While still restricted by regulatory requirements for transfers and travel exchanges, the foreign exchange system has improved regarding convertibility of the Guinean franc. All current international payments in Guinea are handled freely in the official exchange market. While access to the official market for current transactions is free, requests for foreign exchange are monitored to ensure compliance with exchange regulations; this monitoring has at times resulted in delays in processing applications.
The official exchange rate remained fairly stable at Guinea francs (GNF) 997 - US$1 throughout most of 1996 so far, as the authorities have stepped up the volume of hard currency sales to the private sector. Guinea maintains a floating exchange rate system, under which the exchange rate against the IMF's Special Drawing Right (SDR) is set in weekly fixing sessions and is quoted in terms of the SDR. In July 1996, the gap between the official exchange rate and the unofficial parallel market rate was about 13 percent in terms of the U.S. dollar.
Exchange control authority is vested in the Guinea Central Bank, which has delegated its authority to the commercia1 banks with respect to
All settlements with foreign countries, including payments for imports, require approval from the Exchange Department of the Central Bank.
The opening of deposit accounts in a foreign currency by residents at the domestic commercial banks is subject to prior approval of the Central Bank. Certain residents, by virtue of their occupation, were authorized to deposit foreign exchange proceeds in their foreign currency accounts. As of January 1, 1992, all foreign residents have been required to keep 20 percent of their accounts in Guinean francs.
There are two types of nonresident accounts: nonresident transferable accounts in foreign currencies, and nonresident accounts in Guinean francs. The opening of a nonresident account is subject to prior approval of the Central Bank.
There is no legal parallel (black) market. Large established firms work only through the Central Bank. A requirement for importers to deposit up to 25 percent of the value of the imported goods with the Customs Bureau, and a Central Bank requirement that an importer have 100 percent of the value of import merchandise on account in Guinean francs have favored the illegal parallel market, especially for smaller merchants outside the Central Bank system.
Domestic merchants may obtain foreign exchange for commercial purposes through a weekly Central Bank currency auction. Hard currency for all other purposes must be obtained through a special window at the Central Bank.
There are at present six deposit money banks in Guinea. These are
Guinea's banking system is dominated by a single bank, BICIGUI, which accounted for 41 percent of total deposits and 33 percent of total credit at end-1992. BICIGUI is the only bank with branches in the interior. Guinea's financial system also includes four insurance companies, a social security institution, and two small cooperative banks.
Bank lending practices tend to be highly conservative. Credit is generally limited to short-term trade finance, and interest rates have averaged approximately 30 percent over the past 2 years. Loans are usually not securable for manufacturing and other investment enterprises. There is a general perception of high risk associated with long-term lending, due to a high proportion of nonperforming assets in existing portfolios. Very limited amounts of acceptable banking collateral are available due to the failure of the Guinean land tenure system up to now to ensure transferability of land rights. Also, judgements against delinquent borrowers, or the ability to have judgements enforced, are difficult to obtain.
Since 1992, the government has allowed privately held foreign exchange bureaus to operate, subject to certain conditions. These institutions are currently limited to issuing no more than $5,000 or its equivalent per transaction to a customer.
Capital markets are undeveloped in Guinea. There are no effective institutional investors in Guinea. Formal equity markets have also yet to be created. There are no stock trading companies or exchanges.
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