Economy relatively healthy despite unbudgeted expenses - President

Kaieteur News
December 30, 2006

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Guyana 's economy is said to be performing well despite the unbudgeted high spending on security and elections during 2006, with economic growth poised for a seven percent turnaround from last year when the country was severely affected by flooding.

President Bharrat Jagdeo said on Thursday that he is very pleased with the country's economic growth which he said was around 5 percent.

He added that despite the instability of the US dollar on the world market, Guyana was still able to keep the inflation rate below what was projected.

The President noted that during the year, there have been huge inflationary pressures around the world and because Guyana imports many of the things that are consumed, it also imports the inflation into the economy.

Noting the fluctuation of the US dollar, the President pointed out that one Euro was previously sold for US85 cents, but now one euro cost US$1.30 cents.

He said that because of this, inflation could be 50 per cent higher as a result of the weakened US dollar.

The President noted too that the inflation rate could have been higher given that a lot of goods are imported from China , whose currency has strengthened significantly in relation to the US dollar.

“So when we get quoted in US dollars here, the quotations go up because the Chinese currency has strengthened… so we import some of the inflation because many of our economies are aligned to the US dollar and a significant amount of our money is aligned to the US dollar,” President Jagdeo added.

He said when the US dollar fluctuates on the world market there is development in the local economy that the administration has no policy control over.

“That's why I am still pleased that in light of the weakening US dollar our inflation rate is below what we had forecasted,” President Jagdeo remarked.

Evidence of the positive economic performance he said was routed in increase exports, increase central government revenues and a build-up of foreign currency holdings.

He added that there has also been a growth in credit to the private sector which is a good signal that people are investing in the economy.

“I am very pleased with the outturn of the economy, in spite of unbudgeted expenses, high spending on security and elections,” President Jagdeo noted.

While he lauded the growth of the economy, he reminded that Guyana suffered a big blow when sugar price cuts were announced, but noted that the mitigation plans to withstand the price cuts are well advanced.

The EU price cuts started to take effect this year with the total cuts expected to be introduced in phases.

The Head of State posited that Guyana may be one of the few countries in the Caribbean that will still be a sugar producing country by the time all the price cuts are phased in.

However, he expressed concerns that the latest round of negotiations at the World Trade Organization (WTO) has been stalemated, largely because the developed countries want to benefit.

He pointed out that the US and Europe , in particular, have not been supportive of this round of negotiations benefiting the developing nations.

Alluding to the stalemate on the issue of agriculture subsidies and industrial tariffs, President Jagdeo noted that this has derailed the entire process that would have led to a new WTO agreement.

“In the broad outlook for this round we are supposed to have been a beneficiary… our country never benefited significantly from the several rounds of negotiations…this round is stalemated because of the intransigence of some of the industrial nations because they want to benefit from this round too,” President Jagdeo stated.

He added that Guyana along with the rest of the developing countries will not accept any agreement, but they are seeking an agreement that recognises the need of the developing world.

“This will be the guiding principle for the Caribbean and more particularly the negotiations we are involved in.”

Debt relief

The President stated that Guyana stands to benefit from US$460 million in debt write-off from the Inter-American Development Bank (IDB) next year, despite some initial challenges.

The President said that Guyana had to battle against a proposal which placed the cut off date at 2003 and only fully dispersed loans would have been eligible.

He said that this would have reduced the debt relief significantly to Guyana and five other Heavily Indebted Poor Countries.

However, the Head of State is optimistic about the success of his lobbying efforts for debt relief at the recent meeting of the South American Community of Nations (SACN) held in Cochabamba , Bolivia , where a resolution was passed affirming the debt write-off.

He said that the resolution insisted that the cut-off date for the debt relief should be December 2004 and that the total stock should be eligible.

President Jagdeo said that from the time the multilateral debt relief initiative was announced, Guyana started lobbying the Presidents of several countries, which is just the start to the process.

He expressed confidence that Guyana has found allies in the United States and Brazil .