Producing two budgets within six months is a feat that is deserving of the highest commendation and the Minister of Finance and all of those who participated in this process must be given their deserved credit.
When the 2015 budget was reviewed in these columns the point was made that it was devoid of transformative projects and made little headway in addressing unemployment, particularly the joblessness among youths. Considering that the government had only been in office for a few difficult months, the budget’s deficiency in this area was excusable. Unfortunately, despite high points in various parts of his 2016 presentation, the Minister of Finance was again found wanting in these two areas and this time it is not excusable. Aside from vague remarks about three thousand jobs to be created in the Belvedere and Lethem industrial zones there was no concrete sign of any significant planning for employment creation among youths even though Minister Jordan had adverted in his August 2015 budget speech to disturbing findings by the Caribbean Development Bank about high joblessness among the young here. If 3,000 jobs are to be created, the public should be made aware of the particular incentives that would attract job-creating businesses to these zones, the kinds of jobs that may be offered and a timeline for this. The Minister would be aware that the former PPP/C government had also promised jobs in these two zones with little to no result. Given the high standard of transparency and accountability this government has set for itself, Minister Jordan would be cognisant that he would be held to promises in this area. It is highly recommended for budget accountability that prior to the delivery of his next budget the minister issues a detailed statement on the fate of all the promises made in the two budgets and the progress on major projects.
The only other source of job creation is the ambitious and expansive public infrastructure programme unveiled by the minister. Many of these projects including the link between the East Bank and East Coast are worthy and can be dynamos in themselves for ribbon development and further job creation. However, given the difficulties outlined in Minister Jordan’s speech in relation to speeding up the procurement process it is doubtful how many of these will see a major takeoff this year. Further, the reality on the ground is that all of these projects will be competing for a limited pool of contractors, supervisors and skilled construction workers which in itself can lead to further delays. Jobs for labourers and the unskilled will likely be where these projects can make an impact but that it is unlikely to dent the unemployment and low income problem. The minister and the various ministries will likely endure serious problems in sequencing these projects in such a way as to ensure smooth execution and materials availability.
In terms of transformative projects, the likeliest possibility remains a large hydro project which would create real green credentials for the economy and open up further avenues of climate adaptation financing, create the prospect of the sale of excess power to Brazil, lessen the foreign exchange burden on the country, boost the economy through the purchase of goods and services and lower energy costs to manufacturing businesses and consumers as a whole. In the last year or so with the collapse of the oil price and the risks associated with a mega hydro project, the last benefit is now not a sure thing though it remains a worthy aspiration. This year, the possibility of a large hydro project is remote as a final feasibility assessment is still to be done of the Amaila project via Norway. The 2016 budget caters for the developing of smaller hydropower projects but these would hardly be transformative and will pose their own individual challenges as it relates to management and aligning with the national grid.
While there are many worthy projects outlined in Minister Jordan’s portfolio, 2016 can end up being a year of marking time with the 50th independence celebration being a key distraction and major unresolved questions facing sugar, rice and bauxite. The brightest spark would be the entry last year into gold production of Guyana Goldfields Inc and Troy Resources.
Since the report on tax reform by an expert group did not arrive in time for incorporation in this year’s budget, Minister Jordan will have an opportunity mid-year to deliver a mini-budget stimulus to the economy particularly after he has assessed performance for the first six months. There is an expectation that the government will, on the basis of this report, lower the Value Added Tax and provide corporation tax relief. These and other measures, considering the early delivery of this year’s budget, could form the basis for a well targeted lift to the economy by July. Deflation, as revealed by the minister is a dreaded occurrence in any environment and there is clearly a built in resistance to spending by consumers and this is a phenomenon that will have to be watched carefully though it can be masked by the spending spurt that would be expected this year at the independence celebrations.
The adjustment of the excise tax on vehicles under four years old will be welcomed by some though in tandem with the prohibition on vehicles older than eight years and the planned ban on used tyres this will be seen as heavily skewed against public transport providers. The ministers of public infrastructure and business must convene urgent dialogue with public transport providers on how they will be affected by these new provisions and some common ground should be striven for.
The reduction in the price of fuel and the increase of the power company rebate will be welcomed although the scale of the follow through on the cost of goods and services is uncertain.
Perhaps the most significant statistic from the $5,000 increase in the tax threshold is that 68,000 persons are earning under $55,000 each month. Of great interest is the Minister’s announcement that options are to be considered for the repayment of $5.24b which had been held by the now dissolved CLICO (Guyana) Limited for the National Insurance Scheme (NIS). If followed through with, it will improve the outlook for the NIS and enable greater returns from its investments. It should however run parallel to earnest efforts to recover said monies from CLICO’s sister companies or its parent company.
The progress of the 2016 budget will be followed closely by the public with the expectation that the government will make the adjustments that are necessary for the delivery of its objectives. The budget must also stimulate a much larger vision of how the economy can be catapulted beyond its present confines.
