Growth has to come with financial discipline
November 14, 2002
A key economic challenge facing Guyana is to encourage growth while maintaining macro-economic stability and financial discipline, said Finance Minister Saisnarine Kowlessar on Tuesday.
Kowelssar was delivering the keynote address at the opening of the thirty-fourth Annual Monetary Studies Conference at Hotel Tower.
More specifically, Kowlessar said that the government will have to introduce various programmes to improve the investment climate, bring dynamism into the financial sector, contain public expenditure to affordable limits, increase the access to resources for deprived segments of society, and improve governance with its budgetary operations, as well as, improve the country’s international competitiveness.
He said in order to mitigate the current economic problems the government will implement policy measures to attract more foreign investment, improve the country’s financial architecture and raise the efficiency of the country’s domestic financial services; accelerate the process of introducing programme budgeting and reforming treasury operations and management; make the exchange rate more responsive; and pursue monetary policies that are more accommodating.
Kowlessar noted that last year was a challenging one for Guyana due to the deceleration in global economic activity before and after the September 11 attacks on the US. The reduction in the prices of rice and sugar, coupled with market uncertainties served to contain domestic output and export performance, except for sugar.
He said the government adhered closely to its budgeted spending to avoid increases in the fiscal budget; maintained a fiscal deficit of 6.5% of GDP; and contained inflation at 0.4% despite increases in utility tariffs.
He noted that the external balance narrowed because of increased export earnings of sugar while external debt continued to decline reflecting debt relief under the original and enhanced HIPC initiatives and prudent concessional borrowing.
He added that interest rates continued on a downward trend because of the Central Bank’s easy money policy to spur investment.
In spite of the modest recovery, he said that for the first half of 2002, signs of fragility still abound, with important issues remaining to be solved. The main fragility in the recovery process at this time, he said, was the sluggishness in domestic demand. This was further compounded by the slow growth in bank credit, the fall in commodity prices and external shocks.
He cautioned that the current external environment does not bode well for the recovery going forward. The global slowdown was placing strains on Guyana’s exports and was adding pressure to the current account and external stability.
Given the change caused by the global environment, he saw this year as being a time for consolidation rather than for expansion.