In tonight’s budget debates, the lead Member of Parliament (MP) for the faction of 12—who some have described as “a shadow of shadows”—attempted to throw around economic theories in a manner that reflected more confusion than clarity. In his substantive contribution, he cited:
• short-term and medium-term inflationary pressures that can become long-term,
• exchange rate depreciation, using the street rate as his barometer,
• the construction sector driving non-oil growth, which he argued is a bad thing, and that if stripped away non-oil growth would be smaller,
• and contended that a 10% non-oil growth rate is “bad.”
All of these points were presented as economic theory, but without practical application, without analysis, and with a deep misunderstanding of how these issues actually work in real-world macroeconomic management.
First, the street rate does not determine the real exchange rate impact on the domestic currency. The street market, including non-bank licensed cambio dealers, accounts for a negligible share of the total foreign exchange market. While the street rate may reflect sentiment in the cash market, it is not a reliable barometer for determining the direction or stability of the national exchange rate.
The dominant players in the foreign exchange market are the commercial banks. Accordingly, the correct indicator to monitor is the commercial banks’ weighted average mid-rate. If we look at the data, the average market exchange rate in 2024 was $214.77/US$1, which depreciated to $216.39/US$1, representing a 0.75% depreciation. That is perfectly normal and well within a stable range.
More importantly, if one examines the exchange rate trend since 2015, it has fluctuated within a bandwidth of roughly ±4%, which is a strong indicator of stability. Stability is far more important than an appreciation, which the said MP advocates. Many countries operate managed float regimes where exchange rate movements of several percentage points per year are not abnormal and do not constitute macroeconomic instability. What matters is the overall stability of the exchange rate trend, not isolated noise from informal cash markets.
It seems the MP has failed to appreciate a basic reality: a sharp appreciation of the exchange rate would actually achieve the opposite of what he claims to want. A rapid appreciation would cripple non-oil manufacturing, tradables, and export-led sectors by making them less competitive. This is standard macroeconomics and a core feature of the Dutch disease dynamic that resource-rich countries must actively manage.
On the issue of the construction sector driving non-oil growth: how else would you expand the non-oil economy?
The construction sector is naturally a key driver at the outset of economic transformation because in economics there is something called the gestation period or time-to-build—in other words, the development period required to expand the economy’s productive asset base and create new sectors.
It takes time to build bridges, roads, farm-to-market infrastructure, ports, energy plants, industrial zones, logistics corridors, and supporting public infrastructure. During the development period, you do not capture the full productivity benefits of these assets because they are still being built. That is common sense. The key issue is that construction must be infrastructure-led and productivity-enhancing, not speculative consumption.
Given his background in the fried chicken business, he should understand that you don’t simply have fried chicken ready in an instant. There is a process—preparation, seasoning, heating, and cooking—before the final product is ready. That is the same concept as “time-to-build” in economics: the productive base must be developed before the full benefits can materialize.
Now, on the issue of a 10% non-oil growth rate, it is frankly absurd to suggest this is “bad.” Not many countries in the world sustain double-digit growth. Even a GDP growth rate of 7% is considered exceptional in international terms. It is also worth noting that during 2015–2020, non-oil GDP growth was comparatively weaker and was further disrupted by the 2020 contraction.
China grew at around +7% consistently for a decade before slowing, and that was regarded as one of the most significant economic expansions in modern history. Yet here we have an MP suggesting that 10% non-oil growth is somehow inadequate.
In fact, attempting to accelerate non-oil growth beyond the economy’s capacity constraints, without the required infrastructure buildout and productivity expansion, would likely become inflationary. It is not only unrealistic, but economically reckless.
The overall GDP growth driven by oil at the outset is also perfectly rational, since Guyana is moving from a base of near-zero oil output pre-2019 to rapidly expanding production. That is how output-based GDP accounting works.
But the sustainable part of this story is the non-oil economy, and non-oil expansion requires exactly what is happening now: infrastructure investment, capacity building, and time-to-build.
So, I do not know what kind of “finance expert” this MP claims to be, but his argument was all over the place and, frankly, amounted to nonsense—economic theory thrown around without comprehension, analysis, or practical application.
And by the way, there was nothing stopping the party he represents from building infrastructure when they were in govt (2015–2020). They could have advanced transformational projects such as bridges, gas-to-energy, major incentives for hotel and tourism investment, and other productive capacity-building measures, but they did none of that.