Critics misinterpret macroeconomic fundamentals to the detriment of Guyana

Jul 30, 2009 Letters

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Dear Editor,
SN has started its campaign as one of the contestants for the 2011 elections through its allocation of entire pages of distortions of Guyana’s history and economics by opportunists. One of them is Tarron Khemraj.
Tarron Khemraj sits on his throne in Florida and thinks that ink on a paper will change the production sectors in Guyana, and believes he has all the answers to Guyana’s problems.
Throughout history, we find that people of this sort are opportunistic.
This man fails to understand the context under which the PPP Government took over Guyana in 1992. Guyana was in a state of turmoil, heavily indebted, with dilapidated infrastructure, and the people suffered countless human rights violations. The environment was unstable, hostile and poverty was unimaginable.
Khemraj argues against financial assistance from the International Monetary Fund (IMF) and the World Bank (WB), and states that it fails to cater for long-term development strategies.

These international financial institutions provided Guyana with funds to make investments so as to reach a state of financial viability, since the country was heavily indebted.
Guyana in its state of turmoil took assistance from any institution willing to lend to recapitalise and rejuvenate the state of Guyana’s failing economy at the onset of the PPP/C’s rule. Also, Guyana and the Caribbean region were exposed to external shocks, and are still facing some of these shocks even today, which make it even harder to rehabilitate their economies.

Khemraj is captivated by the thinking that Guyana has to produce more products in order to survive in this global market. The question he should ask himself is: how would Guyana be able to produce products if it is in a state of indebtedness and financial instability, coupled with declining commodity prices on the world market?
According to the IMF, “The IMF’s main goal is to ensure the stability of the international monetary and financial system.
It helps resolve crises, and works with its member countries to promote growth and alleviate poverty. It has three main tools at its disposal to carry out its mandate: surveillance, technical assistance and training, and lending.
These functions are underpinned by the IMF’s research and statistics.” These are long-term goals that would work toward long-term stability of these recipient countries; Sri Lanka is the latest recipient of over US$2 billion of IMF funds.

These international financial institutions, such as the IMF and WB, have provided Guyana with the armour to achieve financial viability, in order to continue economic growth.
When Guyana was struggling, where was Khemraj? He fails to holistically understand Guyana’s financial context, and it is impossible to offer any substantial and credible financial proposals without understanding the entire financial framework of the country.
Khemraj said that Aguiar and Broner’s arguments in the Journal of Monetary Economics may not be relevant to Guyana’s economy; this is totally absurd. Guyana’s economy is part of the global economy; Guyana’s economy is governed through the World trade Organisation rules just like Western and other countries; Guyana’s economy faces external shocks like other economies. His argument, therefore, is sterile. Guyana’s economy is not an isolationist economy.

And Aguiar and Broner’s Abstract in the Journal of Monetary Economics reads as follows: “Emerging market crises are characterised by large swings in both macroeconomic fundamentals and asset prices.
The economic significance of observed movements in macroeconomic variables is obscured by the brief and extreme nature of crises.
In this paper we propose to study the macroeconomic consequences of crises by studying the behaviour of “effective” fundamentals…We find that these effective fundamentals provide a different picture than that implied by observed fundamentals. First, asset prices often reflect expectations of improvement in fundamentals after the initial devaluations; specifically, effective depreciations are positive but not as large as the observed ones.
Second, crises vary in their effect on credit market conditions, with investors expecting tightening of credit in some cases (Mexico 1994, Philippines 1997), but loosening of credit in others (Sweden 1992, Korea 1997, Brazil 1999).”

Aguiar and Broner’s points do have a lot of relevance to Guyana’s economy; this critic sees the world as static; the world is dynamic. Aguiar and Broner surely destroy Khemraj’s arguments about macroeconomic fundamentals because this critic sees macroeconomic fundamentals only within a static context.
Khemraj is also against remittances, as if this financial developmental tool is evil. Remittances offer a whole host of benefits to the ordinary person of any developing country and should not be shunned.
Through remittances, many poor people are able to send their children to school, gain access to health services, make local investments to sustain themselves, and achieve better living standards.
Also, Khemraj believes that Guyana’s political conflicts are not based on a Marxist class argument but rather on race. Khemraj needs to stop inciting racism into the minds of the Guyanese, as many politicians do, and stop brainwashing them to think that there is a racial problem in Guyana.

People like this critic believe that the PPP Government is an East Indian Government; but if Guyana really suffers from a race problem, then there would have been ethnic violence, all the people who are poor would have been Africans, and the Africans would have been marginalised and not granted opportunities to progress.
This is not the case, poverty is across the board in Guyana, and it is experienced by people of all ethnic groups. People from all other ethnic groups hold high positions in Governments and have access to their fundamental human rights, there is no marginalisation.
Kimberly James

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