THE PIPER: The economic challenge

It is said that “all good things must come to an end” and whatever one may say about our Jubilee Independence celebrations, it was a good thing. Who can really quarrel with a country celebrating the 50th anniversary of it achieving independence from an empire that literally “ruled the waves” for centuries? But the celebrations are over and the country must now get on with the  business of improving the welfare of its citizens which was the goal independence promised five decades ago.

“Welfare” in its usual usage refers to the health and happiness of persons but practically when we talk about the responsibilities of a State, it is related to the satisfaction of the needs of the entire populace in terms of food, clothes and shelter etc. within the “economy”.  While the academics have long argued about the substance of “growth” of the economy as measured by various metrics such a GDP; versus “development” of the people as measured by other metrics such as Human Development Index (HDI), there is no disagreement that while there may be growth without development, there can be no development without growth.

The question that must be placed on the top of the government’s agenda, therefore, is how will it get the economy out of the doldrums into which it has slipped. The first thing it must do is to acknowledge it needs “all hands on deck” for whatever plan it may craft – including the crafting of that plan. Guyana’s economy is unfortunately still overwhelmingly dependent on what President Granger described as the aenemic “six sisters” –  which also held the same status at independence – sugar, rice, bauxite, gold, diamonds and forestry.

In each of these primary products the level of our production is not sufficient to make us anything but “price takers”. And in a global slowdown that has affected economies from America to Zimbabwe, with Brazil and China in between, it is most likely the demand for and the prices of our products in the near term, will remain stagnant. Guyana’s economy needs a quick stimulus to staunch the haemorrhaging that has plunged the economy into a downward spiral.

 The action taken by the the U.S. to jump start their economy after it crashed in 2008 suggests one policy initiative to accomplish. Our Bank of Guyana (BoG) has been allowing the private banking sector to sterilise their money – and avoid intermediating funds into the real economy – through the issuance of T-Bills. This is because the BoG’s mandate is to focusing on only keeping inflation down rather than, as with the U.S. Fed, to also stimulate full employment. By bringing interest rates down to even zero, the Banks will be forced to lend to businesses at much lower rates than at present. New businesses or aggressive expansion of existing businesses will result in generating revenues and employment.

In the medium term the government can embark on a massive infrastructural investment which had already been launched by the PPP before they were removed from office. The linchpin of that development programme, embedded in the Low Carbon Development Strategy (LCDS) conceptualised almost a decade ago by then President Bharrat Jagdeo, was the Amaila Falls Hydro Electric Project (AFHEP). Such a programme will employ large numbers of Guyanese, pump money into the economy as well as saving critical foreign exchange.