Reassessing the actual devaluation of the Guyana Dollar

Dear Editor
Please allow me to reassess the actual devaluation of the Guyana Dollar that I said may take place in my letter to Guyana Chronicle, 27 March 2009, “Savers should convert their savings into foreign currency to offset depreciation”.

In that letter, I said that the Guyana Dollar may be devalued from the current G$205: US$1 to G$300:US$1 because primarily remittances to Guyana may be a lot less than in 2007/08, Guyana’s exports may be reduced and the American Dollar (to which the Guyana Dollar is loosely tied) may lose its purchasing power due to the “quantitative easing” (printing money) by the US Government.

However, recently I noticed that the price of oil has risen from US$45 per barrel to US$54 per barrel in less than two weeks. This rise in oil price may also put pressure on the foreign exchange reserves (even if we purchased oil through Venezuela PetroCaribe Agreement…..which is more about Financing than about cheap oil).

The “compounding effect” rather than “aggregative effect” (this is where a lot of politicians and economists get it wrong in not understanding the difference) may lead to further devaluation and may send the Guyana Dollar from the expected G$300:US$1 to G$500:US$1.
Sean Brignandan