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Changes in financial system promote strength and stability
Since 1999, the financial sector in Guyana has undergone a far-reaching process of reform. Controls on interest rate and bank credits have been removed and a more market- oriented approach through the indirect instruments of reserve requirements, open-market type operations and control of discount facilities has been implemented. The reforms have had positive effects. They have created an environment conducive to financial intermediation and a sound banking system. They have enabled the economy to mobilize funds for investment and growth, as well as contributed to the development of the private sector.
Director of Research Gobind Ganga said that even though the banking system has made a lot of progress, the Guyanese policy-makers understand and appreciate that, with widespread globalization, further banking reform will be needed. Hence they will continue to restructure the financial system on an ongoing basis so that financial institutions are equipped with the necessary strength and stability to cope with future challenges.
The government has made significant efforts to attract foreign investment through, for example, an enabling investment environment that maintains political and macroeconomic stability, privatization programs that create new opportunities for both local and foreign investors and the creation of the investment vehicle - GOINVEST - offering incentives and security to potential investors, he said.
Ganga said that a development bank that has been proposed by the private sector would, like any other development bank, specialize in medium and long-term loans for industrial projects that commercial banks would not supply. In particular, the long-term financing will diversify the productive and export base of the economy. This will spur economic growth and development as well as reduce the country's external vulnerability. He said that the relatively high share of agriculture in the Guyanese economy and the low share of manufacturers' output suggest that Guyana is still at the initial stage of industrialization.
Therefore, he said, "there is no doubt that a development bank can and will have a major role to play in the country's development. It should therefore be encouraged and facilitated."
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Table of Contents President Bharrat Jagdeo pursues foreign and local investment, builds confidence in private sector |
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The financial system in Guyana has experienced significant changes over the last few years in both structure and financial regulations. The regulatory body of commercial banks and nonbank financial institutions, the Bank of Guyana, has been strengthened with the passage of the Financial Institutions Act (1) of 1995 and help from the World Bank and International Monetary Fund.
The Central Bank has supplemented these efforts through the reform of the financial system. Specifically, the banking system has been liberalized and developed, providing services comparable to those offered in the Caribbean region. A fully convertible currency has led to a liberalized exchange rate, and there are no restrictions on the capital account of the balance of payments, thereby allowing for capital inflows and the reparation of profit.