After increasing for more than a decade, Guyana’s foreign currency reserves have swung in the wrong direction since April 2014. This decline was started under former President Ramotar (no doubt about that fact), but the pace of the decline has accelerated multiple folds since the arrival of President Granger.
Seen by many investors as a signal of their rejection of Ramotar’s minority government and his subsequent fatuous prorogation policy, this rejection mutated into a systemic lack of confidence in the economic policies of the PNC-led Granger government. Under these two presidents, the foreign reserves have declined by some US$90 million since April 2014.
Their major defect remains that both of these Presidents have failed to stimulate value-added ventures in the agriculture sector, especially in the sugar industry. To Ramotar’s credit, the oil price in April 2014 was US$104, which contributed to the rapid reduction of the available reserves — at a rate of some US$300 million in 2014. But what is Granger’s excuse, when the evidence reveals he is faced with a very low oil price of US$52? This is where the rubber hits the road on Granger’s performance; he has no excuse for his “D” Grade performance.
The graph above is extremely telling. There are consequences for such fiscal wildness. At the end of April, the Central Bank balance sheet revealed a G$7.5 billion reduction in its net foreign assets in the 6 months to April 2017. When the mismanagement of the economy starts to affect your last bastion of financial stability (your Central Bank), it means the “economic gangrene” is well advanced.
A nation cannot afford to weaken the balance sheet of its Central Bank, but this is exactly what the PNC-led Granger Administration has done between October 2016 and April 2017. It reminds the analyst community of the horrible old PNC days — between 1982 and 1987. In the period January to April 2015, 2016 and 2017, the Central Bank had to pump US$0.5 million, US$10.1 million and US$7.7 million respectively into the system to stabilise the rate. But even such a rapid increase, with the injection of new foreign currency into the economy under Granger, the exchange rate declined by 16% in 6 months (November 2016 – April 2017) compared to a decline of 0.1% in the same 6 months in 2015/2016.
These concerns are not entirely without foundation, because the evidence supports the position that the economy is being bungled under Granger/Jordan. Unless Finance Minister Winston Jordan rolls out some urgent progressive policies to stimulate investments, the run on the Guyana dollar can possibly hit G$250 to one US dollar by Christmas 2017.
Much will depend on whether the Granger Administration can shed their cloak of secrecy on their economic strategies (if they have any) on how they plan to rebuild the international reserves, stabilise the exchange rate, and stimulate investment in the Guyanese economy. If the right strategies emerge, confidence can be restored in this small Guyanese economy. Hoyte/Greenidge did it in 1988, and with Greenidge in the Granger Cabinet, it defies logic why this man is not being given a chance to do it again.
To restore domestic and international confidence in the Guyanese economy, the Granger Administration needs to make several policy changes at once. Deadwood projects like that Durban Park Ponzi Scheme have to be privatised. Professionalism in the procurement system has to return. There is a system in place to secure the best value for money at all times, instead of stuffing money into the pockets of friends and families of the PNC. But, most importantly, we must truly take all action to open Guyana for business.
This means GO-INVEST and the Ministry of Business have to be disbanded, because they have failed on all scores to bring the new investments to Guyana. A new super-ministry, reporting directly to the President, should be formed. It should be focused on trade and investment, and should be fully empowered and endorsed by the Presidency to make swift decisions. There must be no scope for petty interference from other Government departments. None whatsoever.
Assuming that the Pageantry President is too lazy to lead on this front, all is not lost. Such an important role can be reposed in the care of a powerful man like Joe Harmon, who can use his powers for the good of the nation. Guyana can fix itself, but it needs urgent presidential policy action, which remains the core shortcoming; exposing why the nation is in such an economic mess.
