With the overall Balance of Payments (BoP) recording a deficit of US$139.8 million in the first half of 2018, compared to a deficit of US$46.0 million recorded in June 2017, former People’s Progressive Party (PPP) Government Minister Irfaan Ali has said this trend is becoming even more worrying.
Balance of Payments is statistical data on a country’s fiscal transactions, including imports and exports.
Therefore to record a deficit, Guyana would have had to spend more on imports, among other things, that it derived from exports.
However speaking on the issue, Ali who is the point man on finance for the Opposition in Parliament explained that in order to finance this humongous deficit, the Government usurped US$110 million from the Bank of Guyana’s (BoG) Foreign Assets Reserve, tanking the reserve to a 10-year low of US$473.4 million.
It was revealed that the overall Balance of Payments, by the end of 2018, is projected to record a total deficit of US$182.1 million.
The former Minister noted that the initial projection of the BoP deficit was set at US$79.7 million for 2018, “in other words we have surpassed that amount by 130 per cent within the first half of 2018” he said.
According to Ali, the current account deficit is expected to weaken to a deficit of US$366.3 million by end 2018, down from an initial projection of US$292 million.
Ali said another critical element of the BoP is factor services (net). And according to the report, net factor services are projected to record a higher than anticipated deficit of US$66 million, compared to US$11.5 million last year. This is mainly the outcome of lower investment income and higher interest payment.
However, also speaking on the issue, economist, Colin Constantine told this media group that based on the report, the widening BoP deficit is driven largely by higher import prices for fuel and lubricants.
Constantine said “When this is juxtaposed with lower export earnings in sugar and gold, we must expect a worsening of the external accounts”.
As such he reasoned that part of the widening deficit is also related to the recovery in the construction sector, a recovery in real estate increases the importation of capital goods. Further, the economist noted that the downsizing of the sugar industry will definitely have an adverse effect on the BoP balance.
Despite this, the economist feels that the projected 3.7 per cent growth rate is achievable because the wider BoP deficit is not driven by consumption but by intermediate imports, which are key inputs for production and therefore growth could be experienced.