Wide ranging reforms have made our economy the freest in the region
August 19, 2001
I refer to the letter [ please note: link provided by LOSP web site ] from Mr Ravi Dev captioned "Guyana poorly rated by Index of Economic Freedom" (16.8.2001) in which he took the opportunity while replying to Mr Archer's letter (4.8.2001) to flay the government about its economic policies. Mr Dev took objection to the claim that Guyana operates "the freest economy in the Caribbean".
There is an abundance of available evidence to substantiate this claim. It is well known that prior to the 1990s Guyana's economy was characterised by controls and stagnation. Since 1992, wide-ranging and far-reaching reforms have been implemented in all facets of the economy that are unequalled and unmatched in any other Caribbean state.
The exchange, trade and pricing systems have been liberalised. The government does not determine the exchange rate; instead, this is left to the forces of the market. If there is any intervention, through the Bank of Guyana, it is to smooth out any kinks that may develop from time to time. Further, there are no restrictions on the repatriation of capital and profits. Without a doubt, Guyana operates the freest trade regime in the Caribbean, a fact that has been attested to by many local and foreign businessmen. Just look at the ease with which Caricom goods access Guyana's market and compare this with the difficulties faced by local exporters. And gone are the days of price controls and shortages of basic food items. Prices are now market determined.
Financial sector reforms included new banking legislation, a new Financial Institutions Act, new Insurance Act and new stock exchange legislation. Together with a new Companies Act, these reforms were designed to create a facilitating environment for investment.
Mr Dev also accused the government of mismanaging the economy. He alleged that eight years after being in office, there has been "continual implicit devaluation of our dollar, high inflation, large budget deficits, and negative growth." What are the facts?
The data shows that between 1992-2000, there have been small depreciations in the average yearly exchange rate of the Guyana dollar. In fact, the rate actually strengthened between 1995 and 1996, appreciating from G$141.90 to G$140.38. More recently, between March 1999 and July 2001, the rate has remained relatively stable with marginal movements being experienced.
Contrary to the assertions of high inflation rates, this government has had signal success in curbing inflation. From raging triple digit inflation of 118% in 1990, it was at a moderate 5.9% in 2000. It should be noted that the inflation rate averaged 8.2% between 1992 and 2000, and 4.4% between 1996 and 1998.
And as to large budget deficits, these have steadily declined from about 40% of GDP, in the pre-1990 period to 4.9% of GDP in 2000. This achievement is all the more remarkable when it is considered that the capital programme of the Central Government increased by a massive 220 percent, with substantial allocations to health, education, housing, pure water and sanitation and poverty reduction programmes. At the same time, outlays on wages and salaries rose from $3 billion in 1992 to $14.3 billion in 2000.
Economic growth has been positive between 1992 and 2000, except for small negative growth rates in 1998 and 2000. Growth averaged a high 7.3% between 1992 and 1997 and 5% for the whole period. Few Caricom countries can claim to have experienced such high growth rates during that period.
The Government's prudent management of the economy has attracted the praise of the international donor community. In approving US$23 million to support Guyana's economic programme, the Executive Board of the IMF, at its meeting in November 2000, commended Guyana for establishing "a satisfactory track record of good economic performance ......" It noted that Guyana had implemented a comprehensive programme of macroeconomic, structural and social reforms.
We do not have to blow our own trumpet; the evidence is there for all to see and accolades for sound management of the economy have come from diverse sources.
Saisnarine Kowlessar, M.P.
Minister of Finance