Dear Editor,
Regardless of many commentaries & analyses “for & against” the government’s 6.5 % Public Sector salary increase for 2023. Herein, I would like to share my perspective on the subject.
In the early 1980s the official exchange rate for the Guyana Dollar was $2.40 to USD $1 and by 1989 it was $10 to USD $1. As per related policy focused on the exchange rates the government began devaluing the Guyanese dollar so that the official exchange rate would eventually match the unofficial market rates. This process of devaluation was seen as an essential feature for economic recovery and to target the parallel economy but also to improve the country’s export competitiveness at that time.
In April 1989 the government changed the official exchange rate per US dollar from $10 to $33. This move instantly tripled the domestic currency price of most imported goods (depreciation of the Guyanese dollar stood at: 1275% as of 1989). Eventually, an important policy was established in early 1991 when Guyana adopted the floating currency exchange rate mechanism (Cambio) removing the distinction between the official the market (unofficial) exchange rates. This policy framework led to a temporary stabilization of the Guyanese dollar $125 to USD$1 by June 1991 (but with an additional depreciation of the Guyanese dollar by: 278. 8%)
Now let’s fast forward to year 2023. The US dollar is trading at: USD$1 to GUY$215 the least (a further depreciation of the Guyanese dollar by 72%). The overall devaluation of the Guyanese dollar from early 1980s to 2023 (GUY$2.4 to $215 = USD1) is approximately: 8858%.
As such, what must be taken into consideration is that the nominal exchange rate depreciation and inflation would have had significantly eroded the Guyanese standard of living and increased poverty starting from the 1980s (notwithstanding the current per capita income around USD$17,045). However, it will still require substantial increases in wages and salaries over time to correct this anomaly.
Truly yours,
Paul Ramrattan, CBMBA, MCBI,
ICEA (Grad. Acct.)
