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Borrowing could lead to an economic crisis
Editor,
I am no Economist but one does not have to be good at Economics to know that in an environment of declining production, it is not possible to grow the economy to any significant level.
The 2019 Budget presentation by Finance Minister Winston Jordan has only served to confirm my worst fear; namely, that the key productive sectors of the economy have experienced significant shortfall in production levels. I refer specifically to rice, sugar, forestry and mining.
Make no mistake about it. It is the export of goods and services that is the bedrock of economic growth. It is through export earnings that the country gains its foreign exchange, which in turn it utilizes to import consumer goods into the country.
In a situation of declining exports, pressure is put on the exchange rate, which can result in inflation and currency depreciation. Raising revenues by way of taxation does not create wealth. What it does is to redistribute money by way of budgetary measures to meet Government expenditures.
Guyana had experienced these in the past especially during the late 1970s when the country suffered from a severe production crisis. This in turn led to a deepening social and political crisis where at one time we were ranked among the poorest countries in the western hemisphere. The economic and social fabric of the country took a severe battering, which one labour leader described as a ‘crisis of confidence.’
There is a dialectical relationship between the economy and the other sectors, in particular the social sectors. When the economy contracts it takes the other sectors down with it. During the late 1970s and the early 1990s, the country registered a prolonged period of negative growth. The country was deemed uncreditworthy by the IMF after it failed to honour its debt obligations to multilateral lending institutions.
We have to be careful that we do not go down that road once again. We borrowed so heavily that our debt payments became a windmill around our necks.
While there is the prospect of oil looming in the horizon, we have to be careful that we do not engage in unnecessary and reckless borrowing and spending. The debt burden is already growing at an alarming rate, which when coupled with falling production and declining reserves could prove disastrous.
Hydar Ally
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