Dear Editor,
The government is spending $221 billion from August 2015 to March 31, 2016. That is $221 billion in eight months or $27.63 billion per month. This is equivalent to a $332 billion yearly budget. The PPP spent $220 billion for the 2014 budget year at $18.33 billion per month. I endorse this kind of Keynesian government spending in the face of an economic meltdown. However, the question is whether this spending is enough, whether the spending is going to areas that will actually stimulate the economy (particularly once it ultimately recovers) and lastly, whether the spending is being done in the proper fashion. Growth in GDP for 2013 was 5.2% based on a $208 billion budget. Growth slowed to 3.8% in 2014 even on a $220 billion budget. The evidence suggests that because of the impending election in May 2015, the PPP spent in the same fashion this government plans to spend.
Yet, despite this humongous spending, the economy slowed to 0.9% GDP growth from January to June 2015. Plus, any objective analysis will admit the economy has slowed further since this government came to power. The current budgeted expenditure may simply not be enough to avoid a dance with the dreaded ‘R’ word ‒ no, not rain, recession.
To return to the question of whether the spending is in areas that will stimulate the economy. Public sector salary and pension increases are excellent measures if properly applied. But the application here is troubling. The public sector is bloated. Rightfully removing the PPP-affiliated contract workers fat but leaving the fat in the traditional public sector – APNU’s base – is ludicrous. Imagine, military spending to the GDF was increased when the nation is feeling severe economic pressure. I believe the President’s village economy proposal is failed thinking for obvious reasons. However, there was no better demonstration of intent on this plan than by trimming the traditional public sector and shifting those trimmed to the village economy by using the funds saved (tens of billions) from the trim to fund the village economy.
I read the budget and it is light on entrepreneurial advancement, creating environments for value-added production or indigenous, locally-driven resource exploitation. The foundations for serious indigenous wealth creation are missing. Nothing has been done to pass on low oil prices to
consumers. While the budget has confirmed the PPP were effectively lying to the public and further, it explains why the PPP refused to table a budget before the election, this government is now holding the reins and looking back is of no value when the future is dismal. The government will be judged on its performance, not on the PPP’s failure or deceit. The government’s projection of 3.4% growth for the whole of 2015 is bogus given the gloomy economic climate, state of commodity prices worldwide and plummeting confidence, and considering that GDP growth was a ‘whopping’ 0.9% in the first half of 2015.
While the PPP did control the Guyana economy for most of the first half of the year, the coalition controlled it for one-and-a-half months up to June 30, a period that incidentally reflected a marked decline in overall confidence. Blithely stating the PPP was in control for most of the first half of the year is not enough to blame the dismal 0.9% first-half growth entirely on the PPP when it is unclear to what extend the economy declined from May 15, 2015 to June 30, 2015 and whether the decline during that period was disproportionately higher than at any other period during the first six months. Conveniently, we are not given quarterly statistics to know the
quarterly GDP growth for January to March and from April to June 2015. The Finance Minister and the government must release the quarterly statistics to indicate whether this nation will technically be in recession as early as October 2015. This is the same nonsense the PPP did that gave us the shocking 0.9% mid-year growth.
The budget has to be similar to the PPP’s budgets of the past because most of the line items remain the same and are fixtures in any government budget. The PPP borrowed many of these same line items and key areas from the prior PNC regime. For a man who graduated with a degree in economics, Bharrat Jagdeo can really make a mockery of himself with his utterance about empty treasury and the budget.
A budget is for spending over the course of a year. The money is not in hand. It will be received and borrowed throughout the year.
Yours faithfully,
M Maxwell
