The Central Bank is injecting US$50 million into the local foreign exchange market to ease demand in the small and medium enterprise sector.
“The Central Bank will conduct a special sale of US$50 million to facilitate some of the outstanding trade related demand for US currency. The funds will be disbursed to authorised dealers on (March 5, Ash Wednesday). The funds are being allocated solely for trade related demand, especially for small and medium enterprises,” the bank said in a release yesterday.
To ensure funds from the sale are duly allocated and credited for meeting demand, all eligible buyers must present valid and current supporting documentation, such as invoices or payment orders. The maximum sold to any one client will be US$250,000.
Authorised dealers will be required to submit a report to the Central Bank within two business days following the settlement date of this intervention (by March 7) identifying all customers and the amounts purchased.
In February alone, the bank has pumped US$140 million into the market.
Since November 2013, it has injected US$500 million to meet demand.
“The bank is committed to strengthening the operational efficiency of the domestic foreign exchange market and will continue to monitor the market and take the appropriate intervention action when needed,” the release said.
In an interview earlier this month, president of the Bankers’ Association (BATT), Larry Nath, said it was not unusal to see this sort of tightness in the system this time of year.
“Christmas is always a tight time for foreign exchange as suppliers have to pay for their Christmas goods. In this country the foreign exchange supply is also driven by the energy companies doing quarterly conversions for tax purposes, so you find around tax quarters, for example in March, June, August and December, the system gets very flushed with foreign exchange, at non-tax ends, like January, it gets tight again, especially when suppliers have to pay for foreign goods,” he said.
Every year around this time, the feedback on foreign exchange is similar, he said, but he believed banks had a handle on the situation.
“We expect to see a resolution in the short run. It’s acute and banks have been in conversation with the Central Bank to see if they can essentially tide over with extra injections into the system until the next time for tax conversions, in March. We believe this temporary bottleneck will be solved soon,” he said.
The country’s foreign exchange reserves are currently US$10 billion, or up to a year of import cover.