Dealing with monetary expansion holistically

Legitimate concerns have been raised about our expanding money supply and its relationship to the cost-of-living pressures facing ordinary households. However, assessing those concerns requires a more nuanced approach by examining both how money enters the economy and how the Bank of Guyana manages the resulting liquidity.
The monetary expansion is concededly substantial, with the Bank of Guyana’s annual report recording broad-money growth of 29.3 per cent in 2025. Its explanation identifies increases in net foreign assets and domestic credit as contributing factors.
Government spending financed through the Natural Resource Fund (NRF) is an important part of this discussion. When the Bank purchases withdrawn US dollars and credits government with their Guyana-dollar equivalent, it creates a domestic monetary liability. Government’s subsequent payments to local contractors, suppliers and workers can increase private bank deposits and therefore broad money.
The distinction matters since crediting the Consolidated Fund does not itself immediately expand broad money, since central-government deposits are excluded from that measure. Spending into private accounts as when the governments pays local workers and purchases local supplies, does.
Foreign-exchange backing does not eliminate inflationary risk because as in our case, oil earnings can finance imports, but cannot instantly produce additional local construction workers, rental accommodation or agricultural output. Spending can push up domestic prices where supply cannot respond quickly and we know for instance we face wide labour shortages.
However, this is only one side of the account. The Bank of Guyana already uses Treasury-bill auctions and foreign-exchange operations to manage liquidity, alongside reserve requirements and other instruments. Its report identifies Treasury-bill auctions as its principal monetary-control instrument.
These operations work differently. When a commercial bank purchases Treasury bills, it exchanges reserves for securities; customers’ deposits do not automatically disappear. The operation absorbs bank liquidity and can influence lending conditions. When a household or business purchases bills using its deposits, broad money can decline directly, provided the proceeds remain unspent. Foreign-exchange sales for customers’ import payments can likewise reduce both deposits and bank reserves.
We must also distinguish bills issued to absorb liquidity from those issued to finance expenditure. Government spending of borrowing proceeds reinjects liquidity. Gross Treasury-bill sales therefore cannot simply be counted as a permanent withdrawal of money.
Indeed, the Bank reports that bills issued and redeemed specifically for monetary purposes each totalled G$4 billion in 2025, producing no net annual issuance in that category. This qualifies the extent of that particular offset; it does not establish that monetary management was absent.
The observed growth in broad money already reflects the combined effects of monetary injections, withdrawals and other transactions. The proper question is whether the Bank’s operations sufficiently moderate demand and exchange-market pressures while accommodating productive growth.
Comparisons with output also require consistency. Money measured in current dollars should be compared with nominal non-oil GDP. The October assessment reproduced by government implies nominal non-oil growth of approximately 19.9 per cent in 2025, against its broad-money estimate of 28.4 per cent. That gap deserves attention. The difference between this monetary estimate and the Bank’s 29.3 per cent also merits clarification.
But monetary growth alone does not prove fiscal dominance – evidence is needed that government financing requirements constrain the Bank’s ability to preserve stability. Neither does it establish that inflation statistics have been manipulated. That allegation requires scrutiny of the statistical methods and underlying prices. Equally, however, official averages cannot dismiss household hardship. Slower inflation does not restore previous prices, and families spending heavily on necessities may face greater pressure than the average suggests.
Government and the Bank should explain their coordination more clearly, publish accessible evidence on liquidity management and household costs, and align spending with available labour, materials and productive capacity. The government’s targeted assistance and improvements in food supply, transport and housing should assist monetary management.
The government’s challenge is to turn oil wealth into lasting improvements in living standards and that calls for scrutiny of the entire policy framework. An expanding money supply is a reason to investigate; it is not, by itself, a verdict of economic mismanagement as is being suggested.