In Guyana’s fast changing news cycle, the issue of whether or not there is a shortage of foreign currency appears to have receded into the background. That of course does not mean that the temporary problem has been permanently solved. Official sources maintain the line that there was never a general shortage, that if anything, the problem was restricted to a few of the commercial banks. The rest have their foreign exchange niches – Scotia from petroleum, Demerara Bank from DDL and Agriculture, and GBTI from Agriculture and Gold. That’s from the supply side. The shortage, if any, comes from several factors on the demand side, including what is perceived in some quarters as Guyana becoming the Cambio and main source of foreign currency for our Caribbean partners, to borrow from a claim made by Ms. Kamla Persad-Bissessar as Prime Minister of Trinidad and Tobago in respect of her own country.

The Petroleum Sector

As column # 105 showed, the paradox of any shortage in the midst of a petroleum boom is partly explained by the liberal Foreign Exchange Control provisions of the 2016 Petroleum Agreement which allows the oil companies to run their own exchange regime, outside of the national framework. And here it is worth noting that the regime is enjoyed not only by Exxon’s indirect subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) but also by Hess and CNOOC which have a 55% share in the oil consortium with Esso the remaining 45%.

Apart from being the Operator of the Stabroek Block, EEGPL appears to have taken on the role of representative and spokesperson for the other two. It is a member of the Private Sector Commission, represented at the meeting between the PSC and the Bank of Guyana. EEPGL’s representative however, made no admission, suggestion or undertaking to contributing to any solution. Indeed, the representative was totally silent, taking in all that was said, no doubt relaying the discussions to his principals. We need to remind ourselves that EEPGL holds a minority interest (45%) in the Stabroek Block with Hess owning 30% and CNOOC the remaining 25%.

Government failure

Guyanese should note that the much-vaunted Model PSA put out recently for discussion and comments within a brief 14-day period, essentially retains the old foreign exchange framework. So much for a progressive, nationalistic model promised by the Government. While I intend to address the Model over the coming weeks, I urge the Government not only to extend the 14-day consultation period but to engage the public in a public forum for broad, general consultations. The draft does have some positive features but repeats some of the major weaknesses of the existing regime.

In returning to the foreign exchange issue, we must not make the mistake that it is all down to the oil companies, that the Agreement is the sole cause of the problem or that

any fixing of the Agreement would solve all the problems. Rather, if the Model PSA is a signal, it is safe to assume that the Government does not intend to address the issue of foreign exchange – surplus or shortage – but to leave it to the Bank of Guyana and the so-called market. Perhaps the Government has to be reminded that the Bank of Guyana is a statutory creation, bound to act within the policies set by the Government. The central bank does not make policy but only carries out policies set by the Government. Since neither the Governor of the Bank nor the Government has indicated any change in policy on foreign exchange in response to oil, one has to assume that the Government is comfortable with the status quo.

Such continued inaction on the part of the Government has grave consequences. It has become the victim of the Cambios, the tax evaders, the money launderers and the illegal export of the country’s foreign exchange resources, transfer (under)pricing and the faithful adherence to the foreign exchange rules, already limited as they are.

Dr. King’s prediction of the resource curse

This Government has to get around to managing the economy and to address the problems with the economy and the country. Unless it acts soon, the condition can potentially become totally unmanageable and insoluble. Maybe the Government fears that necessary action will not be welcome by their friends and supporters but it must surely realise that it has to act in the best interest of the country rather than in the Party’s electoral interest. The Government is right to be offended by the dire predictions of Dr. Damien King, the Jamaican economist. The paradox is that by its delay or unwillingness to act responsibly and decisively, the Government is actually sowing the seed of the resource curse threatened by Dr. King.

Here are some matters requiring immediate attention, outside of the increasing and self-serving weaknesses in public financial management.

Repeal of the Dealers in Foreign Currency (Licensing) Act by excluding the non-bank cambios which are almost universally personal cambios, impervious to audit or adequate supervision and regulation. These were created for a different era and purpose and have no place in this society.

The Issue of more banking licences, thereby increasing competition among the banks.

The need for strengthening and enforcing the only semblance of transfer pricing rules under the Income Tax Act.

Rigorous enforcement of the laws against those communities of foreigners – regional and international - that rob the revenue of taxes, underpay our workers and take out foreign currency under all forms of guises. We must not hesitate to place the law breakers before the Courts and to apply our extradition laws in appropriate cases.

Addressing the large scale smuggling across the extractive sector and not hesitating to make it possible to revoke leases and licences.

Dealing with the gaping weaknesses in the Local Content Act.

The review and amendment of the Bank of Guyana Act and the Immigration Act.

Strengthening and depoliticising of the Financial Intelligence Unit and the SOCU.

Ensuring that foreign investment means what it says. Afterall, if the local economy finances the investment, directly or indirectly, allowing the investor to repatriate both capital and profits, the gains to the economy are significantly reduced.

Liberalising the rules for foreign borrowings but subject to thin capitalisation rules.

Conclusion

To state the obvious, managing an economy cannot be only about big spending, sometimes without regard for the Procurement Act, the Appropriation Act or the Fiscal Management and Accountability Act, responsible and accountable spending, and good governance. What kind of democracy is it that the National Assembly has not met since the passage of the 2023 Budget? Is it that the Government is waiting until it needs parliamentary Supplementary cover for unauthorised spending?

Despite all the evidence, I remain optimistic that the government will carry out its functions and duties to address the grave problems and threats facing the country. I would hate ever to have to concede that Dr. King’s predictions were more prescience than theory.