Dear Editor,
Mr C Ram, in a recent column has done a very insufficient analysis of the Guyanese economy.
He stated that the PPP/C only recently finished paying off US$300 million loan for the PNC’s failed hydropower project; that the Guyana Power and Light (GPL) line loss was not 50% in 1991 – not less than 30% today – that GuySuCo does not produce 30MW of bagasse power at Skeldon, a diesel-powered engine does; that the external debt which is approximately US$800M is actually US$1111M; that re-basing the economy in 2009 accounts for growth figures; that the exchange rate of US$ sank 65% since 1992. Mr Ram should note that the PPP/C government has maintained the stability of the exchange rate which has been stable since mid-2007, when it was $195 to US$1. As such this deflation boosted exports which contributed significantly to the overall growth and development of our transition economy. Mr. Ram stated that the domestic debt climbed from $18B in 1992 to $103B in 2011, but he should focus on the workings of the PPP/C as it relates to the foreign debt of this country. In 1992, 96% of revenues were consumed in servicing debt; it is now only 4%. These prudent macroeconomic policies were effective since 1993 under the PPP/C.
Further, he noted that the cost of electricity was $12 compared with $54 per KW currently. Once, again, Mr Ram should focus on improved quality (fewer blackouts), and look at the real increase in costs. This is a nominal increase – $42 for almost 20 years – compared with trends in electricity cost in region. The current cost per KW in Jamaica in 2009 was $84, and in Anguilla $86.
Mr Ram noted that greenheart was $85 per board metre compared with $350 now. This is indeed correct, but he needs to focus on the general cost of operations in the forest sector and then he would realise that this increase was also subject to external factors that exist in a free market economy.
For greater attention, Mr Ram stated that no new ideas were presented in the 2011 manifesto; that these were just principles and policies from the Jagdeo era. Perhaps Mr Ram should read the PPP/C 2011 manifesto a few more times to fully grasp the ideas and concepts of growth and development. While emphasis will be placed on the full realisation of the Amaila Falls Hydropower Project (AFHP), there are other developmental pillars which will be laid, such as renewable energy sources, job creation, ICT in developing and initiating new business sectors for increased investments and the full computerizing of government services.
Mr Ram set out to criticise the One Laptop Per Family programme by stating that these laptops are expensive and will cost billions of dollars. Once, again, let us school Mr Ram on economics and to a lesser extent on maths. US$7.5M was the cost to supply 27,000 laptops from China. If you do the maths the cost will get pretty high. The Government of Guyana has allocated US$1.8B to procure the 90,000 laptops.
He stated that with hydropower, the cost of electricity will still remain high. Is he serious? This country will benefit tremendously from cheaper and cleaner sources of energy and the Amaila Falls Project will allow for Guyana to ensure we have a greener economy. The hydropower plant will save Guyana an estimated US$135M annually and produce 150MW of power for local usage in all elements of the economy.
Moreover, in the 2011 manifesto of the PPP/C, there is a notable element of equal opportunity and national unity regardless of race, religion or social circumstances. There are plans which this government has for infrastructure and diversifying the productive sector which will directly benefit the private and manufacturing sectors. Also, tax reforms in the past have contributed to the regulatory groundwork essential to reduce tax evasion, and other financial reforms have provided the groundwork essential for reducing corruption. The PPP/C is now working towards greater implementation and will continue to explore different financial reforms such as procurement, for ease of doing business in Guyana.
Mr Ram further stated that the the figure of 25,000 new Information and Communication Technology (ICT) jobs that will be unfolded in the next five years is unrealistic. Let us be true and fair, the Government of Guyana through infrastructure development including the fibre optic cable will substantially improve the investment climate for ICT, and call centres alone have produced 2000 jobs over the last 2 years. There is continued expression of interest in this emerging sector, with some investors waiting to see the results of other call centres, and the advantage of commonality of time and language will allow for significant resources to be allocated to improving Guyana’s competitiveness, thereby attracting greater Foreign Direct Investments (FDIs). Even more positive externalities in the form of indirect jobs will be created in other sectors through the advancement of the ICT sector.
