Recent Bank of Guyana reports confirm economic downturn and the deterioration of the macroeconomic and financial stability framework in Guyana. This past week, former Alliance For Change (AFC) Executive Member and Economist, Sasenarine Singh, thankfully highlighted the precarious situation that is emerging in our country. Between 2015 and the present time, the US dollar foreign reserve at the Bank of Guyana has dwindled from more than US$800 million to under US$550 million; an astounding US$250 million reduction in less than three years since the A Partnership for National Unity (APNU)/AFC took the reins of Government. A similar reduction in US-dollar reserve is evident at the private banks. The disappearing foreign reserve is hollering a warning to us that the macro-economic and financial stability of our country is at peril.
Only countries which are bankrupt or under threat of bankruptcy have weak or negative foreign reserves. Guyana is no stranger to this sin. When the People’s Progressive Party (PPP) took over the Government in 1992, at the time we restored democracy, the foreign reserve was almost zero and the country was virtually bankrupt. For the decade before 1992, Guyana maintained near zero and even negative foreign reserves. Dr Cheddi Jagan and the PPP made restoring and building a foreign reserve a priority. Bharrat Jagdeo made building the foreign reserve at the Bank of Guyana a fundamental foundation of a sound macro-economic and financial stability platform. As Guyana’s foreign currency reserve at the Bank of Guyana improved and increased reaching between US$600 million and US$1 billion, the then People’s National Congress (PNC)-led Opposition attacked the PPP and, particularly, Bharrat Jagdeo, for not using the foreign reserve to increase public expenditure.
APNU/AFC inherited this healthy foreign reserve in 2015 and then immediately began depleting it by financing wasteful projects like the $1.4 billion D’Urban Park Project, the sole-sourced $630 million procurement of medicines at a cost about 66 per cent above market value, the more than $175 million annual expenditure for a house that serves as a medical warehouse, barely utilised for medicine storage. Since May 2015, Government public expenditure – current and capital – has increased, but an examination of the Auditor General’s Report will show an astonishing degree of waste, with more than $20 billion falling in the category of waste in 2016. Given the diminishing foreign reserve with an increased public expenditure, Singh correctly asks the salient question – how are we paying for the extravagance of this Government’s wasteful spending?
The genesis of the problem is not merely the wasteful spending by APNU/AFC. They have been collecting more Value Added Tax (VAT), more Income Taxes, more taxes from about 200 new or increased taxes since 2015. One would, therefore, have thought that there was no need to draw down from the foreign reserve. But the fact is that the deteriorating economic base is also resulting in an increase in the balance of trade. Our export earnings have tanked and APNU/AFC has recklessly began to deplete the foreign reserve to fund wastes such as the 50 per cent increase in their own salaries.
Sugar is a major reason for reduced export earnings, leading to an assault on the foreign reserves at the Bank of Guyana. For most of the period between 1992 and 2015, sugar earnings in foreign currency amounted to between US$150 million and US$300 million, with an average annual export earnings of about US$200 million. Because of APNU/AFC’s spectacular failed management of the sugar industry, export earnings fell to below US$70 million in 2017. In fact, the export earnings from sugar in 2018 is expected to fall below US$50 million and this will catalyse the real possibility that the foreign reserve at the Bank of Guyana will further deteriorate in 2018. While the heroic efforts of the rice farmers and the millers are maintaining a strong performance within the rice industry, its export earnings in 2015, 2016 and 2017 have all been significantly less than the annual US$250 million in the period 2012 to 2014, mainly because Guyana has shifted to lower-priced export market.
The APNU/AFC keeps boasting that oil will bring in more than US$300 million annually. But this is only good if it is additive to existing export earnings. If as we wait for oil, we reduce our present export earnings, a reduction that is almost US$200 million, then when oil money begins to flow, instead of improving our socio-economic standing, that new oil money will simply replace money we lose from the traditional industries. It means we are no better off. Is this our oil future? Are we going to use oil money to simply replace what we lose from sugar and rice? This is the very height of stupidity.
