Is Guyana heading Venezuela’s Way?

By: Sase Singh; MSc – Finance, ACCA

In order to learn how this political crisis is affecting the ordinary people, one has to look at both the micro and macro-economic variables with an intrusive mind. The bottom line remains – as the economy weakens, the deficit will automatically increase.
The Bank of Guyana has reported that the overall balance of payments recorded a higher deficit of US$160.6 million for the period January to September 2018 compared to US$53.4 million for the period in 2017. This is the only accurate number at this time for 2018. I have no confidence in the numbers in Budget 2019; they are guess-estimates (incomplete numbers without adequate evidence to support them).
To properly understand the reality, one has to converse with the real people living and working in Guyana. Meet Doris! A self-employed hairdresser with a husband and two children. Her household has no car and she rents. She applied for a house lot in 2017 and was asked to pay GY$60,000 for the land. She was also asked for a personal donation of GY$50,000 from the official in the Ministry to accelerate this public service.
She takes home about GY$18,000 to GY$20,000 per week, and her husband works for about GY$68,000 per month. However, he only gives her GY$40,000 per month and she assumes he uses the remainder for transportation and personal expenses. This table reflects her world.

Between her husband’s contribution and her income, she can barely save between $4000 and $5000 per month in a special saucepan for that house lot, but on most holidays such as Christmas, she finds herself dipping into it. Using current calculations, it should take her about 15 months to save for the house lot but her clock restarted because she took $20,000 out of the special saucepan last Christmas. Today she has only $15,000 in the saucepan. This is real life of the majority of Guyanese.
There are too many Doris’, Sharons’, and Shameezas in Guyana who are experiencing this identical situation? These are the facts that the CDB will never get because their statistical analysis is done in isolation of the real development issues but instead rely on documents like Budget 2019 with their guess-estimates.
But the real news remains, life is about to get worse for Doris as Team Granger dedicate all of its energies towards staying in power rather than implementing public policies that will lift all the boats of Guyana. Today propaganda has trumped human development as the election season commences.
While the foreign currency is depreciating at a rapid rate, Presidential candidate Granger is politicking rather than applying his mind to the issue, consulting the stakeholders and taking progressive action. I have in my possession a letter from Muneshwars Shipping where they are using an exchange rate of GY$230 for US$1 to compute their demurrage fees. I am told the situation is the same as all the other shipping companies and airlines. Is this a reflection of things to come as 2019 progresses in this sea of political and economic uncertainty?
So what is causing this stressful situation in the economy? The Bank of Guyana stated in its September 2018 Quarterly Bulletin that merchandise imports rose by US$170.4 million mainly due to increased importations of intermediate goods, capital goods and consumption goods for the first nine months of 2018. How do we pay for these imports? Mainly by increasing our exports. However, merchandise export receipts declined by 3.6 per cent or US$37.1 million, which stemmed from decreased exports led by sugar, gold and timber during the same period. The simple facts remain imports are more than exports and this was compounded when Team Granger shut down four sugar estates, causing sugar exports to fall by 47.4 per cent during the first nine months of 2018 and replacing it with zilch. The economic fundamentals have been compromised and therefore this shortage of US dollars is going nowhere soon.
The Guyanese people are not stupid, they know what is happening and those with options and wherewithal are actively engaged in capital flight or are storing their wealth in assets such as gold. My advice to Doris is – focus on getting that house lot but store your savings in stable investments (US dollars or gold jewellery) to retain value rather than watch her cash become like the Venezuelan Bolivars.
Unfortunately for the majority of people like Doris, they can only stand in the middle of the road as the headlights from the oncoming vehicle approaches at a high speed and pray for divine intervention. Is this the “good life” Candidate Granger promised the people; a free ride to Venezuela?