Guyana dollar depreciates 1.1%
by Gitanjali Singh
The Guyana dollar has depreciated another 1.1 per cent in the past two months and cambios are hard put to relieve an estimated US$15 million demand on the foreign currency market. At the end of June, the Guyana dollar had depreciated by 3.1 per cent, but this had moved to 4.2 per cent using the current mid-rate of exchange. Last December, the weighted exchange rate was G$144.4 to US$1. Conrad Plummer, Managing Director of the National Bank of Industry and Commerce Limited, estimated a US$10 million shortage in the foreign currency market, but a government official later said the figure was closer to US$15 million. "The foreign exchange system is under pressure," Plummer said yesterday. He put this down to the problems the country experienced in recent months which has led to some amount of speculation. Plummer said that some persons would withhold supply expecting the rate to move, and they would benefit, while on the demand side persons were buying the US dollar to keep, and also to pay bills in advance. "This has helped to create the bottlenecks in the system," he said. Does he think the Central Bank's intervention is needed? "That would be nice," Plummer said, noting that the agency had intervened earlier. At the end of June, the Central Bank released US$28 million into the market, 70 per cent more than in the first half of 1997. Such interventions would affect the country's international reserve requirement. The volume of transactions recorded at half year was US$564 million, which is 13 per cent below the same period last year. However, Finance Minister, Bharrat Jagdeo, has expressed concern about the intermediation spreads of the cambios, contending they were too high. The average buying and selling rates to the US dollar are G$145.43 and $154 respectively, giving an average intermediation spread of around $9 dollars. This, Jagdeo said, is too high and he told reporters last Friday that he had spoken to the banks on this issue. "They are basically making a killing [but] I hope that this situation will alleviate itself," Jagdeo said, noting that the average rate did not really give the picture. He said that only the selling rate of the US dollar was moving and not the buying rate. "We are examining that situation and still stand ready to look into this situation [foreign exchange]," Jagdeo said. The intermediation spreads by the commercial banks range from G$8 to G$11 per US$1. The Bank of Baroda spread is $11, Bank of Nova Scotia $8, Citizens Bank $8, Demerara Bank Limited $8, Guyana Bank for Trade and Industry $8.5, Guyana National Cooperative Bank $8 and the National Bank for Industry and Commerce Limited $8.40. These, however, are the intermediation spreads advertised but because the banks often negotiate in large transactions, average spreads are much lower, around G$4.50. Plummer, however, does not believe that the intermediation spreads are too high. "I think the spread reflects the state of the foreign exchange market. It reflects the flexibility within the demand and supply of the currency and the actual state of demand and supply," Plummer stated. He also noted that the buying and selling rates are market determined. Additionally, Plummer said NBIC only operates within the spreads it advertises, but conceded it is quite possible that some cambios will advertise rates they do not adhere to. Jagdeo at his briefing last Friday, said the government would continue to monitor the foreign exchange situation "very carefully". He contended that the exchange rate had held in spite of the projections from some analysts at the beginning of the year that by June it would reach G$178 to US$1. He said despite the external currency changes which should have fed into the local economy, and despite reduced flows into the market, Guyana had managed to maintain its exchange rate within a 10 per cent range. Briefing reporters on the economy's performance, the minister said although there had been a decline in the real sector, the impact on export earnings was not that great and the trade balance had not deteriorated very much. That, he said, was one reason why the exchange rate remained "relatively stable". He contended that the economy was maturing and little hiccups did not have any widespread impact now. 
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