ONE indicator of a sound and healthy economy is the expansion and growth of the banking system. Not only are new banks established in different parts of the country, but the balance sheets of nearly all the established financial institutions are showing significant after-tax profits.

Only recently President Dr. Mohamed Irfaan Ali commissioned a new branch of Demerara Bank at Leonora, West Coast Demerara. The bank, according to its Chairman, will employ cutting-edge technologies to make banking and access to loans and credits much easier and customer friendly.
Delivering the feature address at the commissioning ceremony in the presence of senior government officials and top executives of the bank, President Ali said that government has been creating an enabling environment for the local banking sector to expand.

According to the President, ‘banks do not become successful by themselves. It is the policy framework; it is the government, it is the fiscal planning and if you look at one indicator in September 2018, our non-performing loan [sic] was almost 12 per cent; our non-performing loan is now just three percent.’

The fact is that the banking sector is a major driver of economic growth in any society. There was a time under the previous administration when the sector was experiencing severe stress, which resulted in the stultification of economic growth and development.

Take for example the World Bank 1991 Report on the state of the banking system under the then PNC regime. According to the report: “The financial sector in Guyana is relatively underdeveloped and continued to be dominated by public sector institutions. Gaibank has 35 per cent of its loans in arrears. Most banks do relatively little lending, but simply collect deposits and funnel them into the treasury bills market. Lending and saving rates tend to follow treasury bills rates closely, since treasury bills represent the major alternative use for funds. At times, lending rates of some public sector institutions have been below the cost of funds to the Treasury.

“The supervision and regulation of the financial system is divided between the Bank of Guyana and the Ministry of Finance with some overlapping and conflicting jurisdictions. The level of supervision has deteriorated in recent years owing to inefficient technical staff, and few public sector banks have recent supervision reports or public audits.”

One consequence of such an environment was a near collapse of the banking sector, high levels of corruption, graft, inefficiency and economic stagnation. The private sector as the engine of growth was marginalised and suppressed.
Thankfully, all of that has changed since the PPP/C administration assumed power on October 5, 1992, culminating in a situation where the country is today experiencing unprecedented levels of economic growth and dynamism.

The current PPP/C administration must be given credit for putting the economy on a solid footing through sound policy prescriptions and the creation of a macroeconomic framework for continued economic growth and social progress. This is indeed worthy of celebration as we usher in the new year of 2024.