Saturday, December 18, 2010

Carl Greenidge's 'visionary leadership' devastated Guyana between 1985-1992

Carl Greenidge

PNC/R Presidential nominee Carl Greenidge must tell us if it was with his 'visionary leadership' during his tenure (1985 to 1992) as Finance Minister in the then PNC Government that Guyana went through its worst economic times.
Here are some aspects of Guyana's economic mismanagement which Greenidge presided over:

Public finances were terrible throughout most of the 1980s. The overall budget deficit - the difference between actual expenditures and the revenues - widened from 17 percent of recorded GDP in 1980 to 59 percent in 1985. After experiencing a short-level reduction during 1987-1988, the deficit jumped back to an estimated 55 percent of GDP in 1989. This deficit was rooted in increases in central government expenditure, increased domestic interest payments and decreased revenues due to economic decline and the shifting of many activities into the parallel economy.

The deterioration of the state enterprises also contributed to the budget deficits. Up to 1980, their combined current account surplus had partially financed the deficit. But this surplus turned into a deficit from 1981-1987 as a result of devaluations and a steady drop in production of export commodities.

2. In 1986, Guyana was importing more goods and services from the rest of the world than it was exporting, and was experiencing serious problems in making payments to international creditors. Part of the payments was made from the reserves, including stocks of gold, but when these reserves dried up, the government found itself in no position to continue paying. Guyana thus became a bad credit risk and faced problems in acquiring even short term credits from international lenders. By 1988, the external payment arrears amounted to almost three times Guyana's GDP.

To finance the budget and the overall deficit, the PNC administration with Greenidge as its chief financial officer resorted to heavy borrowing. There was a sharp increase in commercial arrears (US$1.2 billion in mid-1989) and the total public sector external debt reached almost US$1.9 billion by 1989 or more than twice its level at the beginning of the 1980s. Measured by the usual indicators of debt to GDP and debt to exports, Guyana became one of the most heavily indebted developing countries in the world.

4. In 1990, Guyana's debt service payments and interest amounted to 140 percent and 53 percent respectively of export earnings. Our foreign debt by the end of 1991 amounted to US$2.1 billion with debt service payments amounting to 105 percent of current revenue.

Further, as a result of the PNC regime's incompetence and mismanagement, the Current Account Consolidated Fund showed a huge deficit, increasing from G$6 billion in 1989 to nearly G$18 billion in 1991.Earlier, the October 1989 report of the Commonwealth Advisory Group (the McIntyre Report) on Guyana's economic and social situation had emphasised that this state of affairs was "clearly unsustainable".

5. In 1991 there was a drastic decline in the production levels of the key exports - bauxite, sugar and rice. Sugar production declined from 220,995 tons in 1987 to 129,900 tons in 1990. Rice production was 131,700 tons in 1987 but dropped to 94,000 tons in 1990. Bauxite dropped from 1,486,000 tons in 1987 to 1,321,000 tons in 1990. As a result of the decreased production Guyana could not supply sufficient bauxite to Venezuela for the existing bauxite/fuel deal.

Sugar and rice, accounting nearly 16 percent of the GDP, contributed almost half of Guyana's foreign exchange earnings while employing 40 percent of the labour force. But through mismanagement, these two industries, which were net foreign exchange earners, were experiencing a serious production crisis. Sugar production since 1988 had fallen to such an extent that the government was forced to import supplies from Guatemala for domestic consumption. Because of this drop in production, Guyana failed to meet its export quotas for markets in the European Economic Community and the United States.

6. Inflation, which had generally remained within the 20 percent range after 1981, rose to 40 percent in 1988 and doubled to 80 percent in 1989. In 1991, it stood at between 110 percent and 125 percent. Prices, measured by the official Consumer Price Index (CPI) constructed on a 1970 base year, increased by 13 percent annually.

. In 1991, workers were given a 50 percent increase in wages and salaries, raising the daily minimum wage from $43.03 (given in 1990) to $65.56 (or less than half a US dollar), about the lowest in Latin America and the Caribbean. This was totally inadequate to meet the cost of living and well below the $193.77 per day demanded by the TUC in 1989 and the $307.07 for 1991. On May Day 1991, the General Secretary of the TUC, Joseph Pollydore, stated that workers were in a state of near destitution and incapable of buying "even basic food"; that Government "has left children breadless and homes rice-less because of the inability of bread-winners to buy even minimum quantities for their families". And TUC President, Frank Andrews attacked the government's policy of removal of subsidies and price controls, while imposing utterly inadequate wages and salaries levels. To illustrate the effects of the harsh cost of living, workers on May Day 1991 carried placards declaring that the ERP brought them "Empty Rice Pots"!

The level of desperation of the workers' situation can be gauged by the purchasing power at the daily minimum wage of $64.56 in 1991. This amount could buy only about one and a half pounds beef, or six eggs, or two and a half pounds sugar. It definitely was insufficient to purchase a pound of chicken.

Noting the marked deterioration in economic and social conditions, the McIntyre Report had observed two years earlier: "But perhaps the even greater loss has been the deterioration in the physical quality of life of the population. Since 1980, average incomes have fallen by 50 percent, unemployment has doubled to 40 percent of the work force; health and educational services are minimal, and many of the best doctors, nurses and teachers have emigrated". Interestingly, the very Carl Greenidge who now talks about visionary leadership, alluded in his 1991 budget presentation to the fact that several economic indicators were in poor shape. So serious was the situation that in 1990 GDP had declined to less that US$370 per capita.

1 comment:

  1. this man has pushed guyana right into the gutter back under Hoyte's administration. why would they nominate such an incompetent man..this clearly shows the aim of the PNC/R to put guyana once again in the dirt..