In a recent Jamaica Observer column written by Henry Lewis Jr titled ‘Revaluing the Guyana dollar’, published on July 4, 2023, it was suggested that it would be best for the Guyanese authorities to revalue the Guyana dollar (GYD).

By definition, a revaluation is the deliberate increase in the value of a currency by the authorities. Strictly speaking, this occurs under a fixed exchange rate regime or when the authorities find it useful to move from a flexible exchange rate regime to a fixed exchange rate regime.

I humbly disagree with every argument submitted in support of a revaluation of the GYD. Save for the ease of mathematical conversion of having the currency at a ratio of 1:1, 10:1, or 100:1 against the US dollar (USD), there is no material benefit of such a move.

It is quite a common mistake for people to look at the value of a currency and arrive at all manner of incorrect ideas about the economy of a country and, more importantly, the welfare of the people of said country. Simply put, it is not the value of a currency per se which is of importance, but the stability of that currency over time.

Indeed, I imagine that some will view the Jamaican dollar (JMD) as superior to the GYD simply because the JMD is more valuable; however, the GYD has been relatively stable for more than two decades, while the JMD has lost about 50 per cent of its value over the last decade. Further, there are several examples of countries whose currencies are called “weak” — for example, the South Korean won (SKW) is valued at SKW1,300:US$1 — but their economies are highly developed and the welfare of their people the envy of countries with stronger currencies, such as GY$210:US$1.

Interestingly, South Korea, with its so-called weak currency, has an hourly minimum wage that is equivalent to the minimum wage in the United States. What matters here is not the value of the currency but the real value of the goods and services workers are able to purchase with their incomes.

Paying less GYD for imports is of no consequence if workers are not paid higher wages in USD terms. A revaluation will simply result in a wallet with less notes or less zeroes.

Workers will not consume more goods and services unless there are real changes in the structure and productivity of the economy or the Government subsidises the cost of goods and services, whether imports or domestically produced goods and services. This is not a call for such subsidies.

A revaluation of the GYD will not increase the number and quality of jobs and will not attract foreign direct investment. The discovery of natural resources, prudent macroeconomic management of the economy, a stable political climate, quality infrastructure, a reliable supply of energy, and a skilled labour force are factors which encourage foreign direct investment.

A revaluation of the GYD will not keep inflation in check. Inflation is determined by the rapid growth in the money supply without a concomitant increase in productivity and output. Imprudent increases in government spending can also be inflationary. Interestingly, poor fiscal and monetary policies can fuel domestic inflation and lead to a depreciation in the value of a currency. Domestic policy considerations aside, external factors are also crucial to inflation in small, highly open economies like Guyana’s.

Guyana has many challenges, but the value of the GYD is not one of them.

Dr Samuel Braithwaite is a lecturer in the Department of Economics at The University of the West Indies, Mona. Send comments to the Jamaica Observer or braithwaitesamuel@gmail.com.