Guyana’ foreign reserves problem is getting worse, and this is a concern that any Government ought to get cracking on so that they can return it to stability. The international reserves at the Central Bank fell by US.9 million to reach US9.5 million at the end of September. The international reserves controlled by the Bank of Guyana have been below US0 million since November 2017. This US0 million is a recommended low watermark based on the size of the economy. If this is extended to the entire banking sector the new is even worst. This cannot be good news for the Guyanese business community.
The decrease was larger than for the same period last year and was caused principally by weak growth in exports, a higher outflow of investment income (capital flight mainly) and stagnation in remittance. The easy answer to Guyana’s 
foreign currency problem is to expand the supply of foreign currency. Thanks to the good work of the Bank of Guyana in the second quarter of 2017, the demand was to some extent dampens but the supply of foreign currency is at an all-time low as big foreign currency contributors like the sugar sector implode and the gold sector foreign currency contribution flattened over 2017.
If the entire banking sector is considered, according to the Bank of Guyana September 2017 Statistical Abstract, the stock of foreign currency declined by US$69.4 million. (see graph above). Any rational thinker would be very concerned about the evolution patters of the foreign reserves since 2015. It is the responsibility of the policymakers in the Ministry of Finance to act and act fast. The usual spate of political sound bytes and propagandist deflection is not an option anymore.
The reserves act as an instrument of confidence that gives the assurance to the international community that the nation can pay its bills. When people start to realize that your ability to pay your bills is being compromised, they may not want to invest in your country fearing that they may not be able to transfer their profits across borders because of inadequate supply of US dollars locally. This will impact the future long-term growth potential of the Guyanese economy and spells doom for the people.
So when President Granger offers his PNC members in Atlanta, the assurance that the “only the PNC can run Guyana” as quoted in the Demerara Waves, I am of the belief that such comments are bordering on delusional. Only someone who is delusional will venture along that road when one of your main benchmarks of economic strength exhibits so much instability and you are pumping your chest on hot air.
Love or hate the PPP, it is on record that under the PPP the foreign reserves at the Bank of Guyana topped US$825 million at one point in time, some US$250 million more than where it is today and those were the days when Guyana had oil prices that surpassed US$90 per barrel. Today it is closer to US$53 per barrel. Oil being our largest foreign currency consumer does have a direct impact on the foreign reserves. In those pre-2015 days, Guyana was spending over US$300 million on oil. Today the spending is closer to US$200 million. The operative question remains, where has the foreign currency saving of some US$100 million per annum disappeared since 2015? Why did it not have a positive impact on the stock of foreign currency in the system? This is the real issue.
That is why I am shocked that there is a determined commitment of the Granger Regime to hold on to the Marriot Hotel as a state-owned asset? This is a transaction that should have been divested months ago with a design of selling it to a foreign entity that will bring new US dollars into the system. Easily this hotel can reap US$40 million to US$50 million on the open market. Such a move will boost the international reserves over the short term and can bring back greater comfort to the system. Such an injection would have immediately changed the trajectory of the stock of foreign currency.
Much policy mistakes were made under this Granger regime and in the last 2 years one walk away with a perception that it was a season of policy paralysis under Mr. Jordan. Unfortunately, the period of schooling in the art and science of managing a nation is should have been over by now. Thus it is expected that the 2018 Budget would be structured exclusively to support our private sector investment projects as a means to an end. I would highly recommend a reduction of the corporation tax as an immediate policy measure that can kick forward some export-oriented job creation projects. Such a policy move can contribute towards the building-up of our foreign reserves. I remain hopeful that good sense will prevail rather than more sound bytes and political rhetoric.
