Something is not right with the economy
When the PPP government decided that it was appointing a National Economic Council to be headed by former President Bharrat Jagdeo, critics of the government said it was just a ploy to give the former President a hand on the levers of the administration of the country.
The need for such a Council was also called into question. The Council, in fact, never seemed to have gotten going, vindicating the sentiments of the critics of the government.
It was therefore surprising that when the new government came into office, one of its first acts was to appoint an economic advisory council, similar to that which the PPP had planned to implement.
But just like the fate of the National Economic Council, the APNU+AFC’s Economic Advisory Council seems to have been stillborn. The public has heard nothing from and about the council since its formation.
The economy is, of course, on even keel. The economy is expected to continue its growth based on mining investments that the PPP would have made while it was in power and which are now bearing fruit. But even with the economy likely to show growth for the rest of the year and into next year, there are a number of worrying signs which require attention.
The first is the lack of major investments in the economy. APNU may be tying its hopes on the discovery of oil. But oil prices have dipped so low that even if oil is found in commercially feasible quantities, it makes little sense for the oil companies to invest in drilling at this stage. Nothing is therefore likely to emerge on the petroleum front for at least the next ten years.
Gold alone cannot push the economy beyond the next three years. Output is likely, even with the new mines in the pipeline, to taper off within the next three years, but even if a King Solomon-type mine is found this will not be addressing an underlying fault line in the economy: the lack of purchasing power on the part of consumers.
Money is simply not circulating in the economy. An invasion of tourists is likely in the next couple of weeks. The money that they will spend, the hosting of the CPL final and the hosting of matches in the Tri-Nation series is not likely to change the situation in the country.
Purchasing power cannot be imported. There is stagnation in commerce. Everyone is feeling the pinch. Inflation has remained stable, indicating that the problem is a circulatory one. Money is not circulating in the economy and capital flight is not the answer, because the exchange rate has not been moving up and down.
The Ministry of Finance and the Ministry of Business have not offered any answers to what is happening in the commercial sector. Perhaps they do not know. Perhaps they do not share the assessment that business is down. They should.
Even the vendors are complaining. In fact, a worrying sign has developed. Itinerant vending is springing up all over the country. One explanation is that people are testing the waters to see whether the government will clampdown on them. The second is the more realistic explanation: people are feeling the squeeze and really have no other choice but to go and make a hustle.
The Ministry of Finance needs help. It should not get too comfortable by the fact that growth will be sustained right through to 2017. It should be worried about the lack of investment in the economy. The Ministry should be concerned about the fact that money is not circulating even though two massive national Budgets were passed in the short space of eight months.
Something is drastically wrong with the economy. An emergency meeting of the Advisory Economic Council needs to be summoned. The experts need to look at the numbers and decide whether there is need for any adjustments, including any austerity measures.
The government should not be deceived by the growth numbers. They know all too well how misleading those numbers can be.
