Hoarding, low sugar performance blamed for rising exchange rates

Hoarding, low sugar performance blamed for rising exchange rates

Money

Currency Exchange

March 18, 2014 | BY KNEWS |

Guyana’s rising exchange rates may be blamed on a number of prevailing factors, including reduced proceeds from sugar and a steep drop of gold prices on the world market.

Over the past months, the exchange rate of Guyana dollar to the US climbed from $200 to US$1 to just over $210, a worrying trend for businesses and the administration.  It is not likely to drift down in a hurry, analysts have said.

While banks were advertising trading on average between $204 and $209, businesses have been complaining of hardships in acquiring significant amounts.  

Foreign currency shortages have been blamed largely also on a reduction of remittances to Guyana, as the global economy continues to suffer the effect of a downturn.
The regulator, Bank of Guyana, has been making interventions from time to time releasing much needed foreign exchange into the system.

Last year, the failure of the US$850M-plus Amaila Falls hydro project and the halting of the Specialty Hospital, as well as the slashing of the budget for the expansion of the Cheddi Jagan International Airport (CJIA) have all not been helping to generate some of the foreign exchange needed.

Also, the actual trickle down of proceeds from Norway’s US$250M climate fund deal has not been significant.

The sugar industry remains the biggest of worry for the administration.
Last year, the industry slid to a 23-year low with production falling to 187,000 tonnes, far below the 260,000 tonnes set at the beginning of the year. This year, the target is set at 216,000 tonnes.
With the Opposition urging Government to study other options like ethanol for the industry, the need to bring production up to higher levels remains top of the minds of the administration.

The drop also in gold prices last year after a run that saw prices touching almost US$1,900 per ounce has not been good for Guyana. However, plunging prices to just over US$1,200 have worried miners.
With the price hovering around US$1,380 on March 17, the situation is looking a little more stable for gold.

Banking officials believe that hoarding of foreign currencies, like the US dollars; have also helped to drive the exchange rates up.

Insiders have also believed that the commercial banks may have also been playing a part in rising exchange rates with hoarding a very real possibility.
Whatever the reasons are, it is not likely that the exchange rates will go down anytime soon, a senior manager of the banking sector has said.

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Comments

  • de castro  On March 18, 2014 at 7:41 pm

    Sugar rice and gold(minerals)…compare….which earns Guyana the most
    in world markets. Surely that will determine which industry receives the most
    support….nationally/internationally.
    The world is a “free market” in principle but maybe not in practice….
    that encourages trading blocks …groups….”OPEC” “BRICS” ETAL….

    Commodity prices are determined/manipulated by “marketeers”
    (Stock markets) with losers and winners….buyers sellers.
    Bubbles created and bubbles popped….that’s not going to change.

    There is a saying “if you cannot beat them you join them”

    Maybe Guyana s industries should consider joining like groups
    of producers to secure prices for its commodities.
    Its a very complex “game” and I am no economist….also am not
    sure how Bank Of Guyana raises money in the markets.
    BOE FED BOEURO …CENTRAL BANKS raise money in markets
    by selling BONDS…the lowest priced bonds in markets is GERMAN at
    1.27% followed by UK at 1.37%….and so on….
    This info available on Google…also available on Google
    is central banks interest rates fixed by their respectives governors.

    Will search for BOG bond and interest rates…..what they pay and what they
    charge….to see if they are shown in listings….not all central banks publish their
    rates….or rates are published….

    Still trying to understand how “free market” works in principle and practice.
    But am certain that “competition” affects prices….values are market driven.

    My spin
    Kamtan

  • de castro  On March 18, 2014 at 9:13 pm

    Sorry BOG not listed. Lending or borrowing rates.
    However exchange rates are listed ….the commonsense approach to
    all this is to hold foreign exchange for the currencies that
    you trade with the most…..playing the foreign currency markets is
    “suicidal” “Russian roulette” BOG too little to compete.
    My spin

  • Abert  On March 19, 2014 at 2:51 pm

    Kamtan (playing the foreign currency markets is
    “suicidal” “Russian roulette)

    Some brokerage online sites accommodates small retail players 24/7 in foreign currency trading. Folks who play the casino slot machine like it for the “Adrenalin Rush”

  • de castro  On March 20, 2014 at 12:45 pm

    my “adrenalin rush” I leave to my woman to stimulate….much more interesting !! ha ha

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