Amidst concerns that Guyana is still experiencing difficulties when it comes to foreign money transactions, Opposition Leader Bharrat Jagdeo said that this situation could worsen as many international banks would not want to do business with Guyana for several new reasons.
While de-risking has been one of the major challenges, Jagdeo said that Guyana’s financial risk profile would be further elevated because of two recent occurrences locally. One has to do with the United States Government in its drug report for 2018 now identifying Government corruption as a primary source of money laundering and two, the borrowing policy of the new Administration.
“That was not there in 2017. They inserted the word Government corruption. Before that it was drug trafficking and money laundering. That pushed up our risk profile in the international banking environment and, therefore, if it was bad, it gets worse,” Jagdeo said, referring to the US report.
The Opposition Leader continued, “Countries look at sustainable management from an economic perspective, both at a micro level and in the banking institutions at the macro level. Because if you have macro problems, it could lead to balance of payment difficulties, exchange rates moving that will put their money and correspondent banking relationship at a risk.”
The former President wasted no chance to criticise the Government, therefore, for its plans to borrow US$900 million from the Islamic Development Bank (IsDB). Jagdeo said based on the admission of the Finance Minister Winston Jordan that US$100 million has been borrowed to date since the coalition took office, when that amount is added to the US$900 million, it adds up to US$1 billion and the Guyana Sugar Corporation (GuySuCo) borrowing of US$150 million totals US$1.15 billion.
“Those three elements alone will be more than the entire stock of external outstanding debt of Guyana in 2015 when we left office. So they would have in three to four short years borrowed as much as we left the 23 years in office,” Jagdeo asserted.
But Jordan has claimed that between 1964 and 1992, the People’s National Congress (PNC) Government borrowed less than the People’s Progressive Party/Civic (PPP/C).
Jordan said that approximately US$2 billion was borrowed in the 28 years under the PNC, while in the 23 years of PPP/C rule, US$2.6 billion was borrowed. But in fact-checking this information, Jagdeo, a trained economist, said if the PNC left US$2 billion and added US$2.6 billion of PPP/C borrowing that would be US$4.6 billion, but in reality it was US$1.1 billion.
He said, “What it meant is in spite of the fact that we borrowed $2.6 billion, we paid off US$3.5 billion in debt in our period…I am putting this simply because, of course, some of this is interest and principal payments so it’s a bit more complex than. But I’m just aggregating numbers so you can have a clear picture.”
De-risking
Responding to comments made about the de-risking situation faced by Guyana and other countries in the Region, Jagdeo noted that large institutions have been giving up correspondent relationships with many banks in small countries, out of fear that they may be sanctioned or they may have to face this penalty.
He explained that in some instances, the rewards were not great enough and Guyana has been actively fighting this at the regional level. He explained the main reason for doing this is because this policy could take the country back into the ‘financial stone age’ and create more issues for locals.
The Opposition Leader explained that financial intermediation and a healthy financial system were critical to the well-being of any economy. But given Minister Jordan’s recent statements, he feels that the Minister and by extension, the Government does not see de-risking as a priority. “So, Jordan is not so concerned and deeply involved,” Jagdeo said in response to Jordan’s limited knowledge about which of the local banks were being affected by the correspondent banks in the Region and further afield.
He argued, “The Minister should know this. First of all, he doesn’t know what’s going on with our banks and then the only impact that he could recognise is because he had to put through for himself and it cost him plenty. Rather than being concerned that this could affect every citizen of this country.”
Jordan said Guyana has requested the assistance of the International Monetary Fund (IMF) to fight de-risking, consistent with the Financial Stability Board’s four-point plan.
The Finance Minister said that this plan includes a further examination of the issue, clarification of regulatory expectations, capacity-building jurisdictions where respondent banks are affected, and the strengthening of tools for correspondent banks to perform due diligence checks.
He said that implementing this plan would require cooperation with both international banks and regulators.
