Guyana’s financial environment is in crisis, and this is surely a reflection that the economy is still spiralling downwards. In 2015, as APNU+AFC took control of the reins of Government, Guyana was one of the most, if not the most, stable economy in CARICOM and in the region of the Americas. Guyana’s economy ranked far above the average for growth in the Americas, according to the World Bank and the IMF, for the decade between 2006 and 2015. What happened in just over three years since May 2015, causing the present financial crisis?
APNU/AFC sought to amend the Financial Institution Act (FIA) in Parliament last week, and in the process, the financial environment that exists today in Guyana was exposed. The Speaker, doing his bidding for APNU/AFC, tried desperately to prevent the Opposition from speaking about the financial crisis that prevails in Guyana today. The Opposition’s shadow Finance Minister, youthful Irfaan Ali, provided a frank, pellucid and frightening picture of the financial environment that threatens once again to bring poverty to thousands of families in our country. He calmly, expertly, without any ambiguity, demonstrated that the Guyanese economy is in crisis.
All the productive sectors recorded negative growth in the year before: sugar down 36.2 percent; rice, the one sector that is holding up this Government, fell 6.4 percent; forestry declined 29.2 percent; bauxite fell 29 percent. The only reason the GDP held a moribund 2.1 percent growth is because the Government expenditure keeps growing.
Increased Government expenditure was driven first by increased taxation of the people by 29 percent from introducing or increasing more than 200 taxes, and by introducing 14 percent VAT on water and electricity. Second, from increasing cost of goods by exempting, rather than zero-rating, VAT on a large number of goods. Third, APNU+AFC increased Government’s borrowing. More than 98 percent of the local loans given out by the banking sector were given to the Government of Guyana, with less than 2 percent of the local loans extended to the local private sector.
While the banks remain profitable, their profits have fallen significantly, a frightening proof that the economy has slowed. The Returns on their Equity have deteriorated for all banks in Guyana. Even the Bank of Guyana has not been able to sustain its profitability. The Bank of Guyana’s profits declined 28 percent, from $5.4 billion at the end of 2014 to less than $3.7billion for the year ending May 2018. The Republic Bank’s profits declined from 22 percent to 4.6 percent; GBTI from 19.9 percent to 4 percent; Demerara Bank from 33 percent to 5.5 percent; Citizens Bank from 17 percent to 1.4 percent; and the Bank of Baroda went from an 18.6 percent profit to a loss of 1.6 percent.
In fact, the crisis in the financial environment is so severe that deposits in the Bank of Guyana have gone from $21.4 billion in 2014 to negative $54 billion in the year ending May 2018, astoundingly, an almost 300 percent decline. The gold reserves at the Bank of Guyana have similarly declined from $25 billion in 2014 to about $3.2 billion by May 2018, a decline of about 88 percent. The International Reserves at the Bank of Guyana have declined by 30 percent, from about US$700 million (G$140 billion) at the end of 2014 to less than US$485 million (G$97 billion). This situation has arisen because the APNU+AFC Government is borrowing more than it is depositing in the Bank of Guyana. APNU+AFC has also been borrowing more internationally, increasing the foreign debts from US$1.1 billion in 2014 to US$1.6 billion by May 2018, an increase in international borrowing of about 45 percent. Adding salt to the injury, the Minister of Finance claims that such massive borrowing is no problem.
The crisis is exemplified by the poor performance in loan repayments. Non-performing loans (failure to pay loans) have increased from $18 billion in May 2015 to $29 billion in the year ending May 2018, an increase in bad loans of 61 percent. The crisis is also underlined by a drop of $32 billion in private consumption for the year ended May 2018. In terms of loans and advances made to the private sector, this has dropped by $8.9 billion in the last year. At the same time, APNU/AFC is taxing people more, increasing its tax collection by 29 percent. APNU+AFC promised a good life for ALL Guyanese. In just over three years, it has wrecked the economy, creating a financial environment in crisis, demanding people be patient and wait for OIL. Fact is, OIL will not rescue us; a change in Government will rescue us.
