Global Financial Crisis will worsen before getting better

Feb 06, 2009 News

…local state regulations continuously monitored, loopholes

plugged – Jagdeo

The effects of the current financial crisis plaguing the economies of countries worldwide will get worse before it gets better, possibly reaching a depression first.

This is according to Head of State Bharrat Jagdeo, who yesterday briefed media operatives on his recent trip to Davos, Switzerland, where several world leaders gathered for the annual World Economic Forum to formulate a strategy aimed at tackling the current crisis.

The President said that what is needed is a global governance strategy to ensure a global financial stability in that individual efforts would not work.

This, he said, was necessary given that there are countries that practice good financial policies and those that did not.

According to Jagdeo, in the event of a global financial crisis such as the current one, the countries that practised good financial policies were also affected given the nature of globalisation.

This was in light of the fact that there are countries such as Guyana where the state regulations are sound and continuously examined to weed out loopholes but there are others in the developed world that are far less regulated thus causing the crisis. He added, too, that on the world stage many countries who preached against protectionism were now taking that same road but more multilateral trade should be encouraged.

The President said that Guyana’s financial sector, particularly its regulations, has had to undergo intrusive inspections by international bodies such as the International Monetary Fund and it was found to be efficient. These (regulations), he posited, have managed to cushion the impact of the financial crisis to some extent.

He noted that, unfortunately, developed countries did not take this course and should have (regulated more) and that would have possibly avoided the severity of the crisis given that a major player found to be responsible for the crisis was the lack of, or minimal regulations by the State.

The President said, “We need a coordinated action and not individual efforts” in responding to the crisis and plotting a chart forward.

He said that this was necessary given the nature of the high quantity of cross border trade in the world.
The President added that what was necessary was for stimulus packages to be implemented around the world to seek to reenergize the various economies and would contribute to reenergizing the world economy.

In Guyana’s case, that would come in the form of the 2009 budget which will be detailed on Monday.
The President had earlier said that the 2009 National Budget aimed at restarting and sustaining growth in ways that are achievable and attainable in the context of the global challenges.

He had announced during the first press briefing for the year that this year’s budget should be even larger than last year’s and that the increased government spending is aimed at creating more jobs and at offsetting what he described as an impending financial downturn.

On October 8, last year, President Jagdeo said, “I am not afraid of the immediate impact on our financial sector. What I am more concerned about is the impact on the rest of our economy because if credit dries up around the world, local investment companies can be delayed”, and this has now evolved into a reality.

He noted that the administration would have had to do some financial engineering to effectively weather the future.

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