Finance Minister’s statement on oil points to poor management of foreign currency reserves

Dear Editor,

In his recent attempt to justify his government’s callous refusal to take action to cushion Guyanese businesses and consumers from rising fuel prices, Minister Winston Jordan has made a very important confession. 

The Minister argued that, apart from the fact that his government is wary of giving up the revenue windfall they are currently enjoying from higher fuel prices, they are also concerned about having to find the foreign exchange required to meet the rising fuel import bill. 

The Minister’s concern about foreign exchange and the rising fuel import bill can be translated into layman’s language as follows. Because he and his government have so mismanaged the economy that the country’s foreign reserves are depleted, now that fuel prices are high, the country’s foreign reserves are unable to cover the fuel import bill with these higher oil prices, so the minister is refusing to reduce oil taxes and is hoping that the higher oil prices will force Guyanese businesses and consumers to consume less fuel. In other words, Guyanese businesses and consumers must bear the brunt of higher oil prices and be forced to consume less fuel because the APNU+AFC’s incompetent cabal has mismanaged the economy and depleted the country’s foreign reserves to the point where Jordan is fearful about whether the country has enough foreign currency to pay for fuel imports. Put even more simply, Guyana’s businesses and consumers are now being asked to ration their fuel consumption, lower their living standards, and pay from their pockets for the incompetence of the APNU+AFC government.  

The Minister is well aware that one of the most important variables that a government has to consider in crafting its economic policies is the level of the country’s foreign reserves. A responsible government ensures that it maintains a sufficient level of foreign reserves to meet the country’s external requirements on an ongoing basis. Typically, countries will aim to have, at the very minimum, three months of import cover. Ideally, a country will maintain a level somewhat higher than this, in order to ensure that it can withstand shocks such as higher oil prices.

It is a well-known fact, that during successive PPP/C administrations since 1992, our country’s foreign reserves were rebuilt from nearly zero in 1992 to more than US$650 million equivalent to 3.6 months of import cover at the end 2014. During the PPP/C tenure in office, oil prices rose to as high as US$140 per barrel, and because of the responsible policies of the PPP/C to ensure that our country had a comfortable level of external reserves, we were able to emerge from the oil price crisis without any dislocation to our foreign reserves, while at the same time reducing the taxes on fuel so that the productive sector and consumers were not adversely affected. The Minister’s highlighting of PetroCaribe is an irrelevance. PetroCaribe was merely a form of balance of payments borrowing, which was conducted by the PPP/C in a manner that did not jeopardize Guyanese debt sustainability and which was subsequently applied in a manner to stimulate unprecedented growth in our rice sector by securing a premium market for our rice producers. 

In contrast, after a mere three years in office, Minister Jordan and his colleagues in the APNU+AFC have mismanaged our economy and squandered our foreign reserves to the point where they cannot afford to meet the cost of the country’s fuel import bill, and they now want to use these higher fuel prices to force Guyanese to consume less fuel. 

It would be useful for the Minister to clarify who exactly he expects to reduce their demand for fuel. Is it the family that still has to go by minibus or motorcar to and from school and work every day? Is it the poor mother cooking on a kerosene stove for her children? Is it the rice farmer who still has to plant and harvest his rice because he is indebted to the bank and must keep servicing his loan? Is it the businesses that need back up power because Minister Jordan’s party undermined the Amaila Falls project that it now wants to resurrect belatedly? Is it the gold miner who needs to keep operating his dredge in order to recover the capital that he invested and repay the money he borrowed to invest in the dredge? Which one of these groups exactly does the minister want to reduce their fuel consumption in the short term, in order to help him ease the pressure on the foreign reserves which his government mismanaged and squandered? 

Does the minister not realize that the rising fuel prices that his government is imposing on the productive sector, because of his government’s greed for revenue to spend on themselves, will in turn further destroy the productive sector and further erode the country’s export base? Does he not realize that the higher fuel prices that his government is passing on to private consumers is reducing their disposable income, and reducing their capacity to purchase other goods and services in the economy, thereby further impacting the productive sector? Can the minister kindly explain to the nation where are the foreign currency reserves that would have been accumulated from the savings when oil prices fell to less than US$30 during his government’s term in office, the lowest level of oil prices in over a decade?

In the final analysis, the minister’s statement is nothing more than a confession that his government has mismanaged the economy, squandered the country’s foreign reserves to the point where they are so depleted that the country can’t afford to meet its import bill, so the Guyanese consuming public is now being forced to feel the brunt of this government’s incompetence.

Lest we forget it, it was this same problem of inadequate foreign reserves that led to the banning of basic food items during the Burnham years and scarred the pysche of our people and stigmatized our country with the indignity of being probably the only country in the world where wheat flour was an illegal commodity, possession of which could land you in jail. 

The journey to economic ruination, and its companion journey to political dictatorship, both appear to be well underway. 

Yours faithfully,

Donald Ramotar

Former President

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