Gov’t has the means to supply the market with foreign currency if there is a shortage – VP Jagdeo says central bank has to ensure price stability

Vice President, Dr Bharrat Jagdeo has shed light on the foreign currency matter, explaining that 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.

The vice president who was speaking during his press conference on Friday at the Arthur Chung Conference Centre explained that the central bank, “…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.”

He pointed out, given the free market structure of Guyana’s economy, the foreign currency availability and pricing fluctuate following the market conditions.

Referencing a statement issued by the Bank of Guyana (BoG), the VP noted that there should be an engagement between Guyana’s commercial banks, the Georgetown Chamber of Commerce (GCCI), the Private Sector Commission, and the bankers’ association regarding foreign currency concerns.

He said that seasonal variations can see the appreciation of foreign currency rates coming to the detriment or benefit of select parties, explaining that, “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.”

To combat this, VP Jagdeo suggested the establishment of an inter-bank market to facilitate sharing, adding that some banks practice 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.

This concept, Dr Jagdeo said, will be discussed further with the senior finance minister.

“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.”

The GCCI recently raised concerns about a shortage in foreign currency, particularly USDs.

Following this, the BoG reiterated that the banking system, with an average monthly turnover over US$500 million, has an adequate supply of USDs to meet local demand. The institution added that there would be regular monitoring of the foreign currency position in Guyana to ensure there is no disruption nor the adverse impact on economic activities.

The BoG reminded that its legislative mandate is to promote domestic price stability through the promotion of stable credit and exchange conditions.

In this regard, the vice president noted that “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.”