Dear Editor,
Since the passage of Minister Jordan’s 2016 Budget, the seeds for a deteriorating Guyana dollar were planted. Since then the $ has taken a battering. Against the US dollar, the $ has fallen to its lowest level ever and is currently trading on the open market at $230 to US$1 for off-board transactions at the non-bank cambios and for online and wire transfers at the commercial banks. I had a conversation with a good friend who came from the old country this month and he told me that to get the US dollars to fund his trip, he went to several cambios and banks and could not find the cash at the advertised rate (usually around $215 to US$1), but was advised if he was willing to forgo a receipt and pay $230 to US$1, that the arrangement could be made within 2 hours. He got his money at a rate of $230 to US$1 and made his trip. So what is being told to the nation by Minister Jordan exposed how disconnected he is from the reality on the ground. The reports are revealing a declining stock of US dollars in the system and it is being kept for an exclusive group – their related parties businesses of the banks and cambios, senior government functionaries, their own staff for personal needs and for those who are prepared to pay $230 and above for one US dollar.
Since the 2016 budget, the exchange rate has deteriorated by some 12 per cent compared to what prevailed at the time that budget was read in January 2016. The expectations from the market today are that this slide in the rate will continue primarily because Guyana is just exporting too little and not earning enough foreign currency. Minister Jordan’s poor technical skillsets are also compounding this situation which is leading to a loss of confidence in the economy.
The cause of a currency movement is vital in determining its likely effects. This fall in the exchange rate at a time of low investments and high unemployment will have materially different effects than a similar-sized depreciation in the Econo-mic Recovery Programme (ERP) days (1988-1992). Under Hoyte there was one major difference – rapid increases in foreign direct investments and a more manageable unemployment situation, so the outcome today will be catastrophic compared to the Hoyte days.
Compared to the ERP days and the PPP days, the Guyanese private sector is in the worst possible position to attract new long-term customers in overseas markets, irrespective of what they do to their selling prices. In this new global order, the international market is demanding value-added products, not raw products. But Guyana is on the wrong side of the production platform with their raw products. So the market will pay Guyana heavily discounted prices for our raw products, which are swamping the market. One just has to have a chat with one of the Governors of AMCHAM Singapore, with whom I had the pleasure of engaging and you would realize immediately where the market is situated – value added products. The Demerara Rum has made a great stride in this arena, but how many other Guyanese companies have advanced up this value chain? What sort of “incentivisation schemes” is the Ministry of Finance putting in place to create many new DDLs? You cannot talk about a new breed of Private Sector player when you have failed to play your part Minister Jordan.
When on April 9, 2017, the Minister of Business said, “Guyana currently has no investment project to offer”; he was not wrong. If one studies the latest “Ease of Doing Business Report”, Guyana’s rank in the world on the Competitiveness Indicator reflects a deterioration over 2016. But that was no accident. Because of our small internal market, the only solution for Guyana is to focus on the export sector especially the six sisters (rice, sugar, bauxite, gold, forestry, seafoods).
But rather than do the work it is being paid to do, the Granger administration is busy with their “pointer broom in the sand” constructing SARU and BARU and SOCU and POCU and billion dollar parade grounds. But none of these edifices have generated any foreign currency for Guyana; but the six sisters do.
Is President Granger’s legacy going to be one that is steeped in pusillanimity? Is Guyana under his watch IMF bound?
Yours faithfully,
Sase Singh