Time for a debate on whether Guyana should adopt the US$ as the national currency

Dear Editor,

 

In the increasingly globalized world we live in, continued use of the G$ means we will forever have problems like the one we have now, namely, the declining value of the Guyana dollar. What would the Finance Minister do if we were to enter a period of steadily decline? He would flood the market with the reserves of USD he now holds, but this is a heavy price to pay to stabilize the Guyana dollar. Many times, because of deeper underlying problems in the economy, such a measure does not work. It is like throwing good money after bad. Many nations’ central banks have blown their reserves and still failed to stabilize their currencies.

Also, continued reliance on the Guyana dollar means its citizens will forever have problems of purchasing enough USD ‒ there is a cost on such purchases ‒ whenever they need to travel or pay for imports. This problem would be solved permanently if we adopted the USD as our national currency.

Seventeen nations in the European Union have joined the European Monetary Union and adopted the euro. This was one of the greatest developments in monetary theory and practice. Today goods and services are transacted easily and freely with the payment of the euro without the nuisance of having to constantly change into different currencies. What is happening now in the 17-nation EMU should not be an argument against the adoption of the euro, but an argument against deception of some nations (Greece) which cooked the books to gain admission to the EMU and others which ran deficits outside the limits imposed on member nations.

The idea behind the common currency was to facilitate trade and movement of people and resources without the hindrance and nuisance of constantly having to change into other currencies, and this is what Guyana would achieve if it adopts the USD.

If Guyana were to adopt the USD, would it lose its ability to execute monetary policies? When a nation’s economy slows, central banks want to make more money easily available to stimulate the economy. Singapore achieves this end by reducing the rates of employees’ compulsory savings plans and pensions, thus increasing disposable incomes, and increasing the rates in the event of inflation. Following the practice of Singapore, Guyana can still achieve the benefits of traditional monetary policies.

With the changed environment over the last 25 years, namely, with remittances increasing 100-fold, shouldn’t the economy be more or less fully US dollarized? Shouldn’t foreign companies (gold and Barama, etc) be required to pay its employees and taxes in USD? Shouldn’t all citizens be allowed to hold USD accounts at the local banks?

We live in a world where the old idea of every sovereign country having its own currency no longer applies. Plan and think global. Adopt a currency that is internationally acceptable.

Make life easy for your citizens. Remove encumbrances that hinder trade.

It is time to have a national debate on whether we should adopt the USD as our national currency.

 

Yours faithfully,
Mike Persaud

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