is expected to remain “relatively stable” and flows to the market are expected to adequately cover imports.
The assurance in the recently released report comes amid public expressions by businessmen about difficulties in sourcing US dollars for imports.
The report said that the rise in foreign exchange business is due to increases in transactions through bank and non-bank cambios, foreign currency accounts, and hard and soft currencies. Transactions through foreign currency accounts and cambios accounted for 84.2 per cent of the total volume of trade. The Guyana dollar mid-rate, used for official transactions, remained unchanged at $208.50.
The total value of foreign currency transactions was US$9,889.1 million, representing a 39 per cent or US$2,772.8 million jump from one year ago. Aggregate purchases and sales were both higher at US$4,881.7 million and US$5,007.4 million respectively, resulting in a net purchase of US$125.8 million, the report said.
Transactions at the cambios amounted to US$3,965.4 million, representing 40.1 per cent of the total market turnover. Bank of Guyana’s transactions totalled US$1,550.6 million or 15.7 per cent of the market share. Foreign currency accounts and soft currency transactions were US$4,362.6 million and US$10.5 million, respectively, and together, made up 44.2 per cent of the market share.
The turnover generated by the banks and non-bank cambios was US$3,965.4 million, a rise of US$688.9 million or 21.0 per cent, compared with the same period last year. Cambio purchases were US$1,973.1 million while sales were US$1,992.3 million.
Total transactions for the six bank cambios was 21.3 per cent greater at US$3,929.7 million when compared with US$3,240.8 million for the same period last year. The non-bank cambios’ transactions declined by 0.1 percent to US$35.6 million while bank cambios’ share of the market increased marginally to 99.1 per cent. The market share of the non-bank cambios declined slightly to 0.9 percent.
Among the four major currencies transacted, the US dollar was dominant with a market share of 96.0 per cent. This was followed by the Euro with 2.0 per cent, the Pound Sterling with 1.2 per cent, and the Canadian dollar at 0.8 per cent.
Transactions by non-resident, government, hotel/ tourism, engineering, ‘other’, insurance/finance, and mining/dredging segments, together accounted for 93.9 per cent of total foreign currency accounts business. Transactions of CARICOM currencies rose to US$10.5 million from US$9.9 million at the end of June 2023. The Trinidad & Tobago, Barbadian, and Eastern Caribbean dollars represented 94.7 per cent, 3.7 per cent and 1.6 per cent, respectively, of the total volume of trades in regional currencies.
The Bank of Guyana has said that, “The exchange rate of the Guyana dollar to the US dollar is expected to remain relatively stable due to a net supply of foreign exchange to the market. Moreover, foreign exchange flows to the market are expected to adequately cover imports.”
Currently the commercial banks are charging card holders $218 to US$1 for foreign exchange purposes.
At cambios in the city, the rates on their notice boards are different to what they are selling at internally as selling rates are $220 for US$5 dollar notes although some are paying customers as little as $200 for the small notes.
The US$50 and $100 are being sold at $225 to US$1 and it is unclear if the Bank of Guyana is aware of the cambio transactions.
Jagdeo said that government was carefully monitoring the market.
“We are carefully monitoring the market. The idea is not to have the currency appreciate too much because of the same Dutch disease phenomenon, nor do we want it to depreciate significantly. There is that band over the last several years – it moves from $212 to $222 for US$1 or somewhere there – and then comes back down when there is an injection in the market. We believe that the flow of foreign currency, in aggregate sense, is matching the demand, in aggregate sense, but you have a balkanized market and that is what we try to help with from time to time,” he said.
“And you do have significant amounts of activities funded here. A lot of the capital works and the expansion of the economy sees greater demand for currency for that; for real transactions,” he added.
He pointed out that there have been assertions that Trinidad and Tobago companies use their Guyana accounts to pay for their foreign goods as that country has seen a shortage of foreign exchange, but for the most part, said that here the US dollar is demand-driven here.
“If we believe it is speculative and …that there are some Trinidad and Tobago companies paying for their goods from here directly because they have exchange control. They don’t have forex there. Outside of that, we believe a lot of it is driven by the real demands here. Then you have in the market also, there is a demand for currency and a demand for the instruments like LCs (letters of credit). Sometimes there is not enough physical currency in the system that can drive the rates [so] we watch all of these,” he added.
