Economic strategy is clearly not Mr Jordan’s forte

Dear Editor,
After a relatively calm decade, the Guyanese banking system today suffers incalculably under Minister Winston Jordan. One of the main drivers of this decay is the now conspicuous lowering of the confidence levels of the private sector in the economic management of the affairs of the State by Mr Jordan. One way this can be represented is in the rise of non-performing loans (NPLs) in the financial sector. Talk to any rational private sector leader and their general theme is this man does not know what he is doing.
I have said before and I am saying it again – Carl Greenidge would have been a much more reassuring pair of hands for Guyana at the Finance Ministry. The current office holder, with three successive budgets, has not once, but twice proven to be one big amusing entertainer who does not have the fortitude or awareness of the needs of the economy to be able to deliver the required policy actions needed to get Guyana back on track.
We all have recognised that economic strategy is clearly not Mr Jordan’s forte. This mentality of taxing a flat economic cake, frustrating the productive sectors and spending recklessly on projects like the D’Urban Park parade ground is clearly an intellectually bankrupt economic strategy. His saving grace is “hoping for oil before 2020”. But that is exactly that – “hope”.
Let me put some facts on the table to back up why I believe that there is an unprecedented decay happening in the banking sector.
Asset quality is an essential part of sound banking and one of the main indicators of its quality is the ratio of non-performing loans (bad debt) to total loans in the system. As the graph below illustrates, Guyana’s rate of loans going bad is almost three times higher than the world’s average of four per cent of total loan portfolio. Why is even worse is that the bad loans have multiplied by some 36 per cent since the Granger administration came to power. In simple language, the size of the “bad debt portfolio” is clearly going in the wrong direction.
The source of the data in this graph is from the Finance Ministry and the Bank of Guyana. NPLs (or bad debt) in the banking sector have moved from 8.3 per cent of all loans in June 2015, at the end of the PPP term, to 11.3 per cent in September 2016. I was reliably advised that at the end of 2016, the rate of bad debt is now some 11.5 per cent of the total loan portfolio. This data clearly consolidates this predictable adverse economic trajectory being piloted by Mr Jordan.
The rise of NPLs is a salient feature of a financial crisis. The concern is that persistently high NPLs lock in sluggishness in the economy. For the banks, delays in debt repayment make obtaining further credit more difficult, which often leads to a second round of debt default and even more bankruptcy in companies, especially small businesses. Yet in light of all this financial mess, Mr Jordan is still operating like a third-rated sailor on the MV Titanic.
Any sensible banking leader plagued with a high stock of NPLs is likely to focus on internal consolidation and improving asset quality, rather than providing new credit. Because a functional enforcement mechanism at the Bank of Guyana and a high NPL ratio means all the banks will have to do greater loan provisions, reduces capital resources available for lending and dents the profitability of the sector. This will drive an even further slowdown of economic growth, which in the end comes full circle to the ordinary man and woman. The graph above proves this fact by illustrating how bad loans as a percentage of GDP have deteriorated by some 35 per cent under the Granger administration since June 2015. At the end of 2016, I am reliably advised that the bad debt as a percentage of GDP was almost five per cent. That immediately creates a real, but permanent leakage from the economy. Can we afford this?
Any serious government would have done some strategizing around this issue from day one, but it is now “clear as day” that the life of ordinary humans in Guyana has little value to the ruling elite in the Granger Government. From their public actions, they have reduced the most complex issues in an entire country into sweeping political generalities. Economic growth is down, but we have more Cabinet time to fight a street war in front of Red House. The financial sector is in a meltdown and we got more Cabinet time to spend on why the third-term case of Jagdeo should not be heard or to go to war on who should be the head of GECOM. It is asinine how these supposedly thinking people justify every one of their actions in the name of political brinkmanship with no care for the economic and social impact on the people that really matters, the poor and the working class.
Regular people are suffering because of this intellectual deficit in the Granger administration. But do they care? Why does the welfare of the Guyanese civilians mean so very little to this ruling Granger cabal?

Regards,
Sase Singh