The Ministry of Finance and the European Commission (EC) Delegation to Guyana have signed the Financing Agreement for 2007 paving the way for the disbursement of 27 million Euros or $8 billion later this year as part of the accompanying measures supporting the Guyana Sugar Adaptation Strategy.
Minister of Finance Dr Ashni Singh and Head of the EC Delegation Ambassador Geert Heikens signed the agreement in the Ministry of Finance Boardroom yesterday morning in the presence of Minister of Agriculture Robert Persaud, and Chief Executive of the Guyana Sugar Corporation (GUYSUCO), Nick Jackson among others.
The 2007 agreement is part of a total package of assistance being provided by the European Union to Guyana and other countries of the African, Caribbean and Pacific (ACP) regions following the phased 36% slash in the price of sugar paid by the EU to ACP producers.
EU support
to 2013
The EU support will extend to 2013 with the first period covering 2006 to 2010 for which 89 million Euros have been allocated for Guyana, Heikens explained, adding that the decision on the financial allocation for the period 2011 to 2013 would be taken after the evaluation of the first phase. Heikens said that the total allocation will be released via annual financial agreements.
The government and the EC Delegation signed the 2006 financial agreement in February last year clearing the way for the disbursement of 5 million Euros. The government received the first tranche of the 5 million Euros towards the end of last year and it is still to receive the other part which the EC Delegation officials present said would be handed over shortly.
Asked when funding under the 2007 financial agreement would be disbursed, the EC delegation said that due to the bureaucracy, disbursement of the first of two tranches could be expected after another two months.
Heikens and Singh noted that the funds were being delivered by means of direct untargeted sector budget support, which means that the monies would be channelled through the national budget and the government would have the final say on the disbursement to the sugar sector.
Asked what percentage of the funds government is expected to give to the sugar industry, Singh said that all the funds received would be placed in the Consolidated Fund and the sugar sector would receive funding based on plans already in place and as the need arises.
While he would not anticipate a percentage of the funds that would go directly to the sugar sector, he said that in relation to the 2008 budget the government was making available the sum of US$7 million to start the modernisation of the Enmore factory and the Enmore Packaging Plant. This comes out of the 2006 Financial Agreement which was provided in the form of budgetary support and which the government will transfer to Guysuco.
Both he and Heikens explained that the budget support uses a system of performance indicators to trigger funding.
EC confidence
Singh said the fact that the funds were being channelled through budgetary support was an indication of the confidence the EC has in the government’s institutional financial mechanisms for the disbursement of funds in the context of poverty reduction.
Stating that a permanent exercise of programming, planning and monitoring will be pivotal in the coming six years if the plan is to be implemented smoothly and the policy objectives achieved, Heikens said that the EU supports the government’s commitment to prevent and mitigate as much as possible, any negative social impact that may come about during the implementation of the restructuring of the sugar industry.
In his remarks Persaud said that unlike Trinidad and Tobago and St Kitts, which have already made decisions to get out of sugar, Guyana has made a firm commitment to sugar, which contributes 18% of the annual GDP and makes up 57% of the agriculture sector export. In addition sugar provides direct employment for 19,500 workers and indirectly about 125,000.
In spite of the challenges presented by the price cuts, Persaud said that the Guyana National Action Plan (GNAP) was among the first, if not the first, to be submitted and to obtain approval from the EC.
The GNAP focuses on expansion, development and diversification of the sugar cane industry in Guyana, growth and expansion of specific non-traditional agricultural sub-sectors, and infrastructural and human resource development.
Action plan funding
The resources allocated by the EU are woefully inadequate to fund the action plan, Persaud said, adding that the government, through sound economic management and unwavering determination, has made much progress in the plan’s implementation.
However, on the funding of the GNAP, both Heikens and Singh said that other donors have agreed to support some components of the plan that cover sectors other than sugar, including diversification of non-traditional crops, and the government will have to ensure good donor coordination to effectively combine the different sources of funding.
Meanwhile, Persaud said that the government will continue to pursue the plan’s broad objectives, including increasing sugar production and expanding market share; diversifying the sugar industry and adding value to the final product; improving the efficiency and profitability of sugar cane and sugar production; mitigating the social impacts of the sugar action plan; and reinforcing farmers’ organization.
Business plan
Noting that Guyana has met the indicators set to receive the first tranche under the 2007 financial agreement, Persaud said the Guysuco business plan from which further indicators will be developed has already been submitted to the EC.
In addition a sectoral expenditure framework document has been completed and the 2008 budget for Guysuco has been submitted to the government and Guysuco’s audited accounts are now before Parliament.
