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Fossilization of Traditional Sectors: The Cost of Incompetence and Parochialism
DEAR EDITOR,
Our traditional sectors have been a major catalyst and foundation of our economy for decades. From the rice farmers to sugar workers to loggers, all have played a major role in foreign exchange generation and economic stimulation. Combined, the sectors are responsible for the provision of tens of thousands of employments.
Over the past three years, however, Guyana has witnessed a major decline and contraction in four of its main traditional sectors. Sugar, rice, bauxite and timber have all plummeted, hence, one of the major causes for the country’s depleting foreign reserves, and falling private consumption. From 2015-2017, the contraction in the sugar industry cost the nation in excess of US$506 million in foreign exchange.
Specifically, sugar, rice, forestry and bauxite fell by US$63M, US$155M, US$37.8M and US$86.7M, respectively. Compounding this devastating performance, in 2018 total exports are projected to further contract by another US$167M.
So, how did it affect our balance of payment and foreign reserves?
Our current account recorded a humongous deficit of US$287.4M in 2017, while foreign exchange plummeted by US$199M to US$449M. Given the decline in exports, it could be argued that, had the traditional sectors performed similar to 2014, our current account would have improved its position to US$121M.
Thus, overall the corollary was far-reaching. Loans and advances to small businesses and manufacturers declined. As demand dried up, non-performing loans increased to an all-time high of 12% to $29B, precipitating a decline in returns at commercial banks.
Mohamed Irfaan Ali
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