The exchange rate should be state controlled

Mar 18, 2014 Editorial

In the two decades since the People’s Progressive Party acceded to the seat of Government the exchange rate has soared to heights that have people outside the country demanding that the West Indies cricket team perform to reflect this country’s exchange rate.
In fact, that was the cry from people in the Caribbean even before the PPP came to power. Between 1983 and 1992 the exchange rate moved from $4.35 to the US dollar to $125 to the United States dollar. When the exchange rate was officially announced at $10 to the United States dollar the then opposition which now forms the government, screamed ‘Murder’ to mimic the calypso by the Mighty Sparrow, ‘Ten to One is murder’.
And as the exchange rate climbed so too did prices and the cost of living. There were adjustments to the wages and salaries but at no time could the pay hikes compensate for the inflation. Even today when the government claims that it is paying increases to compensate for inflation, a close look would reveal that the people always continue to be worse off.
We have seen people who were comparatively comfortable, slump to the ranks of the poorly paid although there was no change in their employment status. But there were contradictions. The government says that people now have a larger disposable income because they can now buy cars. And indeed, it does seem that way when one sees the streets fast becoming overcrowded with cars to the point that people are reluctant to drive into the city.
To add to the contradiction is the fact that over the past few years the government has been distributing house lots and housing schemes have been springing up. To build houses people had to be in a position to spend more.
But those comprise no more than ten per cent of the population. The vast majority are poor people—those who live from paycheck to paycheck, who rely on remittances from friends and family overseas.
Many smiled as the exchange rate rose because they would get more local currency for the same volume of foreign currency.
And that remains he case today when the exchange rate has risen to somewhere between $210 and $213 to the United States dollar. In just over two decades the local currency has declined by seventy percent. However, prices have risen by much more. Using a loaf of bread as an example one is now paying far more than the $10 per loaf one did back in 1992.
House rents have risen by a similarly high per cent as have transportation costs, clothing costs and even construction costs.
Some say that the gap between the rich and the poor is widening. A decade ago, the United Nations reported that Guyana was a country with abject poverty. That agency reported that sixty per cent of the country lived in poverty and more than half of those lived in abject poverty.
Yet from many indications the country seems to be doing well economically. High rise buildings are shooting up all over the country. Some say that the high gold price financed a few who undertook these constructions. It would be interesting to see whether these constructions are halted because the price of gold has plummeted.
Many still wonder why has there been no shift in the number of poor even though the country has benefitted from debt write-offs and from significant loans and grants, the largest grant coming from Norway. Money contributed by the European Union was not insignificant.
Now we must ask the government to intervene. Way back then the government promised the United States that it would remove itself from controlling aspects of private sector development. The government agreed. The currency market is now one that the government has consigned to the private sector, something that would be unheard of in most other countries. Even the great and liberal United States controls its money.
Can we expect some intervention? Must the free market determine the exchange rate? We are seeing hoarding of foreign currency thus the rising exchange rate. A pity that the Central Bank is not in control

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The exchange rate should be state controlled

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