Introduction
As indicated at the outset of the present series of columns, outlined in my October 27 2024 column, starting today I engage the third of the five topics listed therein; namely, Guyana’s macroeconomy and the policies needed to promote, ensure, as well as sustain both internal and external balance. In regard to internal balance, I cited inflation, fiscal deficits and domestic debt creation. And in relation to external balance the balance of payments, foreign exchange rate, foreign reserves and foreign debt were cited.
I am afraid that, on later reflection, I may have seriously underestimated the task that I have set myself, particularly in light of the fact that this series on the oil and gas sector has not dwelt at any length or indeed in any serious depth with debt, exchange rate regimes, monetary policy, macroeconomic policy and so on.
To cope with this limitation, I shall therefore narrow my focus to foreign exchange rate management and its related monetary and fiscal policies promoting macroeconomic balance. This requires me to introduce beforehand the concepts of the real effective exchange rate, REER; and the exchange rate regime in the sections to follow.