Bank of Guyana's Ganga disputes extent of underground economy
March 15, 2003
The Bank of Guyana's Research Director Dr Gobind Ganga says the report that Guyana's underground economy averages 47% of GDP is incorrect and that figure is highly inflated.
A Government Information Agency (GINA) release on Thursday quoted Ganga as saying that the underground economy was not as high as suggested in the working paper of International Monetary Fund (IMF) representative, Ebrima Faal.
The release quoted Ganga as saying that in the developed countries, the underground economy was estimated to be between 30% to 35% of GDP and that Guyana's money demand was similar to economic activities in countries such as Barbados and Trinidad and Tobago.
However, in an apparent contradiction, the GINA release also said the Central Bank was still going through Faal's report to determine the magnitude of Guyana's existing underground economy.
Faal, who used a stable error-correction based currency demand model and official data, found that the underground economy averaged 47 per cent. He said in his working paper that this finding suggested that the current national accounts series were not adequate for meaningful economic analysis or policy formulation.
Contacted yesterday for a comment on the Bank of Guyana statement, Faal said he would not like to comment on general statements.
"The intent of any analytical work is to generate constructive debate so as to expand the analysis in various directions, including in understanding the factors (crime inclusive) that still dominate to maintain the underground level at about 50 per cent.
I do believe that the initial thrust in this direction has been done by my paper (which also benefited from previous work by Clive Thomas and Karl Benett for Guyana) so that the relevant government agencies should now be able to conduct their own analysis, and hopefully, at the end of it, derive conclusions that would advance policy formulation. I welcome any and all comments to the draft working paper as noted in the cover of the paper."