In previous writings, this author had presented analyses on a number of macroeconomic outcomes of Guyana’s economic performance by examining datasets from as far back as ten years ago. Those analyses had pointed out two critical, worrying trends viz-á-viz the widening of the balance of payments’ deficit, largely financed from the Bank of Guyana’s (BoG’s) foreign reserves, which in turn is depleting the international reserve balance. 
The above trend has resulted in the BoG having to buy up FX from the private FX market, a trend that started in 2017 and continues to date. To this end, the BoG has bought up approximately US$300 million in just over two years; something that had never happened in the last 10 years. It is noteworthy to mention that, in Guyana’s context, inflation is closely linked to exchange rate as the key driver of inflation. Should the aforementioned trend continue, therefore, the BoG would be placed under severe constraint to attain minimum import cover and stabilise the exchange rate, as further depreciation is anticipated in the short-term.
This is especially the case since the commercial banks’ net foreign assets would eventually be placed under pressure, which would result in depreciation of the exchange rate and, in turn, hyperinflation.
The notion of an FX shortage is perhaps not at an alarmingly serious state at this present moment, because the net foreign assets of the commercial banks remained above US$250 million. In fact, they have reached to about US$300 million as at the end of April, 2019. This outcome means there is sufficient private foreign capital flowing into the system, which can be easily explained by the large influx of foreign companies coming into Guyana on account of the emerging oil and gas sector. This is nothing to be excited about, however, because this situation will be quickly reversed at end of the year, when these companies have to repatriate their profits to their parent companies in their respective home countries.
As such, the point noted about the Central Bank purchasing FX from the commercial banks is an ever-increasingly worrying trend. If this trend continues, the commercial banks’ FX balances would start to deplete, and then there will be a real shortage problem. This analyst’s estimation is that, by December 2019, exchange rate can depreciate by 20 – 25 percent (conservatively) if this trend continues. Within this framework, therefore, this is a serious problem that needs to be arrested forthwith. It appears that the policymakers are taking a throwback attitude towards this issue because oil money is anticipated next year or late this year, which will sort of restore some stability. This does not mean that we should not monitor and instil some stability measures now, because it can get out of hand despite oil.
An important consideration that is perhaps being largely ignored by the policymakers is that, though oil may start to flow by this year end — and that would help to avert an FX shortage problem in a timely manner — if oil production is delayed for geopolitical reasons: (risks) owing to tensions in the region with Venezuela and the border controversy, and this issue takes a different turn for the worse, Guyana would be in serious trouble. Such an outcome would result in dire consequences for Guyana’s economic progress, given that the other traditional productive sectors are largely underperforming. This would be problematic; and therefore, one ought to ask the question: are our politicians and policymakers mindful of such risks?
