New foreign exchange controls a symptom Guyana is already contracting the ‘Dutch Disease’

Dear Editor,
Finance Minister Winston Jordan has been caught in his web of lies yet again. At a press conference held recently by Minister Jordan, he pontificated to local journalists the stability of the economy.
Asked about measures to be taken by the Guyanese government – namely the Finance Ministry – his answers were half baked at best to give some sense there was no emergency.
Every economist knows a significant influx of US currency into the Guyana economy will see the Guyana dollar losing its value and competiveness. This is an early symptom of the dreaded ‘Dutch Disease’, whereby companies and sectors operating locally will now have to confront the challenges associated with that influx of US currency.
First oil is March 2020 at a time when there is expected to be a significant influx of US currency into Guyana.
The Guyana Revenue Authority (GRA) is a creature of the State and cannot be held accountable for the recent currency exchange rates now being used across country. Bear in mind that Jordan recently mandated a limit between buying and selling the US currency locally.
The eroding competitiveness of the Guyana Dollar has already begun to take its toll on export sectors. Importers will also now be paying more for their imports. Simply put, now that the price for buying a US dollar has been increased to G$208 for US$1, it means that importers will have to increase their prices.
An importer who previous paid US$1 for an item at an exchange rate of G$200, will now have to find G$8 more to make the same purchase that is still being sold internationally at US$1.
Consider this being replicated across the other competitive sectors. When a fertiliser agent previously paid US$10 for a bag of chemicals at G$200 for US$1, he too will have to now find more Guyana currency to pay for the same item at the same prices previously paid. The difference in the price increase has to do with the strength of the Guyana Dollar.
Guyana is already contracting the ‘Dutch Disease’; its already crippled agricultural sector with the influx of US currency as a result of oil will no doubt bring additional pressures on the already struggling sector.
Manufacturing across the country will take its toll since the price of fuel on the world market has also been steadily increasing and has been holding at a three-year high.
What this means is that the oil companies are poised to do well and government can look to 2020 with a smile on that front, but it also means that the cost of energy will undoubtedly also skyrocket. I predict pretty soon the Guyana Power and Light Inc (GPL) already saddled with numerous loans and capital costs, will soon increase it rates for both residential and businesses.
This would obtain since the billions in surplus made by GPL and the likes of the Guyana Oil Company when oil prices were lower was instead squandered through the ad hoc arrangements employed at the order of sailor Minister Winston Jordan.
As the price of electricity and transportation increases across country, these costs will no doubt be passed on to consumers, and businesses – in business for a profit ultimately – will have no choice but to pass on the additional overhead costs to the Guyanese consumer.
The ambitiously low inflation targets set by Minister Jordan could very likely reach double-digit figures by the end of the year. This since Government expenditure continues to rise, revenue sources have all but dried up and once productive sectors are now not only struggling but are now on the brink of extinction in some cases – think sugar.
To compound this escalating situation, Guyana’s Business Ministry has in three years implemented not a single measure that has proved to be in aid of local industry; instead the Administration has resorted to doling concessions above and beyond what was done by the previous Administration; this, even though they complained bitterly ‘Jagdeo gave away Guyana.’
Guyana’s Private Sector is under threat and the David Granger Administration has not only done nothing to mitigate the pressures but in some cases have exacerbated the situation.
The David Granger’s economic tunnel vision pinned on the emerging oil and gas sector has already seen the contracting the ‘Dutch Disease’. Extreme situations call for extreme measures. Guyana’s economy in recent weeks was poised to flatline in 2020 ahead of first oil as the life-line, the new currency measures implemented by the GRA has now placed the country on an economic trajectory diagnosed only as ‘Dutch Disease.’

Sincerely,
Peter R Ramsaroop, MBA, PHD
Economic Advisor to the political Opposition