Huge dip in gold reserves points to Govt.’s “spend and borrow” mentality

Apr 23, 2018 ExxonMobil, News

…Ram says at this rate, no amount of legislation would protect oil moneys

By Kiana Wilburg

Chartered Accountant, Christopher Ram is concerned at what he described as government’s “spend, spend, spend, borrow, borrow, borrow” mindset.
He says that this is reflected in the management of the nation’s resources such as gold. The Chartered Accountant said he is left to worry about what this would mean for Guyana’s coming oil wealth.
In this regard, the Chartered Accountant referenced a recent statement by Bank of Guyana, which spoke to the use of the nation’s gold reserves. Ram noted that available figures show that last year, the gold reserve was at $4.8B, but up to April 11, 2018, the reserve was $1.9B. This shows a significant decline in the gold reserves.
There were criticism about the decline in reserves in the media but Bank of Guyana was not happy with it.
In a missive to the media, Bank of Guyana explained that it trades gold and replenishes the stock based on market opportunities. It stressed that gold is not managed as an exclusive reserve asset for holding, but as part of a portfolio of assets.

Bank of Guyana, Governor, Dr. Gobind Ganga

Chartered Accountant, Chris Ram

It said that gold may be sold for a number of reasons; including maximizing profits, rebalancing of the portfolio, meeting liquidity needs, or optimizing opportunities in other asset classes.
It said that with the price of gold as high as USD1,364.00 recently, the Bank has been trading gold as any Bank worth its salt will do. Central Bank stressed that dips in the reserves therefore, reflect strategic trading rather than any involuntary disposal of gold.
‘SPEND AND BORROW’ MINDSET
In an interview with Kaieteur News, Ram said that he has to disagree with Central Bank’s statement that the disposal of the gold between last year and now was part of some rebalancing exercise.
The Chartered Accountant said, “I am not sure how a balancing can result in a significant overall reduction. I would expect a rebalancing to be reflected in a change in the constituent parts, not in the overall pool. This is all part of their culture of ‘spend, spend, spend, and borrow, borrow, borrow’ which seems to characterize the financial administration of the country.”
The Attorney-at-law said that in terms of the spending, one needs to link it to revenues from oil “because if that is the mindset that drives the management of the economy, then no amount of legislation about sovereign wealth fund is going to protect us.”
Ram added, “I would strongly recommend to the Governor of the Bank of Guyana, Dr. Gobind Ganga that he should stick to the mandate of the Bank as set out in the Bank of Guyana Act; that is, to be guided in all its actions by the objective of fostering domestic price stability through the promotion of stable credit and exchange conditions, as well as sound financial intermediation conducive to the growth of the economy of Guyana.”

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