Dear Editor,
Since the passage of Minister Jordan’s 2016 Budget, the seeds for a deteriorating Guyana dollar (G$) were planted. Against the US dollar, the G$ has fallen to its lowest level ever, and is currently trading on the open market at G0 to US for off-board transactions at the non-bank cambios, and for online and wire transfers at the commercial banks.
I had a conversation this month with a good friend who came from the old country, and he told me that to get the US dollars to fund his trip, he had gone to several cambios and banks and could not find the cash at the advertised rate (usually around G5 to US), but was advised that if he was willing to forgo a receipt and pay G0 to US, arrangement could be made within two hours. He got his money at a rate of G0 to US and made his trip.
So what is being told to the nation by Minister Jordan exposes how disconnected he is from the reality on the ground. The reports are revealing a declining stock of US dollars in the system, and that money is being kept for an exclusive group: their related parties; businesses of the banks and cambios; senior Government functionaries; their own staff, for personal needs; and for those who are prepared to pay G0 and above for one US dollar.
Since the 2016 budget, the exchange rate has deteriorated by some 12 per cent, compared to what prevailed at the time that budget was read in January 2016. The expectations from the market today are that this slide in the rate will continue, primarily because Guyana is just exporting too little and not earning enough foreign currency. Minister Jordan’s poor technical skillsets are also compounding this situation, which is leading to a loss of confidence in the economy.
The cause of a currency movement is vital in determining its likely effects. This free fall in the exchange rate at a time of low investments and high unemployment will have materially different effects than a similar-sized depreciation in the ERP days (1988-1992). Under Hoyte, there was one major difference – rapid increases in foreign direct investments and a more manageable unemployment situation. So the outcome today will be catastrophic compared to the Hoyte days.
Compared to the ERP days and the PPP days, the Guyanese private sector is in the worst possible position to attract new long-term customers in overseas markets, irrespective of what they do to their selling prices. In this New Global Order, the international market is demanding value-added products, not raw products. But Guyana is on the wrong side of the production platform with its raw products. So the market will pay Guyana heavily discounted prices for its raw products, which are swamping the market. You cannot talk about a new breed of private sector player when you have failed to play your part, Minister Jordan.
When, on April 9, 2017, the Minister of Business said, “Guyana currently has no investment project to offer”, he was not wrong. If one studies the latest “EASE OF DOING BUSINESS REPORT”, Guyana’s ranking in the world on the Competitiveness Indicator reflects a deterioration since 2016. But that was no accident. Because of our small internal market, the only solution for Guyana is to focus on the export sector, especially the six sisters (rice, sugar, bauxite, gold, forestry, seafoods).
But rather than do the work it is being paid to do, the Granger Administration is busy with its “pointer broom in the sand”, constructing SARU and BARU and SOCU and POCU, and billion-dollar parade grounds. But none of these edifices has generated any foreign currency for Guyana; but the six sisters do.
Is President Granger’s legacy going to be one that is steeped in pusillanimity? Is Guyana under his watch IMF-bound?
Sincerely,
Sase Singh
