Dec 2016 Financial News

Guyana stops buying TT dollars

Dec 12, 2016

The Bank of Guyana has temporarily stopped buying TT and Barbados dollars from cambios as part of efforts to stem increased demand for US currency.

Guyana’s Central Bank Governor Dr Gobind Ganga said there was evidence that people have been travelling to Guyana from Barbados and T&T to buy US dollars, resulting in the decision to stop buying those countries’ currencies from cambios.

“However, individuals can still come to the Central Bank with legitimate transactions for these currencies,” he said.

Figures show there was BDS$8 million circulating in Guyana in 2014 compared to BDS$13 million currently and TT$9.1 million in 2014 compared to TT$38 million at present. The economic downturn in T&T, Barbados and Suriname has led to severe foreign currency shortages in those countries.

Ganga blamed a recent news report about US dollar scarcity for fuelling increased demand along with persons requesting huge amounts of foreign exchange without invoices or proper details, resulting in them being classified as “illegitimate.”

He said commercial banks have been warned against processing illegitimate requests for US dollars or Guyana could end being like T&T which could not pay US$1 million for sugar bought from the Guyana Sugar Corporation and in another case a rice exporter was owed US$700,000.

He said one of the recent major foreign exchange purchases was US$25 million by Banks DIH for its buy-back of shares in Banks Barbados.

“There were indeed purchases in the foreign exchange market to satisfy the purchase in terms of the provision of foreign currency to buy those shares,” Ganga said, adding that Banks DIH is dealing with purchased foreign exchange from other commercial banks to pay for the shares.

“You will find it’s not much more than we would have found to be illegitimate demand or excess demand.”

Ganga warned against media speculation that could affect an otherwise “healthy and strong” economy compared to other Caribbean countries, based on “soundness indicators.”

“We do have the wherewithal to ensure our financial system continues to be sound,” he said.

He said evidence shows that some of the foreign exchange purchases are speculative, some businesses are repatriating “huge, huge profits”, while some of the commercial banks are acceding to requests from foreign exchange account holders.

The Bank of Guyana Governor said there are seasonal demands and there is no need for panic because commercial banks are taking steps to resolve any excess demand.

“There is no chronic situation out there. The commercial banks are dealing with this issue as we speak. Some of them have been bringing back some foreign currencies that they had elsewhere to address some of the demand,” he said.

A market analysis shows there is an immediate demand for US$6 million, moving from a working bank balance minus commitments from US$10.7 million on December 5, and a surplus of US$8.3 million.

Ganga said there were several illegitimate requests for foreign exchange, based on records produced by the commercial banks.

“We had requested from the commercial banks invoices to substantiate some of these requests. All that you received were some letters requesting a certain amount sent to a commercial bank, or an email or a verbal request.

“Obviously if there is a legitimate demand you would have an invoice accompanying,” he said.

 

Source:
Trinidad Guardian
Monday December 12, 2016

http://www.guardian.co.tt/business/2016-12-12/guyana-stops-buying-tt-dollars