The Government, through the central bank has targeted cambio dealers in its bid to deal with the growing foreign exchange problem in the country.
Cambio dealers across the country are up in arms over Government’s strict regulations on their prices for trade, especially since there is legislation which grants them the freedom to determine their own rates.
Government, through the Central Bank, issued a circular to cambios and the local banking sector informing them of the regulated rates for foreign currency trade.
According to the circular non-bank cambios must reduce the spread between the buying and selling rates on foreign currency transactions to no more than G$3.
This means if a cambio dealer purchases currency at G$210, then the dealer cannot sell it for According to the relevant section, “The price at which a licensee may buy or sell any foreign currency shall be determined by the licensee and shall be displayed at a prominent place on the licenced premises.”
A dealer said that by imposing such a limit on the prices, cambio dealers stand to suffer significant loses when the world market prices fluctuate.
The dealer explained that if a particular foreign currency is bought for G$150 today and then tomorrow the selling price drops to G$140 on the world market, then by forcing cambios to sell the currency at the highest $143 would be detrimental to their business.
They were also concerned about the duration of this imposition and how badly it will affect their earnings in the long-term.
In an invited comment, legal practitioner Anil Nandlall explained that any changes in the licence condition in accordance to Section 7 cannot interfere with the cambio dealers’ legal entitlement under Section 9.
He contended that the only body with the power to adjust that entitlement is the Parliament of Guyana.
“Central Bank is not above the law. Therefore, though the Central Bank has a regulatory role to play, it is enjoined to do so in accordance with law. It cannot purport to regulate by violating the law of the land. In so far as it does so, it would be acting unlawful,” the former Attorney General asserted.
Former President and Opposition Leader Bharrat Jagdeo already condemned in the strongest possible terms this new foreign currency policy being implemented by the Government through the Bank of Guyana.
According to Jagdeo, such a move is “absolute madness” and will only hasten the decline of the economy.
The People’s Progressive Party (PPP) also took a swing at the Government over this move, noting that the People’s National Congress (PNC) Government in the past had embarked upon this route before and the outcomes were devastating.
An influential Private Sector operator said such a move would drive a lot of business underground, as already being unfolded in the mining sector with the new taxation measures.
Government has also received scathing criticisms from the Private Sector Commission (PSC) when it initially announced such an intervention.
The PSC also reminded that Guyana had gone down this path before with disastrous consequences to the economy. Minister of State Joseph Harmon, during a post-Cabinet press briefing, announced that the Bank of Guyana, as the regulatory body for banks and non-bank cambios, was instructed to respond with stricter regulations and closer monitoring of the foreign exchange market – following reports of foreign exchange, as well as foreign currency hoarding.
The Central Bank has issued certain guidelines in which it seeks to control the price at which licenced dealers in foreign currency can buy and sell foreign currency. The Central Bank purports to act under Section 7 of the Dealers in Foreign Currency (Licensing) Act, Chapter 87:01. This Section provides:
7 (1) Every licence shall be subject to the provisions of this Act, and as such conditions may, from time to time, be prescribed or specified in the licence.
(7(2) The conditions as to the furnishing as security by the licensee, the amount and forfeiture thereof and the owner of the bank to vary the amount of the security from time to time.
It is clear that this Section does not empower the Central Bank to issue the type of guidelines which touch and concern the rate at which foreign currency can be sold by a licensee. Moreover, new conditions cannot be unilaterally imposed upon the licensee, expo facto, the grant of the licence; and perhaps of greater significance, conditions and guidelines cannot be issued which are in breach of the Act, or indeed, with any other law.
Section 9 (3) of the very Act provides that:
9(3) The price at which a licensee may buy or sell any foreign currency shall be determined by the licensee and shall be displayed at a prominent place on the licenced premises.
To my mind, Section 9 is quite clear in its language and spirit. It harbors no room for ambiguity or equivocation. It is the licensee and no one else who shall determine the selling price of foreign currency sold by that licensee. The Central Bank can lawfully play no part in fixing or influencing those prices.
In the circumstances, it is my considered view that the guidelines issued by the Central Bank in so far as they seek to influence the price at which foreign currency is sold by a licensee, is ultra vires, the Dealers in Foreign Currency (Licensing) Act, Chapter 87:01, and unlawful.