- Published on Tuesday, 23 July 2013 04:12
- Written by Demerara Waves
There are mixed views about why the Guyana dollar is plummeting- reasons include foreign currency gouging, a drop in the price of some exports and diminished confidence in the local economy partly due to political bickering.
Deputy Governor of the Bank of Guyana, Dr. Gobin Ganga, however, assures that there is sufficient foreign currency in circulation. “The Central Bank has been monitoring, has been speaking to them (commercial banks), the Central Bank has been even putting in foreign currency in the system to ease seasonal shortages,” he said.
Central Bank sources, speaking on condition of anonymity, believe that the decline in the local currency is largely due to speculation among foreign currency traders compounded by seasonal shortages.
Officials say a number of commercial banks are engaging in price gouging by negotiating with persons to sell foreign currency at higher rates while claiming that they (the banks) are buying at higher rates. “There is sufficient foreign currency in the system, it is just that the spread is too wide,” the source said.
Most cambios were Monday buying US$1.00 for GUY$204.00 and selling it for US$208.00. Checks at commercial banks show that the US$1.00 was being bought at GUY$200 and sold for between GUY$207.00 and GUY$209.00.
The balance sheets of many commercial banks, the officials say, show that income from other sources including foreign currency is “quite high.” “It is about the same amount as interest-income so that is what they have been doing,” he said.
Chairman of the Economics Committee of the Private Sector Commission (PSC), Ramesh Dookhoo fears that the reduced value of the Guyana dollar will fuel inflation and increased cost of living.
Dookhoo partly attributed the fall in the value of the Guyana dollar to a drop in the international price of gold. The precious metal was being sold for US$1,730 in April but on Monday closed at US$1,327.00 on the London Fix. “I know because of the drop in gold prices, some people may be holding on to gold in the hope that it will go up,” he told DemWaves.
He noted that the Bank of Guyana has been unable to fully satisfy all requests by commercial banks for foreign currency. Many local holders of international franchises and foreign companies usually buy large sums of American dollars to repatriate their earnings. “Every time they have to do that, the cost of foreign exchange goes up so what is going to happen is that it will fuel inflation eventually and as long as inflation is high, cost of living is high,” said Dookhoo.
Other PSC sources say the decline in the value of the Guyana dollar is also due to a 26 percent drop in the price of sugar during the past three months, a steep decline in the price of alumina and the need for more foreign currency to cope with a 29 percent increase in the price for soya meal for livestock and poultry. Foreign currency is also required to purchase fuel, the business executive added.
Another major reason, Dookhoo cited, was diminished confidence in the Guyanese economy by investors because a lack of consensus between the government and the opposition on key multi-million US dollar projects. The opposition has voted down budgetary allocations for expansion of the Cheddi Jagan International Airport (CJIA) and the Amaila Falls Hydropower project.
“My personal view is that there is a lack of confidence. Many international partners are all rethinking their investments in throwing their money in at this time essentially because of what is going on in parliament,” said Dookhoo who is also Chairman of the board of CJIA and Guyana Water Inc.
The PSC hopes to meet with Minister of Finance, Dr. Ashni Singh to discuss the depreciation of the Guyana currency in recent months.