Georgetown: President of the Guyana, Dr. Mohamed Irfaan Ali, on Wednesday, announced that in light of economic constraints caused by the COVID-19 pandemic, he has consulted with the Governor of the Bank of Guyana (BOG) on the way forward.
The Governor further consulted with the Guyana Bankers Association, which yielded several relaxations.
“The Bank of Guyana will extend the moratorium to December 2020. To allow banks to further defer customers payments to the end of December 2020, to cope with the low revenue generation needs, to meet operational needs,” President Ali said.
The deference will result in loans not being classified as non-performing and will not require loan loss provisioning. The Bank of Guyana will further waive Section 13 and relax Sections 14 and 15 of the Supervision Guidelines until December 2020.
“Additionally, a waiver is being given to section 13 of Supervision Guideline: number 5. The relation of stringent statutory measures is intended to result in direct benefit to customers of banks, by giving the financial institutions the ability to operate with more flexibility,” the Head of States outlined.
He noted that the Bank of Guyana will reduce liquidity requirements in two areas.
The reducing of the reserve requirements from 12% to 10%, the lowering of liquids asset requirements for demand and deposit from 25% to 20%; and saving and timed deposit from 10 to 15%.
“These measures will result in overall increased liquidity in the financial sector. The reduction in reserve requirement will result in the injection of $9.4Billion, and the reduction in the liquid asset requirement will immediately release an estimated $23.3Billion in the economy.”
Additionally, the President said that commercial banks have also agreed to continue supporting businesses with short-term working capital needs, to meet payroll and other short-term funding requirements at concessional rates, between 5-6%. This is expected to help to encourage businesses to remain open.
It was also disclosed that the current average short-term financing rate ranges from 8-11%, which makes the reduction a significant step towards promoting business continuity.
Commercial banks have additionally agreed to offer a general concessional reduction of interest rates of 1%, and up to 2% on customer loans below $10Million until December 30, 2020, while special treatment will apply to some services.
“The existing lending rate ranges between 6.5 and 16%. Some commercial banks have agreed to apply special treatment to the interest accrued during the moratorium period, including but not limited to; no capitalization, term extension, and foregoing of interests in special circumstances to loan with an outstanding balance of $10Million and below.
Commercial banks have agreed to waive all bank charges, especially ATM, local merchant charges; to encourage more out of bank transactions as well as charges for transactions by senior citizens. These measures will not affect the soundness of our banking systems and financial architecture.”
President Ali also told the nation that while the measures outlined are not intended to be a silver bullet for all the potential COVID-19 consequences; his Government is working to ensure that effective measures are implemented to sustain the Guyanese economy.
Meanwhile, government is mobilising some US$60M from the World Bank, OPEC Fund for International Development (OFID), the Inter-American Development Bank (IDB) and the Islamic Development Bank, in addition to a $4.5B package it had announced earlier to bolster the national response to COVID-19.
President Irfaan Ali, on Wednesday, during an address to the nation from State House said that those sums are in addition to the US$1M grant received from the Government of India.
Those, he said, were outside of other bi-lateral support received and were in the process of being received.
The President said that he spent the last few weeks consulting with many stakeholders including the private sector, communities, trade union representatives, youths, and healthcare professionals, aimed at arriving at a national holistic plan that integrates every aspect in response to COVID-19.
“So what we have seen is the closure of small business enterprises, our economy declined about four per cent at mid-year, contraction in business by more than 20 to 70 per cent, the loss of jobs, reduced workforce, reduced operations and output due to the implementation of work rotation work schedules,” the President said.
Further, the head of state said the loss of income has led to starvation in many communities, something which is being addressed.
He noted that a holistic plan is being looked to tackle the pandemic, while also targeting measures that would create jobs, ensure the return of income, and improve spending in the economy, while keeping the population in good health.
He said the government is focused on delivering an all-encompassing plan that will hold health and safety paramount, while balancing the need to fortify the economic standing.
“I assure you that your concerns will be dealt with, that the concerns of the business community, parents, teachers, healthcare personnel, we will take all these concerns into consideration and find a balance in addressing this issue,” Dr. Ali said.
Noting that COVID-19 is not only a public health issue, the President said the situation is an economic, financial and social issue and government has been working to implement an approach to bring together all stakeholders.
The objective of the approach, he said, is to ensure the multifaceted aspects of the COVID-19 pandemic is addressed by delivering relief to the strained health system and workers and increasing testing throughout Guyana.
Addressing public health and safety, he said there are needs for stimulus incentives and arrangements to encourage business stability, delivering relief measures to persons affected at the household level and delivering education to children in a non-conventional manner in the COVID-19 environment.
He said that aspects mentioned above are outside other bilateral support that has been received and are in the process of being received.
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