Chartered Accountant, Christopher Ram has reiterated his position that the current foreign currency shortage is a fallout from the 2016 Production Sharing Agreement for the Stabroek Block and he said Guyanese should note that the much vaunted Model PSA has essentially retained the old foreign exchange framework, which is the source of the problem.
Writing in his weekly article which appeared in the Stabroek News on Friday last, Ram observed that in Guyana’s fast changing news cycle, the issue of whether or not there is a shortage of foreign currency appears to have receded into the background. That of course, he said does not mean that the temporary problem has been permanently solved. “Official sources maintain the line that there was never a general shortage, that if anything, the problem was restricted to a few of the commercial banks. The rest have their foreign exchange niches – Scotia from petroleum, Demerara Bank from DDL and Agriculture, and GBTI from Agriculture and Gold. That’s from the supply side. The shortage, if any, comes from several factors on the demand side, including what is perceived in some quarters as Guyana becoming the Cambio and main source of foreign currency for our Caribbean partners, to borrow from a claim made by Ms. Kamla Persad-Bissessar as Prime Minister of Trinidad and Tobago in respect of her own country,” Ram, wrote.
He said the paradox of any shortage in the midst of a petroleum boom is partly explained by the liberal Foreign Exchange Control provisions of the 2016 Petroleum Agreement which allows the oil companies to run their own exchange regime, outside of the national framework. “And here it is worth noting that the regime is enjoyed not only by Exxon’s indirect subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) but also by Hess and CNOOC which have a 55% share in the oil consortium with Esso the remaining 45%,” Ram stated.
He said apart from being the Operator of the Stabroek Block, EEGPL appears to have taken on the role of representative and spokesperson for the other two. He noted that EEGPL is a member of the Private Sector Commission and was represented at the meeting between the PSC and the Bank of Guyana. EEPGL’s representative however, Ram said made no admission, suggestion or undertaking to contributing to any solution. “Indeed, the representative was totally silent, taking in all that was said, no doubt relaying the discussions to his principals. We need to remind ourselves that EEPGL holds a minority interest (45%) in the Stabroek Block with Hess owning 30% and CNOOC the remaining 25%,” the chartered accountant said.
Ram said that, Guyanese must not make the mistake “that it is all down to the oil companies, that the Agreement is the sole cause of the problem or that any fixing of the Agreement would solve all the problems. Rather, if the Model PSA is a signal, it is safe to assume that the Government does not intend to address the issue of foreign exchange – surplus or shortage – but to leave it to the Bank of Guyana and the so-called market. Perhaps the Government has to be reminded that the Bank of Guyana is a statutory creation, bound to act within the policies set by the Government. The central bank does not make policy but only carries out policies set by the Government. Since neither the Governor of the Bank nor the Government has indicated any change in policy on foreign exchange in response to oil, one has to assume that the Government is comfortable with the status quo.”
He said such continued inaction on the part of the Government has grave consequences. “It has become the victim of the Cambios, the tax evaders, the money launderers and the illegal export of the country’s foreign exchange resources, transfer (under)pricing and the faithful adherence to the foreign exchange rules, already limited as they are.”
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Mr. Ram said Government has to get around to managing the economy and to addressing the problems with the economy and the country. He said unless it acts soon, the condition can potentially become totally unmanageable and insoluble. “Maybe the Government fears that necessary action will not be welcome by their friends and supporters but it must surely realise that it has to act in the best interest of the country rather than in the Party’s electoral interest,” Ram stated.
Offering solutions to some of the problems related to foreign currency issue, Ram called for the repeal of the Dealers in Foreign Currency (Licensing) Act by excluding the non-bank cambios which are almost universally personal cambios, impervious to audit or adequate supervision and regulation. These were created for a different era and purpose and have no place in this society. He also called the Issuing of more banking licences, thereby increasing competition among the banks. Ram said too that there is need for strengthening and enforcing the only semblance of transfer pricing rules under the Income Tax Act. “Rigorous enforcement of the laws against those communities of foreigners – regional and international – that rob the revenue of taxes, underpay our workers and take out foreign currency under all forms of guises. We must not hesitate to place the law breakers before the Courts and to apply our extradition laws in appropriate cases. Addressing the large scale smuggling across the extractive sector and not hesitating to make it possible to revoke leases and licences,” he added.
He also called on government to dealing with the gaping weaknesses in the Local Content Act, the review and amendment of the Bank of Guyana Act, and the Immigration Act, strengthen and depoliticise the Financial Intelligence Unit and SOCU, and ensure that foreign investment means what it says. “After all, if the local economy finances the investment, directly or indirectly, allowing the investor to repatriate both capital and profits, the gains to the economy are significantly reduced. Liberalising the rules for foreign borrowings but subject to thin capitalisation rules,” Ram concluded.
Link to Original Article: https://www.chrisram.net/?p=2340
