The Coalition Administration is tying our feet and asking us to run

Jun 03, 2018 Letters

G$Millions except where stated otherwise.

Dear Editor,
Economic policies establish the framework upon which government intends to address a country’s growth and development prospects. They get into office on these, and they also get booted for noncompliance or failure to realize commitments. One of the things about which few if any of us can disagree on, is that we have been lied to by the coalition administration on the campaign trail going into the 2015 elections. Nowhere on their campaign trail did they mention that they would be returning to Burnham’s policies and ideas on development. They have also made a complete u-turn on their commitment to addressing unemployment. Many older Guyanese can remember the slow, grinding halt, and subsequent debilitating contraction Guyana experienced under Burnham’s policies in the 70’s and 80’s. We remember Hoyte scrapping Burnham’s ideas after his death, and implementing punishing economic reforms which sent the country reeling by the mid-1990s as declining exchange rates and sharp bouts of inflation destroyed the value of our incomes. Yet it is these same set of ideas which Hoyte rejected that Granger and the People’s National Congress have picked up to try again.
The following table summarizes the performance of some banking system indicators for the coalition administration’s two years, nine months of administration, and allows for a comparison of what obtained in the preceding years. Growth in private sector loans, an indicator of economic activity, plunged from an average of G$17.4 billion in the two and a half years prior to June 2015 to an average of G$7.6 billion for the two and a half years of the coalition’s administration ended December 2015.

Net domestic credit to the total public sector, which is total loans and advances less deposits, shows that the entire public sector had a net deposit position of G$25.2 billion at the end of June 2015. By March 2018, this changed to a net credit of G$46.8 billion, as net borrowing by the entire public sector increased by G$72 billion. Central government accounted for the majority of this borrowing as it ran up its credit facility with the banking system by G$61.8 billion, carrying an overdraft with the Bank of Guyana of close to G$46.4 billion at the end of March 2018. This compares with a net deposit position of G$8.5 billion in June 2015. Central government’s net borrowing with the entire banking system increased to G$G$101.2 billion, or G$101,172,000,000 at end-June 2018. Deposits of the central government with commercial banks totaled G$10.2 billion by March 2018. Deposits of the public enterprises with commercial banks, which stood at G$49.4 billion in June 2015, contracted by G$22 billion to G$27.4 billion at end-March 2018. Our net international reserves which stood at US619.0 million in June 2015, also contracted, by US$121.5 million by March 2018 to US$498.5 million. In 2012 the economy grew by 4.82 per cent. This fell to 3.17 per cent in 2015, and declined further to 2.1 per cent last year.

The first major concern with all of this information is government’s willy-nilly attitude to destroying our nation’s wealth by running up its overdraft facilities with the Bank of Guyana. Because at the rate the economy is going, there is little if any likelihood of this money ever being recovered by 2020. Secondly, increases in deficit financing by governments typically give rise to increased economic activity, which is usually underpinned by increased private sector borrowing. This is not happening. Finally, based on current trends, it seems reasonable to assume the coalition administration will continue its ill-informed policy of abusing its overdraft facilities with the Bank of Guyana.

The last thing Guyanese seriously expect is that the G$30 billion the administration is investing in GUYSUCO will return the company to global competitiveness and profitability. It would be irresponsible of me or anyone to say that our economy has crashed, or is crashing, but the figures just presented which were extracted from the banking system statistics published by the Bank of Guyana, suggest exactly this. It seems pretty clear that the administration’s fiscal program is not generating growth, and worse, is destroying our nation’s financial resources. The coalition administration is tying our feet and asking us to run.

Craig Sylvester.