Dear Editor,
I caught a largemouth bass in one of the big lakes in Florida a few days ago and I could not hesitate to laugh. For those in Guyana not familiar with a large mouth bass, think of it as a giant tilapia with an excessively big mouth, capable of swallowing anything about four inches or more, taste good fried dry! It is not as colourful as our Peacock Bass (Lukanani). I pulled the hook out of its mouth and remembered, “The two most powerful warriors are patience and time” – Leo Tolstoy. Having penned a few articles on Guyana’s economic morass over the past 5 years, I am tempted to address what I saw coming several years ago, putting aside what many perceive and believe as corruption, discrimination (apartheid) and a fundamental focus on family, friends, and favourites. I am more a pragmatist, favouring what is best for Guyana, whether PPP/c or an alternative. Let us focus on the fundamental, affecting the lives of everyday Guyanese, this statement reinforces my belief, “Open, transparent conversations can restore mutual trust between individuals and nations who, out of fear for their own future, prioritize their own interests.” Founder and Executive Chairman of the World Economic Forum, Klaus Schwab.
I had a few conversations with “Joel B.”, a budding economist in Guyana, give him credit, he has access to data and is an incredibly detailed individual, I was once his age. However, numbers sometimes do not equate to reality, hence many of us would have won the lottery by now and be rich. Canvassing the recent IMF and World Bank reports, the IMF focuses on macroeconomics and financial stability (we like their report), while the World Bank concentrates on long-term economic development and poverty reduction. Why do we despise and argue with the World Bank report? Simple, it illustrates many Guyanese will be left behind in poverty, I am afraid what 2029 looks like in Guyana. A famous economist wrote “Middle-class societies don’t emerge automatically as an economy matures, they have to be created through political action.” – Paul Krugman. Guyana (one of the fastest growing economies in the world – not the richest) is ranked 44 amongst countries, on the World Bank Index of Purchasing Power Parity (PPP). I will explain, but please this is not the local party called (PPP/c). Purchasing Power Parity relates to the income derived by our country (people) in terms of GDP (gross domestic product), against the comparable purchasing ability of other countries (for a specific & similar basket of goods and services).
Keeping it simple, think of it as the value of the money in your pocket, not the quantity. It is why our teachers, nurses, doctors, and others will jump at an opportunity for a work visa to other countries (like USA, Canada, England), these countries have a greater Purchasing Power Parity with their currency than Guyanese. It is also why we strike; we feel poor! “The Government’s solution to a problem is usually as bad as the problem” – M. Friedman. Our local politicians will tell you they are trying to prevent the Dutch Disease, hogwash. Paying higher wages is even worse, since it’s inflationary overtime and is unsustainable in the long-term as oil/gas resources are used-up, other than a sustained NRF to buffer against international price volatility. Though the World Bank considers taxes, a hidden denomination in Guyana are the duties (tariff) we pay and the emolument of many Government officials. This has created a class structure of disparity for many and the working poor in Guyana (the average person). “Poverty is the parent of revolution and crime.” — Aristotle. Are we still putting grates and bottles on our glass windows and painting some of them?
Guyana does not have a true floating exchange rate contrary to popular local belief, we have a stabilized exchange rate managed by the Bank of Guyana, which in most cases, result in products from many countries costing more to Guyanese to dissuade importation (we can argue but it’s the reality). The average person feels this forcing him to buy local, the fallacy of the Dutch Disease is overblown locally, where proper government policies can sustain and prevent the growth of poverty and foreign dependency. Substantial increases in salaries or handouts will not solve the problem. Guyana’s PPP (Purchasing Power Parity) as of 2023 is estimated to be about ($85) difference between the international dollar, whereas our currency is pegged around 1US$ = $208. It means on average, we pay more Guyanese dollars to purchase goods tied to the US$, a bit less for Canadian goods, and more for British goods. This equates to a lower standard of living (cost to us compared to other nations). Now we have the big picture as to why our nurses, teachers, doctors, and others leave. From 1968 to 1980 it hovered between 2 and 4. Our adjustment up to its current level is over 25 years old, because Guyana was broken with no foreign reserves and high debt – University of Pennsylvania study.
Guyana importing teachers, nurses, doctors, from other countries, is just delaying the inevitable, our currency is too weak given the rapid growth in GDP now and into the future. When a country has a labour shortage (and many still want to leave at the first opportunity) increasing salaries is not the best solution. It suggests a disequilibrium in PPP (Purchasing Power Parity) primarily driven by exchange rate distortion. The Guyana currency is too weak! It was relegated as practical junk decades ago and with our current and projected growth still languishes at the bottom. Most Guyanese assets (land, homes to be specific) are bought by those in the Diaspora/Foreign with greater Purchasing Power Parity than many local Guyanese, driving inflation in those two assets’ classes. Local Guyanese are being priced out of the housing and land market! “It is good to have an end to journey toward; but it is the journey that matters, in the end.” Ernest Hemingway. Allowing the exchange rate to rise is tantamount to giving every Guyanese a raise without the Bank of Guyana printing more money or giving big salary increase.
Miguel de Cervantes Saavedra, the celebrated 16th century Spanish author of Don Quixote de la Mancha, once said that “the gratification of wealth is not found in mere possession or in lavish expenditure, but in its wise application.” The Dutch Diseases, as known worldwide, challenges the Guyana Government (fiscal policy) and Central Bank (BOG monetary policy) to create an equilibrium. Guyana has never been a manufacturing export economy, we are agrarian, natural resource economy, our educated people being part of the hidden export resource. We will continue the brain drain if fiscal and monetary policies are not managed closely. Trying to resuscitate sugar is a glaring example of the misuse of resources, which is already our Dutch Disease before oil. More strikes are coming if we do not change the rudder of the ship. It is time we change the Governor of the Bank of Guyana, Guyana has changed, so monetary policy should also change. The voters will decide with their votes in 2025 who has the best fiscal policy.
Sincerely
Everton D. Morris