By: Sase Singh; M.Sc. – Finance, ACCA.
Introduction
Depreciation in a country’s currency is when it continues to lose value in a floating exchange system. The outcome of such a situation in respect to Guyana, where our productivity and export production are flat-lining, is increased inflation and a rapid increase in the cost of living. Such a situation hurts the poor the most.
Currency depreciation can occur due to any number of reasons – the economic fundamentals malfunctioning; interest rate differentials; political instability; risk aversion among investors; capital flight, and so on. The overwhelming view of the majority in the analyst community is that the root cause of the economic troubles in Guyana is not being addressed. Rather than waste time and resources on phantom troubles like the Lindo Creek investigation, President Granger needs to urgently wake up to the real troubles– the economic ones. He cannot continue to be “out-to-lunch” on these gross acts of economic mismanagement that are present in his Government.
The reliance on future oil revenues cannot be the solution, especially after the fact that not even EXXONMOBIL knows the exact exploitation date or price which will translate to Guyana’s share of the oil revenue. It is all guesswork currently. The IMF has already warned Guyana about “scaling up” public spending in anticipation of future oil revenues, yet this is exactly what Team Granger continues to do.
So how did we get here? Although President Granger complains that the PPP bequeathed him with an empty treasury, the evidence reveals that this is furthest from the truth. The last IMF Report on the PPP performance was headlined “Guyana experienced seven consecutive years of solid growth buoyed by agriculture and extractive industries”. Again, in that report, it noted that the PPP Government has been able to “gradually reduce Government expenditure as a share of GDP,” which was expected to improve the fiscal deficit. The PNC-led Granger Government came in and upturned that entire plan. What this Granger-led Government has done has been to plunder the treasury of some Gy$70 billion in 12 months, and the rest is history. As at August 8, 2018, there has been a net balance of some G$57.6 billion owed to the Central Bank by the Ministry of Finance. Where has all this money gone?
Since President Granger came to office, his Government has made a determined effort to use the State as a vehicle to crowd out the private sector. His henchmen went as far as to try to label the private sector as mercantile vultures, rather than as the engine of economic growth. The nation did not respond well to such ideas, and around the end of 2016, capital flight started to happen at an accelerated pace. Today, capital flight is actively taking place in Guyana. The end result in a drying up of the stock of foreign currency available to the nation. In such a situation, something must give. The graph below using Bank of Guyana data and my projections for December 2018 based on the Ministry of Finance’s Half Year Report for 2018 reveals what is happening to our exchange rate.
As we can observe, the exchange rate has been sliding under both the PPP and PNC-led Governments, but the slide has accelerated since December 2016 under President Granger, as more people have lost confidence in his ability to charter a new course because of the allegations of rampant acts of corruption under his Government, evidence of wasteful spending, and the destruction of many parts of the six sisters (the productive sector) that Guyana needs as the generators of the foreign currency to fuel the economy.
What has been clearer have been the determined efforts by some of the most powerful political figures in Team Granger to destroy the partnership between the private sector and the state sector by using state agencies like “SARA and SOCU” to run down the private sector. Clive Thomas, Head of SARA and Economic Advisor to the President, made some damning statements against the private sector in the early days of the Granger Administration, and those helped to cement this destruction. His machinery is still at work today, even though not one of his cases has been concluded some three years later, which has reinforced the notion that Team Granger really have not figured out their developmental model yet, and the role that the private sector ought to be playing in that model. That is not how you run a country, in such a “school boyish” way with petty agendas. You think nationally, as you rule for all the people all the time.
CONCLUSION
We can do much better than this. The people must continually raise their voices on the issues, to ensure that better must come. That is why we must all stand with the teachers today.
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