How did Jagdeo know this?

Aug 26, 2023 Features / Columnists, Peeping Tom

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Kaieteur News – Recently, the Prime Minister of Trinidad and Tobago did an impromptu interview with a television reporter from his country. He was asked by the reporter about his reaction to one of the parties, which contested the recent local government elections, receiving some 30,000.

Clearly, the reporter’s numbers were wrong. And the Trinidadian Prime Minister shot back and said this must be Guyana dollars, which provoked laughter.

Vice President Jagdeo, as a former Head of State and former CARICOM colleague of the Trinidadian Prime Minister should have let the little banter slide. It was unnecessary and unwise for Jagdeo to have responded to that remark.

Even as he said that, he did not wish to get into a political cross exchange with Rowley, Jagdeo nonetheless came out swinging. He sought to accuse Trinidadian companies operating in Guyana of paying for their imports, for both here and in Trinidad, by utilizing foreign currency bought in Guyana.

Now this is a strange criticism coming from the very person who was Guyana’s Finance Minister when the Exchange Control Act was repealed in 1996. This legislation allowed for the unhindered repatriation of funds overseas by companies operating in Guyana. In fact, the PPP has been wooing foreign investment by citing that foreign companies were free to repatriate their profits overseas.

Since the repeal of the Exchange Control Act in 1996, the Guyana dollar has continued to slide. In 1996, the US dollar was trading at G$140. Today, the exchange rate has climbed to G$218.

As Chris Ram pointed out earlier this year, the oil agreements, signed under both Janet Jagan and the APNU+AFC, grant to the oil companies the right to retain their export earnings abroad.  They also enjoy the right to maintain foreign currency accounts outside of Guyana without having to convert any part of all of its proceeds into Guyana dollars. The companies also have the right to open foreign currency accounts in Guyana and to remit the salaries of their foreign employees overseas, which means they can pay these in foreign dollars.

Is anyone, other than Jagdeo, surprised then that since oil production began, the Guyana dollar has depreciated? Is anyone surprised that businesses are complaining that the US dollar is scarce in Guyana and is presently trading at US$1 to G$218?

One IMF economist in a Working Paper,  has pointed out that Guyana has a de jure floating exchange rate but a de facto rate that is stabilized through exchange interventions and capital controls. He has said there has been little exchange rate flexibility in recent years.

The said Working Paper argues that Guyana’s oil expansion and exports should provide adequate buffers to sustain a fixed exchange rate or an exchange rate peg for the foreseeable future, especially if the planned public investment expansion is done at a pace that does not generate macroeconomic imbalances and is anchored in a medium-term fiscal framework. However, the paper argues a strong case for a gradual shift towards a more flexible exchange rate in the future.

But Jagdeo and the PPP/C, however, do not appear ready and willing to go in this direction.  And shift towards greater exchange flexibility will not be helped by the failure of the present PPP/C government to better regulate foreign currency transactions.

Since assuming office, the government for which Jagdeo works has not taken any steps to regulate the foreign currency transactions of the oil companies. And it is not likely to do so.

But Jagdeo wants to throw bricks at Trinidadian companies. At a press conference two weeks ago, he accused Trinidadian companies of buying foreign currency in Guyana for their imports for both Guyana and Trinidad.

But how does he know this? It would appear that in investigating the causes of the shortage of US dollars in the banking system, Jagdeo was provided with information on demands for and purchases of foreign currency. And according to him, there is supposed to be sufficient forex in the system to meet the demand.

Obviously, for reasons of confidentiality, the data that Jagdeo received would have been aggregate numbers. He would not have had or should not have had access to individual transactions since this is supposed to be confidential information.

How then did Jagdeo know that it was Trinidadian companies that were buying up local foreign currency if he had access only to aggregate data? Perhaps, at his next press conference, he will tell us.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)

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• dollars, Elections, Government, Prime Minister, Trinidad and Tobago

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