CURRENCY ISSUES

GUYANA SHOULD ADOPT THE US DOLLAR.

Several countries have already adopted the US Dollar and Guyana should do the same. The act of a foreign nation adopting US currency as its own is referred to as “dollarization.”

The US Dollar is already official legal tender in the following countries: Ecuador, El Salvador, East Timor, Marshall Islands, Micronesia, Palau, Turks and Caicos, British Virgin Islands, Zimbabwe, the US Virgin Islands and Puerto Rico (these countries that have no currency of their own).

In Guyana’s case, the main reasons for adopting the US Dollar are as follows: the substantial amount of foreign remittances from the USA and mitigation of the substantial risk of a significant devaluation of the Guyanese Dollar.

About 35% of Guyana’s population resides abroad, mainly in the United States, and they remit a substantially significant amount of money to their relatives living in Guyana. Upon receiving the US Dollars, the recipients immediately exchange the US Dollars for Guyana Dollars (GD). This results in an artificially overvalued GD. This overvaluation makes Guyana’s few exports less competitive on the open market.

At the same time, even with a rising currency the country’s risk kept interest rates high. This prevents the economy from growing as fast as it could. In addition, as long as the GD currency is controlled by Guyana’s government, there is always a risk of a devaluation. This impacts interest rates significantly.

In order to eliminate these problems, the Government of Guyana must quickly adopt the US Dollar as a reference currency and establish a static exchange rate (250 GD = 1 USD).

The Government should go even further by allowing the US Dollar to be the country’s legal tender. At the same time and without delay, the banks need to convert all their accounts to US Dollar-denominated deposits. Thereafter, the GD will merely disappear: although it may remain the official currency, in practice it will not exist

There is no need for a formal agreement between the US and Guyana. Of course Guyana cannot print US banknotes rather Guyana should get its US dollars through trade, foreign direct investments and remittances from overseas.

Finally, there is no way the US can prevent Guyana from using US dollars as their primary means of exchange (a country can literally declare any product legal tender), nor would it want to prevent this as it creates demand for US dollars.