BoG must be proactive in addressing shortage of foreign currency

The content originally appeared on: INews Guyana
GCCI President Kester Hutson

With reports continuing to emerge of businesses having to wait long periods for foreign currency needed for their businesses, the Georgetown Chamber of Commerce and Industry (GCCI) is reiterating the need for the Bank of Guyana (BOG) to be proactive in the way it deals with the issue.

Foreign currency is used by businesses for importation and other transactions. This publication has been informed by persons in the business community that they have had to wait extended periods for foreign currency, and even of being on a two-week waiting list to obtain same.

Some local businesses have also been struggling to purchase US dollars from several banks, but to no avail.

When contacted, Bank of Guyana Governor Dr. Gobind Ganga declined to comment on the issue. However, GCCI President Kester Hutson acknowledged that there have been complaints about this shortage as recently as some weeks ago. Further, he noted that this is a longstanding issue for which a lasting solution needs to be found.

“We’ve been dealing with the challenge, and the latest that we know of (is that) our members would have cited some challenges probably about a month ago. And thereafter, through the representation of the Vice President, he was talking about the injection of a certain amount of US dollars into the economy to ease that shortage.”

This is a reference to Vice President Bharrat Jagdeo’s comments made earlier this year, when he had said that should a foreign currency shortage exist, the Government could take steps to inject foreign currency into the market. According to Hutson, this is a solution that would be monitored by the chamber.

“We are monitoring that to see if that will resolve the issue. I have some concerns about that, as in how long that will last. I think it’s much deeper than that in terms of the inter-bank relationship and how the influx and the outflow of forex (is taking place),” he said.

“I also believe that the Bank of Guyana has a greater role to play in terms of monitoring and reporting that issue. It’s been going on for far too long, and it needs to be addressed, because it would only get worse. We continue to ask our members to report on their challenges when it comes to forex,” Hutson has said.

Exit of the Mohameds

The latest reports and complaints of the foreign currency shortage come on the heels of the recent sanctions that were levelled by the United States (US) against local businessmen Nazar Mohamed and his son Azruddin Mohamed.

Specifically, those sanctions have led to the Bank of Guyana (BoG) revoking the Mohameds’ licence for their Confidential Cambio located on Lombard Street in Georgetown. This action resulted in the exit of a major player from the foreign currency market.

As is known, the Cambio which was operated by the Mohameds was the first to secure a licence from the Government years ago. Since then, the company has been transparent in its operations – a notion that can be verified by the Bank of Guyana.

Nevertheless, the announcement of the revocation of the licence was made last month, after which a copy of the formal letter issued by the BoG – dated June 13, 2024 – was circulated, confirming that the licence had been revoked in accordance with the Dealers in Foreign Currency (Licensing) Act 1989.

Sanctions were imposed on the Mohameds last month by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC). Their companies have also been sanctioned: Mohamed’s Enterprise; its subsidiary Hadi’s World; and Team Mohamed’s Racing Team, for their alleged roles in public corruption in Guyana.

The US Treasury Dept also alleged that Mohamed’s Enterprise evaded paying Guyana tax on gold exports, and defrauded the Guyana Government of tax revenues by under-declaring their gold exports to Guyanese authorities.

Late last month, the Guyana Government was asked by the US Government to have its Attorney General write the US Department of Justice (DoJ) for the information it requested in relation to the gold smuggling and public corruption allegations against the Mohameds and a senior Government official.

To date, all commercial banks have ceased doing business with the Mohameds. The closure of the Mohameds’ accounts has undoubtedly added to the foreign currency shortage, since that company was a major gold trader whose payment would have been wired to their accounts in foreign currency. This, in turn, would have been made available for the Guyanese public.

This publication understands that revocation of this cambio licence has not only affected the circulation of foreign currency, but is also affecting some 250 workers who were employed by Mohamed’s Enterprise and its sister companies.

The company has said it remains confident that the sanctions would be lifted, and intends to fully cooperate with the relevant authorities.

Complaints

In the past, the private sector had been complaining bitterly about a shortage of foreign currency on the local market – something which the Guyana Government as well as the Central Bank has denied.

While both the Government and BoG had insisted that there were sufficient foreign currency, especially US Dollars, in the local banking system to adequately meet the needs of the market, they nevertheless made an intervention last month to supplement the circulation of foreign currency.

Based on reports, more than US$80 million were injected into the local monetary system.

Vice President Dr Bharrat Jagdeo had explained on June 6 that, “We’ve seen a situation where we’ve had a short-term mismatch and we’ve asked the Central Bank…to make a major interjection in the foreign currency market and this morning most people said that the market is entirely cleared.”