The political crisis currently enshrouding Guyana will affect the country’s response to the budding health crisis, by impeding on the implementation of a fiscal policy response.
This was the position shared by the Inter-American Development Bank (IDB) in the recently released Caribbean region quarterly bulletin report, which expounded on key issues.
The institution noted that the country faces several constraints to address health needs in times of the coronavirus pandemic, the first of which is brought on by the incessant political stalemate. Without a National Assembly, the production of a fiscal response policy or simply dipping into the National Resources Fund (NRF) to support the sectors would have to wait.
There is currently no functioning Parliament in Guyana, since the 11th Sitting of the National Assembly (Parliament) was dissolved in order to pave way for the March 2, 2020 elections.
“Guyana faces several constraints to address the impending health crisis. First, the ongoing political dispute over the election results is an impediment for designing and implementing a fiscal policy response. With Parliament currently dissolved, legislation cannot be passed which affects any potential fiscal stimulus or drawing on the recently created Natural Resource Fund (NRF) to support the health sector, the private sector, or social policy providing relief to the vulnerable,” the IDB highlighted.
This would affect potential economic incentives to cushion the health sector or social policy by providing relief to the vulnerable. The NRF – where all Guyana oil revenues are deposited – has strict withdrawal rules in place, but does take into account the possibility of emergency financing in the event of a major natural disaster. Notwithstanding, such withdrawals cannot be made.
The caretaker coalition Administration had committed to make funds available to strengthen the Public Health Ministry’s response, in terms of testing, facilities and intensive care capacity. But the institution cautioned that other policies are important to address stakeholders who cannot withstand fluctuations.
“Other policies that may be important to consider include expanding cash transfer programs, especially if social distancing policies are strengthened and household incomes fall, which could contribute to reducing the risk of social unrest. Similar support for small and medium-sized enterprises could be considered.”
In the Bank of Guyana’s annual report for 2018, it shared that its capacity to respond through reserve requirements or policy rates is minimal or nonexistent because of the financial sector’s generally high level of liquidity and little need to borrow.
As such, the IDB contended, “The main policy response from the Bank of Guyana has asked financial institutions to provide flexibility by lowering interest rates, deferring loan payments, and promoting measures to reduce in-person transactions. Several banks have adopted these measures, including reducing opening hours and deferring loan repayments for a period of up to six months on a case-by-case basis. Supporting liquidity in deteriorating market conditions will be key.”
Back in March, Bank of Guyana Governor, Dr Gobin Ganga told Guyana Times that Government cannot access the US$55 million deposited in the NRF which is held in the New York Federal Reserve Bank. These monies were earned from the sale of the country’s first entitlement of one million barrels of crude oil from the Stabroek Block.
At that time, he reminded that the Fund is governed by an Act of Law. Further preventing the current Government from accessing the funds is the fact that the Act lists two committees – the Public Accountability and Oversight Committee and the Investment Committee.
The BoG Governor had told this publication the Administration is prevented from accessing the fund, even if it tries to in light of the coronavirus disease and the Public Health Ordinance Act recently signed into force by caretaker President David Granger.
The political situation will only come to an end with a final declaration from the Guyana Elections Commission, paving the way for a swearing-in of a new President. Based on the National Recount exercise, the People’s Progressive Party/Civic secured the highest number of votes, thus defeating the APNU/AFC coalition. However, the APNU/AFC Administration has refused to accept defeat and has moved several challenges in the court of law, through its supporters, in an apparent bid to block a declaration. However, in all of the instances, the court has dismissed their cases. The Guyana Elections Commission is scheduled to meet today to discuss the final result. (G12)