Bank of Guyana report : Balance of Payment deficit widens

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. as exports show 4.4% decline for 2018

The Bank of Guyana’s recently released annual report has shown that while the Government has optimistic projections for next year, the Balance of Payment deficit and export earnings for the previous year continue to be a source of worry.

According to the figures provided by the bank, the overall Balance of Payment deficit widened due to a relatively larger current account deficit.

Speaking with<<<<INews>>>>, Financial Analyst Sasenarine Singh said this is a clear sign that Guyana is stricken by a crisis of confidence as the export sector implodes. The report notes that while the overall deficit in 2018 is US$132.2 million, this is 90 per cent deterioration from 2017 when it was at $69.5 million. According to the report, the current account deficit worsened to US$679.7 million in 2018 from a deficit of US$297.2 million in the previous year. Singh’s stated principle reason for this is the state of the export sector.

The report stated that exports declined by 4.4 per cent. This is an equivalent of US$63.6 million to US$1,373.8 million. The report explained that revenue from sugar, rice, timber and gold declined by 44.1 per cent, 7.5 per cent, 6.9 per cent and 6.2 per cent respectively. Both the decline in exports and the average export price was cited in the case of sugar.

But Singh also pointed to the decline of exports from the fish and shrimp industry, which was down 2.5 per cent; exports of fruits and vegetables were down; pharmaceutical exports were also down; diamond exports were down; and molasses exports collapsed. Singh said, “this is the story of Guyana, the export sector is in a tailspin and yet, we are in April 2019 and we cannot hear one word of a coordinated set of policy measures to stem this implosion in the export sector”.

“Sugar export earnings amounted to US$27.1 million, 44.1 per cent less than the 2017 earnings. This outturn was attributed to a 28.0 per cent decline in the volume of sugar exported as well as a decline in the average export price… the volume of sugar exported amounted to 77,796 metric tonnes or 30,191 metric tonnes less than the level exported in 2017,” the report states.

The sole bright spots were bauxite and other exports, which actually increased by 22.6 and 1.0 per cent respectively. Bauxite export earnings totalled US$128.2 million, 22.6 per cent above the 2017 level. And meanwhile, other exports include commodities like rum.

“The capital account surplus resulted from higher inflows to the Private Sector in the form of FDIs and to the Non-Financial Public Sector in the form of disbursements,” the report also states. This, Singh highlighted, is mainly as a result of the oil investments, which are nothing other than a book entry when it comes to Guyana because the bulk of that investment does not directly impact the local economy, but those countries that are building the machinery and equipment needed out there in the sea. The Dutch, for example, are building the FPSO to temporarily store the crude oil.  That is where those dollars will end up, in Holland, after just passing through the Guyanese books for bookkeeping purposes. Singh asks what good is that for the well-being of the locals?  Where are the hundreds of oil jobs from these billion-dollar investments?”

According to the report, the overall deficit was financed from the gross foreign reserves of the Bank of Guyana and debt forgiveness. It noted that Guyana’s entire international reserves were equivalent to approximately 2.3 months of import cover.

“The total volume of foreign exchange transactions increased by 19.6 per cent to US$8,548.1 million… the market was impacted by increases in transactions in most segments – licensed bank and non-bank cambios, as well as hard currency and foreign currency accounts.”

The Balance of Payment tables in the report contains statistical data on a country’s fiscal transactions, including imports and exports. To record a deficit, Guyana would, therefore, have had to spend more on imports, among other things, that is derived from exports.

The parliamentary Opposition had previously expressed concern over the increasing deficit in the country’s balance of payments, which it had said would continue to have serious implications for the local economy.

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