Please do not convert our U.S dollars!

Apr 05, 2018 Letters

DEAR EDITOR,
It was just a few days ago that I was attracted to a news item that was attributed to Minister Harmon indicating that Government was in the process of placing the proceeds of the US$18M Signing Bonus into the Consolidated Fund.
This I understood to mean that the funds would be converted into Guyana dollars.
If indeed that were to be the case, then it would represent a blatant misuse of scarce foreign currency, coming at a time when the bills for Guyana’s legal representation in relation to its border dispute with Venezuela have started to roll in.
Further, if such action is being taken to appease the legal purists, then Government should be bold enough to change the law to allow for the Consolidated Fund to become a multi-currency Fund into which funds other than Guyana dollars can be placed.
While according to the late Charles Dickens “the law is an ass”, we should not allow the law to make asses of ourselves by doing things that are patently ludicrous.
A logical extension of Minister Harmon’s statement is that in the coming years, the hundreds of millions or even billions of U.S. dollars flowing from oil revenues into our Treasury will have to be converted into Guyana dollars and placed into the Consolidated Fund.
Not only can this “wash” of Guyana dollars lead to spiralling inflation, but it can also result in a breakdown in fiscal discipline, since Government might be tempted to go on a spending spree without the benefit of a careful screening of its activities.
Such action as contemplated is also short-sighted, in that Government itself needs foreign exchange to pay debt service on the various loans, which it has secured from international institutions such as the Inter-American Development Bank (IDB) and the Caribbean Development Bank, bearing in mind that most of the projects (roads, water, electricity) that have been funded from these loans do not themselves generate foreign exchange.
Thus, by keeping a portion of its oil revenues in U.S. dollars, Government can better manage its debt service obligations as well as its exchange risks on these foreign loans and also have access to foreign exchange for other purposes whenever needed.
As I indicated in an earlier letter, the Consolidated Fund can be a multi-currency fund comprising hard currency (such as U.S. dollars, Pounds Sterling, Euros) along with Guyana dollars, with its reporting to Parliament being done in Guyana dollars.
I would further suggest that a prime, strategic priority for a small open economy like Guyana’s must be not only the earning but also the prudent management of foreign exchange.
We are already witnessing the proliferation of imports and the adoption of lifestyles befitting of First World citizens, well before the oil revenues start to “kick-in”.
Looking ahead, I would suggest that in the coming months, the Minister of Finance establish, with the assistance of the IDB or the World Bank, a Treasury Management Unit to manage our future flows of U.S. dollars.
This Unit should be staffed with well-trained finance professionals (MBAs in Finance) who can be exposed to the fundamentals of Investment Management by way of training attachments to the IDB or World Bank, with such training being further complemented by short-term programmes run by a number of Wall Street entities such as Moody’s or New York Institute of Finance. We cannot wait until 2020 to address these issues.
The time for action is now.
Finally, some eighteen years into the twenty-first century, we need to be bold and imaginative in addressing contemporary issues and those of the immediate future, rather than being shackled by the practices of the past.
Do the right thing, Minister Jordan, by putting the country’s interest first.
Steve Fraser

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