The world financial crisis will have major implications for counties like Guyana but these impacts will not be felt here in the immediate future.
Yesterday, President Bharrat Jagdeo said that while he is not afraid of any immediate impact on the country’s financial sector, he is more concerned about the blow this crisis may have on the rest of Guyana’s economy.
Once credit ‘dries up’ around the world, he noted yesterday, local investment companies can be delayed in terms of acquiring capital for their projects.
The Head of State told the media yesterday that once the world’s economies shrink there will be a reduction in global demand.
Already on the stock market, the price for commodities such as oil, metal and wood products are falling steeply.
As such, he added, there will be fall in price for the commodities that Guyana exports and a shrink in global demand for those commodities.
Investment flows and remittances could be affected to some extent while the cost of capital will go up for anyone who wants to borrow for any purpose abroad, the Head of State pointed out.
On the positive side, President Jagdeo said that fortunately Guyana has a provincial type of banking system; the local businesses are not heavily integrated into the world’s capital, money or bonds markets.
“We are isolated from the impact…if our banks were investing large sums of money in these markets they would have been affected.”
Similarly, if Guyanese were investing heavily in the stock exchanges, they would have seen significant losses, he added.
Just a small part of Guyana’s portfolio, the President said, has been invested in these markets and as such the banking systems remain essentially sound.
“So we may be isolated from that immediate impact and depositor’s funds should be safe here.”
He said that stakeholders in the insurance sector have assured that they will not be significantly exposed to the crisis.
“I have met with the people and they have assured me also that they are not very exposed but you know we have been reinsuring a lot of our policies abroad…When an insurance company issues a policy here they then reinsure abroad…some of the companies that they have reinsured with may run into difficulties but from all the assessments that they have given me, they will be able to pay out on people’s policies here,” the President said.
According to the Head of State, he and his Cabinet will be meeting with various stakeholders to continue the discussions.
This will be done, he said, to address the kind of national response that can be sought to build as far as possible a ‘firewall’ for the country against some of the most negative impacts of this global financial crisis.
The President added that he has since suggested to CARICOM Secretary General, Edwin Carrington, that a meeting should be convened to have the regional Heads of State discuss the situation.
President Jagdeo added that the world is in its worst financial crisis ever and this crisis has grave implications not only for the financial sector but it also has significant implications for the real sector.
At the end of the day yesterday, Wall Street bounced higher and lower, trying to make up its mind about an unprecedented coordinated interest rate cut by central banks around the world.
According to a Washington report, in the end, it settled on a familiar feeling: fear and plunged again.
The Federal Reserve, desperately trying to jump-start the lending that keeps the U.S. economy moving, dropped its closely watched federal funds rate to 1.5 percent.
The cut from two percent took the rate to its lowest level in more than four years.
Central banks in England, China, Canada, Sweden and Switzerland and the European Central Bank also cut rates after a series of high-stakes phone calls over several days between Fed Chairman Ben Bernanke and his counterparts.
In Britain, the government said it would pour cash into troubled banks in exchange for stakes in them. (Tusika Martin)
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