There is a shortage of foreign exchange on the market

Apr 12, 2017 Letters

Dear Editor,
The current APNU-AFC regime seems bent on a policy of reversing the economic and social gains made by the previous PPP/C administration. The recent budget has demonstrated that this so-called caring government is really heartless. It has resorted to propaganda and political chicanery. A 3-card trick is done to deceive and all the pre-election promises made by coalition have now vanished in thin air.
Perhaps the most punishing and heartless was the decision taken by the administration in the last budget to place the Value Added Tax on water and electricity which apart from the burdens faced by the consuming public would also have an indirect impact on the overall cost of living. Water and electricity are two unavoidable inputs in the production of goods and services which will invariably be passed on to consumers by way of higher prices. And as if these were not enough, the regime has now extended the VAT on private schools which understandably has generated protest actions by private education providers and affected parents and students.
It is not that the administration inherited an economy that was in bad shape. On the contrary, it inherited a robust and growing economy which was among the fastest growing in the region. The rate of growth averaged five percent in ten consecutive years prior to 2015 which catapulted the country from low income to middle income status. The debt burden which was in the vicinity of ninety five percent of revenues in 1992 was reduced to a mere five percent.
Actually, the fiscal, monetary and other policies of the then PNC regime led to extensive borrowing which was utilized mainly to finance public sector deficits and repayments of debts. External debt service as a percentage of exports was 87.5% in 1990. Debt service payments were US$161.3M in 1991 with interest payments alone eating up some 58% of current expenditure. By contrast, wages and salaries accounted for a mere 6% of total expenditure.
The huge debt payments plus extravagance and corruption had eroded living standards. More than 60% of the working people existed below the poverty line in 1992. The then Finance Minister Carl Greenidge in July 1991 in Paris said that the average daily cost of food items increased by 39% between January and May alone! And all of that, in the face of rampant inflation which had reached 104.7%, instead of the budgetary 53%.
My fear is that unless something dramatic happens to arrest this precipitate decline in the foreign exchange reserves and for that matter the performance of the economy as a whole, there is a real danger of the country reverting back to the days of a sliding exchange rate, rampant inflation and the hoarding of foreign currency not to mention currency flights out of the country. This will further weaken the local currency and result in unchecked inflation and a situation where an increasing supply of money is chasing fewer goods. Put in a different way, the purchasing power of the local currency will decline and the basket of goods and service will get smaller.
The Granger administration inherited a good wicket from the previous PPP/C government and it therefore has no one but itself to blame for the current unsatisfactory state in which the economy has now found itself in. The two main sectors of the economy namely rice and sugar are underperforming which is already impacting adversely on the economy. Gold production buoyed by favourable market prices has saved the day but with fluctuating prices for the commodity and high levels of undeclared gold, the prospect of gold mining hangs in the balance.
The current administration has clearly embarked on a denial mode by creating the impression that the economy is doing well when the whole of Guyana knows otherwise. As in the pre-1992 period, the structure of the economy is already moving in an unfavourable direction from the productive to the non-productive sector. Agriculture, once the backbone of the economy and major source of employment and foreign exchange is de-emphasized in favour of the service sectors.
A recent attempt by a reporter to obtain a small amount of foreign exchange from the banking system and which was published in that paper exposed the lie that there is no shortage of foreign exchange on the market. The current regime will in a matter of a few months complete two full years in office. The balance sheet is not looking good and if present trends in the economy persists which seems highly likely, the future of Guyanese looks bleak.
Hydar Ally

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