I once again ask Mr Ram to re-read the 2011 manifesto of the PPP/C since he openly stated that there was no mention of culture in that detailed contract which has been set out for the people of Guyana. There is an entire section on youths, sports and culture. Specifically, mention was made of upgrading of the cultural assets in urban areas and providing similar facilities in rural and hinterland communities. Youth empowerment is related to culture.
In the 2010 International Monetary Fund Article IV Consultation of Guyana, the following was highlighted about the Guyana economy under PPP/C governance: “Guyana has become a magnet for environmental issues, given its large forestry reserves. In this context, its prospects hinge in part on a Low Carbon Development Strategy (LCDS) for structural transformation. The macroeconomic outlook is generally positive.” Despite external and domestic shocks, the Guyanese economy demonstrated resilience and registered a fifth consecutive year of robust growth.
Monetary policy has been moderately expansionary in Guyana. In 2010, the twelve-month broad money growth – the anchor of monetary policy – and credit to the private sector were robust, at 10 per cent and 11.6 per cent respectively in September 2010. Treasury bill rates have fallen below inflation, which has been relatively subdued. The currency has remained broadly stable against the US dollar, in the context of a steady increase in reserves. Most financial system indicators improved markedly through end-September 2010, including the non-performing loans ratio which has declined to 6 per cent of total loans. During 2010, reform efforts continued in the fiscal and financial sectors. For the fiscal sector, reforms at the Guyana Revenue Authority have continued, including streamlining the new functional organization, further improvements in the integrated tax information system (TRIPS), the profiling of taxpayers and the implementation of on-site inspections in the country’s ports of entry, and the more intensive training of personnel. For support for the development of the credit market and improved lending conditions, the authorities passed the Credit Bureau Act, and guidelines for its operations are being prepared. In addition, legislation was passed in parliament bringing the mortgage institution New Building Society under the supervision of the Bank of Guyana.
Other reforms in 2010 were in support of long term growth such as the Low Carbon Development Strategy (LCDS). The Government of Guyana guided the signing of a LCDS trusteeship agreement between Norway and the World Bank on the administration of a US$250M payment pledged to Guyana by Norway, paving the way for the annual disbursements to commence. A Multi-Stakeholder Steering Committee has been formed to oversee the selection of investment projects. In the sugar sector; modernization plans continue with the reorientation of canefields to better accommodate mechanization. Meanwhile, work also continued on the sugar packaging plant, which is part of the overall strategy to improve revenue, and this was realised in early 2011.
In the case of infrastructure, during 2010 the Government of Guyana started a project to improve the distribution and transmission of electricity throughout Guyana. The Guyana Power and Light Company (GPL) has also installed additional generation capacity to replace worn out equipment and correct longstanding underinvestment in generation capacity. In the area of information technology, a fibre-optic cable project linking Guyana and Brazil is being installed, which would facilitate the introduction of e-government. In the housing sector, additional external resources have been secured for the expansion of low income housing. Finally, work has commenced on the access road to the AFHP site, while enhancement work is soon to start on the road from Georgetown and the international airport. The baseline macroeconomic outlook remains positive for Guyana in an election year and in the medium term. Guyana is on the cusp of major changes, led by the government’s Low Carbon Development Strategy (LCDS) and private sector investments in the gold, oil, and gas sectors as well as the large public-private partnership associated with the construction of hydroelectric plant, AFHP. These investments should sustain growth levels above the long-run trend of 3 per cent, to around 5 per cent over the medium term. While fully financed, the external current account deficit would narrow somewhat in 2011, largely on account of receipts from the GRIF3, before widening in subsequent years as the AFHP is being constructed. Risks remain, but they are more balanced over the longer term. On the upside, Guyana stands to gain from the global carbon credit market on account of its large rainforests, and the implementation of the LCDS. While gold and sugar prices are at historical highs, Guyana will also benefit over time from lower electricity prices.
Yours faithfully,
Bobby Gossai
