Economic Revisionism

May 20, 2013 Editorial

While all commentators have a world view or even an explicit ideology that influences their pronouncements, when those commentators are in a position to influence the decision making of the government, one has to interrogate their premises since, whether valid or not, they have effects that are real in their consequences for the entire populace.
It is from this standpoint that we examine the premises of the PPP’s Mr. Hydar Ally’s letter on “Guyana’s Economic Recovery” (KN 5-19-13).
Mr. Ally states that, “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.”
While we hold no brief for the IMF, we do not believe that they have ever presented themselves as holding out “panaceas”. However, although we have “graduated out of the IMF structural adjustment programme”, but we are still following their prescriptions rather fastidiously, we wonder to what extent Mr. Ally’s skepticism is shared by his other colleagues in the PPP leadership cadre.
Mr. Ally states rather disparagingly that the IMF prescriptions to Guyana in 1989 were operationalised under the “Economic Recovery Programme, which essentially was premised on market reforms, deregulation and a neo-liberal economic agenda.”
But when we examine the programme’s four interrelated objectives: “to restore economic growth, to incorporate the parallel economy into the official economy, to eliminate external and internal payments imbalances, and to normalise Guyana’s financial relations with its foreign creditors”, we find that the plan was successful in every area.
Take the restoration of “economic growth”. It was the ‘bitter medicine” of the programme in a wide array of economies that forced institutions to adjust to the new regime and then fostered rapid expansion once the discipline was maintained.
The most important requirement was to have the political will and courage, as Hoyte displayed. He imposed, for instance reductions in the public service and massive devaluations (“10 to1”). It is doubtful that these would have been achieved under a PPP regime.
In 1989, the year after the ERP kicked in, the GDP contracted by 3.3% but by 1991 had jumped to 5.9% and in 1992 to 7.7%.
Therefore, Mr. Ally is being very disingenuous when he claims that “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 growth momentum begun under the PNC and continued for the next five years until it was reversed under the PPP. Growth between 1998 to 2006 was not even 1% annually.
The integration of the massive parallel economy was also achieved under the Hoyte administration because of the political will to step on a lot of toes that had grown very big and powerful by then. But it is the “debt burden” that we have to turn because this has been the biggest horn that the PPP toots in its economic credentials.
But here, too, they do not give credit to the Hoyte administration. Because of non-payments on previous loans, the IMF had cut off lending to Guyana in 1983. But as a precursor to the ERP, Hoyte worked out a reform plan with the IMF premised on promise of renewed multilateral financial support. Without the IMF’s support no other foreign loans would have been forthcoming.
Guyana’s debt in 1988 was only US$884 million and it was the accumulated interests that raised it to the US$2.1 billion that is cited. It was under Hoyte that an International Donor Support Group arranged for overdue arrears to be repaid in 1989. It was this act that enabled Guyana to borrow once again, and for the PPP to reschedule the debts and have then eventually written off.

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