Opposition alarmed by deficit in country’s balance of payments

The Parliamentary Opposition has noted, with deep concern, the increasing deficit in the country’s balance of payments, which it says will continue to have serious implications for the local economy.
Opposition Member of Parliament Irfaan Ali has said these rising deficits are mainly due to lower export receipts, resulting from lower revenue from export earnings.

As a result of this unprecedented increase, the Government still has to finance these deficits. As such, the Government has been tapping into the Gross International Reserves to finance these deficits.
“Our overall balance of payments moved to a deficit of US$46 million from a surplus of US$12.1 million, and this was mainly as a result of the deficit of the Current Account of US$101.1,” Ali revealed.
Ali went on to state that if one were to look at the local forestry sector as well, one would recognise that that sector has seen a decline of over 80 per cent. And this decline from 2014 to date has cost the country US$5.8 million. The Opposition MP said this same crisis exists in other key sectors.
“The deficit in sugar, for example, is $6.3 billion, and you can add this up and at the end you will imagine not having this amount of revenue in the economy circulating, what it means to the ordinary people and the various industries,” he said.
The former housing minister also highlighted that there has been an increase in non-performing loans, which tells a very sad story that things are not right. Ali believes the economy is now reeling from the damage imposed on it by Government since assuming office over two years ago.
“We have increases in essential goods and services. We have decline in the productive and financial sectors and services sector, and declining revenues coming in,” he added.
Even with increased production in the key traditional sectors, data compiled in the recent mid-year Finance Ministry Report has clearly shown that the economy is eroding at a fast rate.
In light of this, Ali pointed out, as foreign exchange tanks, imports will become relatively expensive. “Overall, imported goods would become relatively expensive, hence stoking inflation in the process,” he contended.
Ali noted that net foreign reserve plummeted from US$633 million in June 2016 to US$574 million in mid-2017; the lowest ever recorded in over seven years.
“In other words, the A Partnership for National Unity/Alliance For Change (APNU/AFC) Government destroyed in two years what the PPP/C [People’s Progressive Party] took to amass in seven years. Even more worrisome, external debt increased by US$53 million to US$1,200 million,” he added.
The Opposition Member of Parliament said it is also worthwhile to mention that net foreign revenue to external debt ratio had increased from 172 per cent in mid-2016.
He added that under the PPP/C Administration, Guyana had the fastest growing economy in the region. He said that from 2006 to 2014, Guyana’s economy experienced continuous positive growth. This was the longest period of uninterrupted growth in the history of Guyana. The average growth rate was 4.5 per cent per annum.
In 2014, the last full year of the PPP/C in office, Guyana’s GDP was US$3.1 billion. That was up from US$1.4 billion in 2006, an increase of 121.4 per cent.
The country’s Gross International Reserve held at the Bank of Guyana at the end of 2014 was US$665.6 million, which was equivalent to 3.6 months of imports. It was up from US$251.4 million in 2005, an increase of 164.76 per cent.
The PPP/C Administration, Ali said, had drastically reduced the huge debt it had inherited from a previous PNC regime, and educed the external debt to just 39.5% of GDP.
In this year’s mid-year report, it was stated that the overall balance of payments recorded a deficit of US$46 million during the first half of 2017. According to the report, key traditional products such as sugar, timber, rice, and even gold, have all recorded a decline in export earnings. The Opposition is urging Government to rethink its economic policies so as to bring about greater levelS of development and opportunities.