Guyana’s economic recovery

May 18, 2013 Letters

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DEAR EDITOR,
Guyana’s economy is doing well, especially when seen against the background of other economies in the region. The country has now graduated out of the IMF structural adjustment programme which, as the experience of Jamaica and other crisis-stricken economies has demonstrated, is not a panacea for the myriad social and economic woes that have bedeviled those countries.
According to media reports, the Jamaican government has now entered into a new agreement with the IMF to help stabilize the economy and put it on a path to economic growth. An IMF Executive Board Member stated that, ‘for most of the past three decades, Jamaica has suffered from very low growth, high public debt, and serious social challenges. Key factors behind these problems have been Jamaica’s unsustainable debt burden, low competiveness, a weak business climate, and lack of policy credibility’.
The situation facing the Jamaican economy is reminiscent of the days when Guyana was heavily enmeshed into an IMF arrangement and was forced to introduce austerity programmes which saw among other measures, cuts in subsidies and social services, a virtual freeze in public servants’ income and drastic reduction in the public sector wage bill.
The PNC administration was forced to borrow heavily from the IMF in an effort to stabilize a sinking economy, but such agreements came with a heavy price as alluded to earlier. Perhaps more significantly was the virtual surrender of sovereignty when it came to important policy decisions, as the IMF was instrumental in the setting of benchmarks and ‘conditionalities’ which invariably do not go down well with the working people.
It is usually quite a bitter pill for sovereign nations to swallow and many governments, including the Michael Manley administration of Jamaica, suffered politically as a consequence of harsh austerity measures. The Manley Government was roundly criticized by opposition forces – for entering into an agreement with the IMF under such harsh conditions – who derisively dubbed the crisis situation the country found itself in as “Manley Fault”, a clear reference to the IMF and the debilitating effects of IMF-dictated policies and programmes.
Guyana, under the PNC administration, was faced with a similar situation as in the case of Jamaica today. Despite significant sums of IMF money, the country was no better off than it was before the IMF intervention. In fact the country found itself in a situation where it was unable to meet its financial obligations to the IMF, forcing the Fund to declare the country “uncreditworthy”.
A running battle between the Fund and the PNC regime took place during the Burnham years, with Burnham calling IMF technicians “paper doctors” whose prescriptions and medicine, he lamented, only served to make the condition of the ‘patient’ worse than before.
The result was a souring of relations between the then PNC government and the IMF which later spilled over to relations with all the other major international financial institutions and the donor community, of which the United States was a key player. The situation deteriorated to a point where there was a complete rupture of diplomatic relations between Guyana and the United States of America.  The United States, in retaliation, discontinued its PL-480 programme of assistance to Guyana, in which wheaten flour was given to the country on highly concessionary terms.  The government then banned all but a few imported food items including wheaten flour, split peas, sardines and a range of consumer items which only worsened the situation and created a virtual nightmare for the average Guyanese.
It was only after the passing of Forbes Burnham in 1985 that relations between Guyana and the United States, and the international financial institutions, began to improve. Hoyte, in the face of the aftermath of yet another massively rigged election, sought the assistance of the United States and other western powers to push through his Economic Recovery Programme, which essentially was premised on market reforms, deregulation and a neo-liberal economic agenda.
To his credit, the economy showed some positive growth during the initial years of the recovery programme, although much of this recovery was attributable to the sale and divestment of state assets which included several ‘sweetheart’ deals and not necessarily out of any significant increase in production and productivity. Indeed, during the final days of the Hoyte administration, the two leading foreign exchange earners, rice and sugar recorded their lowest levels of production ever.
Guyana’s economic recovery did not commence in earnest until the new PPP/C administration assumed power in October 1992, which saw a steady growth of the economy and a corresponding decrease in the debt burden which was consuming over 90% of government revenues.
The PPP/C administration, due to prudent management of the economy, was able to reduce the debt burden along sustainable lines, while at the same time accelerating the pace of economic development. The economic health of the country is good, a fact that is being acknowledged by the IMF and other regional institutions.
Hydar Ally

 

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