Concern about our Economy

Oct 05, 2008 Peeping Tom

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Peter R. Ramsaroop, MBA
Chairman, Vision Guyana

INTRODUCTION
In my Friday Economic Corner, I addressed the global financial crisis and its current and potential impact on our nation. We have not heard yet from our President or our distinguished Finance Minister since the financial crisis started in the USA.

The PPP/C in the 2006 elections surprised many with terminology such as prosperity, dreams, and even words such as “a Democratic and Prosperous Guyana”.

Now, those words ring hallow to us as a people; now they have proven that democracy is in danger and that the economy has not improved.

Dr. Jagan had promised that he would never let inflation overtake our pay increases. Little would he now know that the current administration has failed his promises. Last year, inflation was over 13% and pay increases were way below that.

The PPP/C government has failed to balance the budget in 16 years and is now borrowing at a faster rate than the PNC did in 28 years.

When the President leaves office in three years, we will still be the second poorest country in the hemisphere and they would have been in power almost 20 years.

Our economy has been held up mostly by remittances, taxes, loans and underground money. There has been no significant major investment in over a decade. Taxes have increased on us the citizens and then are given back through contracts to some.

The underground economy is in jeopardy as the US finally gets our government to act on known drug lords and money laundering agents.

INFLATION: WHAT DOES IT MEAN?
Inflation is the rate at which the general price level of goods and services rises, and consequently your purchasing power will fall.

As inflation rises, every dollar will purchase a smaller percentage of goods or services. The International Monetary Fund (IMF) estimates that Guyana’s 2008 Inflation Rate will be higher than 10% again this year.

Inflation causes many serious and bad effects in the economy, and to citizens, and potential investors. Recently, 17,000 workers went on strike, demanding a 14% increase pay raise, to cope with inflation.

Sugar is very important in Guyana’s economy, and as such the sugar workers will have a high bargaining power. We are all awaiting the three persons’ binding arbitration decision.

LOANS WRITTEN OFF
Recently, IMF and other lenders wrote off billons of dollars of Guyana’s debt for a number of performing and non-performing loans, in an effort to stimulate the country’s economy. Did this stimulation happen? NO.

We have had our own financial crisis for over a decade now. Guyana’s financial crisis is linked to banking and currency problems, which is due to closed markets, lack of rule of law, corruption, nepotism, “relativity”, Government subsidization of state operated companies, lack of transparency, unwise Government borrowings, and poorly executed developmental plans.

Sugar, rice, bauxite, gold and diamond mining are the BACKBONE of Guyana’s production economy. We all know and read daily about the problems with sugar and rice.

As mentioned before, Guyana is heavily dependent on foreign remittances, from USA, Canada and UK families to their extended families in Guyana.

THE REAL ISSUES
The real issues, while seemingly complex to some, have in fact simple basic points: unemployment is a real problem, the lack of a positive investment climate hurts foreign and local investors, punitive tax codes discourage business activity, and a public sector which does not aggressively fight the drug trade hurts all legitimate businesses.

CONCLUSION
How do we begin to practically encourage positive economic change in our land to start climbing the ladder from the second poorest country to a nation with an economic boom? I have mentioned some of these before in other economic forums.

• Firstly, we need to engage the Diaspora. The skills, experience, and wealth of our brothers and sisters who have left Guyana should be engaged to help to bring businesses here.

• Second, we need to have real public debate with full participation by all parties in the parliamentary process. For too long, posturing and carping from the sidelines has left too many voices unheard. Why else do we elect them?

• Third, we need to focus our public debate on jobs, jobs, jobs! How do we encourage foreign companies to build operations here, build tax–free export zones, free up the money held hostage in our moribund financial sector, and extend credit to consumers?

We can do this all through a focus on growing employment opportunities. I am worried that the money the banks had held hostage may now be lost in their investments as a result of the recent financial meltdown.

• Fourth, economic policy needs to be about real people and their real needs. I see everywhere I go in our country the poverty, but also the resilience, of our fellow citizens.

Policy isn’t about talking statistics and debt/citizen ratios; it is about making the hard work of all Guyanese pay off in better lives and stronger families.

• Fifth, we must cease our reactionary budget approach and spontaneous spending and look at solid long-term investments that will demonstrate a Return on Investment that every citizen can personally measure.

We need to hear from our private sector, our banks, and our politicians that they are paying attention to our financial crisis. We need new policies that will put us on the road to prosperity. Where is our plan? Where is our tax reduction? Where are the jobs? Where is the expansion of our private sector?

What are our development targets? Where are our new industries? It is time to move on. We the citizens need the attention, and we need to be able to earn fair and equitable wages.

Send your comments to [email protected] www.visionguyana.com

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