Currency fluctuation
The Guyana dollar has been under pressure for a while. This may be due to a variety of factors, falling receipts from rice and other exports (there are reports that some exporters have been holding all or part of the proceeds abroad), the tremendous fall off in business since December, a bit of capital flight (for example, buying US$ drafts and holding them to see how things turn out) and so on. The economic factors have clearly been strongly influenced by the political instability that has existed since December l997 which has created fear and a lack of confidence. Our currency, in theory, floats freely and foreign currency is freely available, exchange control having been abolished. This was a reform introduced by the Hoyte government together with the bank and other cambios and it has made a huge difference to our economic life. Prior to that, as we all recall, scarce currency was allocated by licence, often to political favourites, and businesses and householders had to survive on the black market with all that that entailed. The free market did away with all that and allowed people to operate legitimately. There were still abuses, but a mere fraction of what they were before when a large part of the trading system had been effectively rendered illegal and there was a huge "informal" economy. The cambios changed all that but we have never had a fully free market. That was partly due to lack of co-ordination. The cambios did not trade with each other so that if one was short they could buy from the other, the system was not integrated and fluid. As a result, one would have to queue up, so to speak, from time to time for currency at the banks, a waiting list would develop and when foreign currency came in the demand would be supplied. In the meantime, the rate of exchange would remain stable despite the unsatisfied demand. This would partly be due to the fact that foreign exchange inflows are to some extent seasonal (sugar, rice) whereas demand is continual. But the system worked reasonably well though it was not a fully free-market. Because of shortfalls in export revenues last year reports indicate that the government intervened from time to time to support the Guyana dollar by selling US dollars to the local market. That is standard practice elsewhere and we have always advocated that it should be done here. The government has also reportedly injected a further US $l2 million this year. Furthermore, both President Jagan and Finance Minister Jagdeo have indicated that they will defend the currency, particularly against speculative attacks. We believe it is vital that the open system we have be maintained and that government should continue to be an active player in the market. Their assurances of support for the currency are timely and welcome. Ultimately, the rate will depend on the economy and in particular on exports. That is why the falling sugar price and the problems with rice markets, and production due to El Nino, are unfortunate. In his budget on Monday Minister Jagdeo will no doubt address this issue more fully and any additional measures that may be required to push exports. Exporters, too, should be called upon to repatriate their receipts. 
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