A paved road to destitution

Dear Editor,

It is crucial to note that the six sisters (rice, sugar, bauxite, timber, gold, and diamond) as the Government terms them, are the cornerstones on which this nation was built. However, as of recent two of these fundamental pillars, rice, and sugar, were no longer considered important, hence, they were labelled by the Government as “none of our business” and “black hole”, respectively.

The haemorrhaging of these two industries, will undoubtedly, force Guyana into a deeper recession.

To highlight the detrimental economic effects, I would be concise as possible, yet retain the essence of the argument, without expounding on employment benefits and disposable income of our consumers. I would rather like to concentrate on our foreign exchange rate–Guyana Dollar for US Dollar. The rate of exchange, in a nutshell, is determine by demand and supply for our currency on the foreign exchange market.

Now, to be as simple as possible, if our country is to cease the production of rice and sugar, the demand for our currency (G$) to purchase these goods will reduce, hence, our currency will depreciate with respect to the US$.

On the other hand, goods and services demanded from abroad (imports), will further exacerbate the feeble exchange rate of our currency in relation to the US$.

Now, what’s the consequence of this and would it not affect every single Guyanese? Of course, all imported goods and services will become relatively expensive which will surge inflation while crimping real incomes in our local economy.

Well, one might argue that it’s not feasible to support ailing industries, which, through the lens of a businessman, is correct. But in economics, the other side of the coin does get examine. Subsidising these industries to help retain jobs and stabilise currency exchange is paramount for the livelihood of our economy.

So what is the government doing to stabilise the economy? They are promoting MSMEs through ease of doing business. This of course is an audacious plan that is meticulously crafted to increase tax revenue.

The other vehicle of economic growth is the “green” economy concept that promotes the creation of recreational parks, cleaning of the city, planting trees, etc. The only logic I found about this concept is the painting of buildings, bridges, recreational parks etc in green, is a propaganda cleverly disguised to firmly entrenched into the minds of the people the symbol of the APNU/AFC Government.

So are we actually approaching destitute? If one is to look at the Quarterly Report & Statistical Bulletin for March 2016, published by the Bank of Guyana, they will observe that the mining and quarry sector, the production of gold, diamond and bauxite increased by 124.8 %, 37.5% and 13.9% respectively while output in the agriculture, manufacturing and services sector decreased.

According to the report, the performance of the service sector was relatively “flat” due to the sluggish activities in wholesale & retail trade, financial & insurance and other service industries.

Private sector credit weakened by 1.3% with loans to distribution, other services and personal sector fell by 7.8%, 2.4% and 1.5%, respectively. In addition, deposits by residents increase by 4% while non-performing loans increased by 25% to 10.2% of total loans compared to 8.5% for 2015.

In the agriculture sector, rice, forestry, and sugar fell by 37.3%, 19.2% and 4.7%, respectively or at a combined value of US$18 million or G$3.7 billion.

In the manufacturing sector, the production of alcohol beverages, stock-feed, flour and paint reduced by 15%, 14.9%, 5.9% and 5.3%, respectively. Merchandise imports declined by 16.6% due to a reduction in imports of capital goods by 25.7%, intermediate goods by 17.4% and consumption goods by 5.0%. Last but not least, inflation fell by 0.5%.

So what does this tell us? It is conspicuous that even though the Government speaks of diversification, their centre of attention rests solely on the mining sector while they turn a blind eye to the agriculture, manufacturing and other services sector.

Now, putting the pieces together, it is conspicuous that our economy is in freefall (sugar, rice and timber industry is on the decline). The hundreds of jobs lost and billions of dollars (G$3.7 billion) that could have benefitted the ordinary Guyanese through an increase in disposable income is now gone, hence the main reason for the decline in demand for goods and services (reduction in inflation, merchandise import and manufacturing sector).

Coupled with this phenomenon is the shocking revelation of the high level of uncertainty that still exists.

Investors are reluctant to invest and the dream of home ownership is now an elusive “dream” (reduction in private sector credit).

With the reduction in sales due to the reduction in demand and increase in unemployment due to the ailing agriculture sector, serving of debts (loans) whether for the expansion of businesses or construction of homes are now increasingly difficult (increase in non-performing loans).

The increase in crime rate is also taking a toll on the economy.

People felt that it’s safer for them to keep their hard earned savings in the bank (increase in deposits). Yet, in the report it was outlined that Internal Revenue Department increased its revenue by G$945 million, which is a clear indication that the Government is “milking” the people.

Yours sincerely,

Chris William