The Georgetown Chamber of Commerce and Industry (GCCI), a key advocate for the business community in Guyana, has complained in recent weeks of foreign currency shortage. This, it said makes conducting trade costlier. But Guyana’s Central Bank as well as its Vice President, Dr. Bharrat Jagdeo, are of the view that the shortage may very well be an artificial one where some banks that have a surplus are not keen on sharing with those with a declining reserve on a given day.
The economist and chief policy maker for the oil industry warned that it would be unwise for regulators to wildly respond by flooding the market with more foreign currency. He posited that this would surely create one of the key conditions for the dreaded Dutch Disease.
The Vice President during his first press conference for the year articulated that Central Bank and the Ministry of Finance have a critical role to play in maintaining the macro-economic pulse of the nation. Dr. Jagdeo also articulated that Central Bank’s role of promoting price stability and controlling money supply is particularly important now given the presence of the oil industry.
He said, “Often, at the level of the enterprise, and at the chamber level, their views may not take into account the macro-economic picture but it doesn’t mean the government has to pander to that.”
While he acknowledges that the government must be aware of the issues affecting the private sector, he cautioned that it cannot hurriedly respond without thinking of the broader economic consequences.
The Vice President said, “If you talk to the exporters and manufacturers, they don’t want the exchange rate to appreciate. It would kill those export industries as has happened in many parts of the world… The importers, and there are many in the chamber; they prefer a rate for US dollar that is appreciating so they pay less for it and often when we look at it, it is not passed on in final prices.”
With a cheaper foreign exchange rate, the Vice President said the chamber’s members benefit from bigger margins. He said the government cannot be swayed by one-sided demands, adding that it has to ensure aggregate demand and supply reaches an equilibrium given the objectives of the Central Bank.
He said, “If we believe there is a shortage we have the means to do it but we have to be careful in not appreciating the rate.”
The Vice President said he will soon discuss with the Central bank and the Senior Minister of Finance, Dr. Ashni Singh, to have commercial banks and cambios provide daily reports of their foreign currency reserves so that businesses can know where there is a surplus.
In the meantime, he said it is for GCCI and the Guyana Bankers Association to have a discussion on how to ensure the market works more effectively.