Value of dollar down 8% -analyst says bank reserve requirement should be cut Stabroek News September 30, 1998 To compensate for the 8% devaluation of the Guyana dollar from the start of the year, the government can immediately reduce the commercial banks' reserve requirement and the withholding tax on interest earnings. A financial analyst, who preferred not to be named, last week said the first measure will free up more money and will translate into a reduction in the cost to commercial banks. This will allow the banks to increase the interest earned on savings accounts and not loans. Coupled with a reduction on the 15% withholding tax on interest earnings on saving accounts, the impact of the devaluation will not be so heavily felt. Contacted for a comment on the impact of such options, Research Director at the Central Bank, Dr Gobind Ganga, said it was not so simple a matter and the impact of such options have to be looked at carefully. However, he confirmed that there was a 8% reduction in the value of the Guyana dollar from the start of this year because of the shift in the balance of payments situation due to declining export earnings. "But there is no need to panic and all the players in the economy need to be more responsible; the bankers, exporters, importers and cambio dealers - and take into consideration the welfare of the general public in their transactions," Dr Ganga said. The shortage of foreign currency on the market is to some degree because of seasonality, he conceded, and said that by the end of the year this situation should correct itself with increased inflows. At the end of August, there was a 17.2% reduction in foreign currency on the market. The Central Bank's intervention up to the end of August was around US$28 million.