Latest update February 14th, 2025 8:22 AM
Ministry of Finance embarked on a wrong policy direction
Dear Editor,
It would be negligent of me, to let another example of poor public policy under the Granger administration pass without offering my remarks.
The Guyana Chronicle of February 2, 2017, reported that Minister of Finance Winston Jordan informed the Cabinet about the “disequilibrium (imbalance) in the foreign exchange market” and offered as a policy response, more regulations and guidelines.
One assumes that this will be to ensure that exporters repatriate their export earnings to the banking system. Knowing that such badly designed exchange control policy in the past was one of the main reasons that contributed to Guyana’s state of un-creditworthiness in the international community under the Burnham regime, one wonders why we are going back there.
Minister Jordan has direct experience in the Ministry of Finance in those hard days of the early 1980’s and thus he more than many ought to have been aware of the questionable nature of that strategy then and now. If this is his policy response, I am shocked because he clearly has to explain his years in the Ministry of Finance.
His action today in the face of widespread rejection of these measures from the business community will only guarantee a path to a certain economic meltdown over the next 2-3 years, which will then lead to social and economic implosion that even the promised oil money in 2022 cannot help. Has he learnt anything from Desmond Hoyte, the intellectual architect who turned around Guyana’s economy?
The Private Sector issued a firm statement which “strongly condemns this move by the Government”. In the words of the PSC, this move by the Granger administration “would have the certain effect of accelerating the capital flight which has already begun with the erosion of confidence in the economy.”
There are two phrases in that PSC statement that sends shivers down my spine – acceleration of capital flight and erosion of confidence.
Knowing the information put out by the private sector is one grounded in economic truth and it corroborates what I have already put out in my Straight Up Column of Friday, February 3, 2017, in the Guyana Times on the state of the investment portfolio. I am now calling on President Granger as Head of State to seek alternative advice on this issue.
This recommended policy action exposes a situation where there is a heavy dose of policy paralysis in the Ministry of Finance. I am absolutely sure even the President’s son-in-law, a longstanding businessman Minister Dominic Gaskin has a better grasp of this situation.
What is required are policy actions to drive the economic reforms needed to bring back confidence in the economy and stem the capital flight that is now well advanced. Bullyism and regulations to control are not the answer; understanding the real problem is the first step.
Hard-nosed, non-political answers to these questions will go a far way in helping the President. Why has the private sector lost confidence in the Granger administration?
Why is there a shortage of foreign currency today compared to May 2015 when there was not? How to rebuild the private sector’s confidence in the economy? There is so much more to share but out of respect for the newspapers and their space constraint, I have to hold fire on this matter. The ball now is President Granger’s court.
Finally, please permit me now to respectfully invite the President to reconsider this policy of his Minister of Finance. As a guideline, the foundation of this problem is the state of the Net International Reserves in the banking system at the end of December 2016.
The facts are Guyana lost some US$60 million of its reserves in the banking system between May 2015 and December 2016 as reported in the Bank of Guyana Statistical Abstract Understanding. What is driving the inflows and outflows are critical to drive the required policy actions.
Also understanding why GuySuCo, SARU, SOCU and the GRA are in the middle of the solution is also of critical importance. Alternatively, he might wish to consider asking his Minister of Finance to familiarize himself on how the modern world deals with the issue of capital flight and loss of confidence in an economy by the private sector.
Sase Singh
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