Recently I found myself immersed in an enlightening discourse with an academic mentor in which we delved into the future of Guyana’s economy.

The premise of our discussion was simple. The question was asked: With Guyana’s newfound oil wealth, isn’t it time for the nation’s economists and Government to consider the potential revaluation of the national currency? But before we explore this further, let’s glance at the history of the Guyana currency.

The Guyanese dollar emerged in 1839 as a localised version of the British Guyanese pound, initially pegged to the British pound on a one-to-one basis. With the decimalisation of British Guiana in 1955, the Guyanese dollar was valued at GY$2 to £1. However, post-independence in 1966, multiple factors, such as political instability, nationalisation of key industries, and escalating external debt, began to weigh heavily on the economy. By the late 1980s, Guyana was one of the countries with the lowest per capita income in the Western Hemisphere, virtually on the brink of bankruptcy.

The financial strain and mounting debt triggered a substantial devaluation of the Guyanese dollar. The People’s National Congress (PNC) Government in 1989 introduced an Economic Recovery Programme (ERP), which included a notable devaluation of the Guyanese dollar from its official rate of GY$10 to US$1 to a rate of GY$125 to US$1. This devaluation was part of a broader reform package intended to liberalise the Guyanese economy. The Guyanese dollar has experienced further devaluation since then, albeit at a slower rate, with the current exchange rate hovering around GY$210 to US$1.

However, Guyana’s economic landscape changed in 2015 when Guyana discovered extensive offshore oil reserves. ExxonMobil and its partners have estimated these reserves at more than 8 billion barrels of oil equivalent, a substantial amount for a country of less than 800,000 people. Oil production commenced in December 2019, marking a transformative period for Guyana’s economy. While the COVID-19 pandemic triggered negative growth in many nations in 2020, Guyana’s economy expanded, largely driven by its burgeoning oil sector. This economic boom set Guyana apart from its South American and Caribbean counterparts, which experienced economic contraction.

Organisations like the International Monetary Fund (IMF) and the World Bank predict substantial growth for Guyana. Despite global economic pressures due to the pandemic, Guyana’s economy grew by 47.2 per cent by the end of 2022, as per the IMF reports. The World Bank forecasts a growth of 34.3 per cent by the end of 2023. Further, econometric models suggest a promising gross domestic product (GDP) trend, potentially reaching around US14.70 billion in 2023 and US$15.20 billion by 2024.

Yet the question of whether it’s time to revalue the Guyanese dollar is intricate, hinging on numerous macroeconomic factors, the state of the national economy, and the international financial markets. Currency revaluation is a deliberate adjustment to enhance a country’s official exchange rate relative to a chosen currency or baseline, such as the US dollar.

It’s important to remember that currency revaluation is a nuanced decision, fraught with potential risks and impacts on the economy. These implications can span trade, debt service, inflation, foreign direct investment, and the overall economic well-being. Still, the decision to revalue shouldn’t rely solely on the inflow of revenue from oil exports. A comprehensive evaluation of several factors is crucial, such as the revaluation’s impact on the broader economy, the country’s monetary policy, inflation, competitiveness of other sectors, and the overall stability of global and regional economies.

The ramifications of a currency revaluation are varied and widespread, permeating different sectors of the economy and influencing the daily lives of its citizens. In Guyana’s context, with a population of approximately 800,000 people, a revaluation of the Guyanese dollar would potentially affect every societal sector. On the other hand, the revaluation of the dollar could have a potentially positive impact on the lives of the population. Let’s examine a few of these.

* Costs of living and purchasing power: A revaluation could modify the purchasing power of the currency. A stronger currency could make imports cheaper, potentially decreasing the cost of everyday items like food, clothing, electronics, and vehicles. If these items constitute a significant part of the local market, living costs could be substantially reduced.

*Employment and Economic Sectors: Revaluation could also influence employment and various economic sectors. If Guyana is a major exporter, a stronger currency could make its exports more expensive on international markets, potentially impacting demand and jobs in these sectors. However, sectors relying heavily on imports, such as retail or manufacturing that use imported inputs, could benefit from a stronger currency, leading to growth and job creation.

*Savings and investments: For those with savings or investments, revaluation could potentially increase the real value of these assets. This could mean that citizens who have been frugal and financially prudent might find their purchasing power considerably increased. It would also incentivise more people to save or invest, knowing that their financial assets would likely appreciate in value. An upvalued currency could make the country more attractive for foreign investments, stimulating the economy, possibly leading to increased employment and improved infrastructure. As a result, Guyana could witness enhanced social mobility and economic growth, with the potential to transform its standing on the global stage. Furthermore, attracting foreign investments could lead to the transfer of technology and skills, contributing to the country’s long-term economic development and diversification.

*Cost of travel: A stronger currency could make foreign travel more affordable for citizens, thereby increasing their purchasing power in other countries. Consequently, travellers may experience a higher standard of living while abroad, allowing them to enjoy a wider range of services or experiences that were previously cost-prohibitive. This could be particularly beneficial for those who travel regularly for business or leisure, as it can significantly reduce their cost of living overseas, making international relations and transactions more feasible and affordable. Additionally, it could also incentivise more citizens to explore international travel, thereby promoting cross-cultural exchanges and global understanding.

*Inflation and interest rates: The effects of revaluation on inflation and interest rates are also significant. A revalued currency could reduce inflationary pressures by making imports cheaper, potentially stabilising prices in the economy. This could lead to lower interest rates, making borrowing cheaper for businesses and individuals and possibly stimulating economic activity.

While some of these changes could bring immediate prosperity, others could pose challenges. Certain sectors could suffer from reduced competitiveness in international markets, leading to job losses. Hence, any currency revaluation decision should be cautiously considered and managed to balance these potential benefits and drawbacks.

It’s about time we start an earnest dialogue on the subject, aiming for our own regional equivalent of the United Arab Emirates, in terms of wealth.

Henry Lewis Jr is a PhD candidate, a social scientist, and an executive life coach. He lectures at University of Technology, Jamaica, in the School of Humanities and Social Sciences. Send comments to the Jamaica Observer or hjlewis@utech.edu.jm.com