The Minister of Public Health and chairperson of the PNCR is reported to have stated that priority would be given to party members in the award of government contracts and in the employment of persons in government. This is an extraordinary statement coming from a Minister and former chairperson of the Public Accounts Committee who served in the latter position for almost a decade. One recalls the 1970s and early 1980s when a person seeking employment in government had to first become a member of the PNC and in possession of a party card. That policy, apart from reeking in discrimination against other sections of the population, proved disastrous as many of the highly skilled and competent persons migrated, leaving behind a depleted public service. It also contributed in no small measure to a marked deterioration of the economy so much so that by the mid-1980s Guyana was unable to meet its debt obligations and became technically bankrupt.
Our well-respected business icon, Dr. Yesu Persaud, in a column in the Stabroek News of 6 August 1991, asserted that ‘[i]f our economy is going to turn around, let me repeat, there is ABSOLUTE NEED to find the MAN FOR THE JOB and not the other way around’. He went on to state that:
Accountability is an indispensable element of Democracy, of Government and Business; it is also indispensable to Civilisation, for a country which runs without accountability is not a civilized nation, and an ‘unaccountable’ person is also an uncivilized person.
Public resources are used to fund government programmes and activities. They belong to all the citizens of the country. These resources must therefore be expended in a manner that does not favour one group to the exclusion of others. Political power must be exercised with due and utmost regard to the principles of good governance, transparency and accountability. These principles promote the highest degree of competitiveness in the assessment and selection of persons and firms for employment opportunities and in the award of contracts based on technical and professional competence. They also embody notions of fairness, equality, equity, ethical values and value for money considerations. Our laws and regulations as well as our constitutional arrangements support such governance principles, and so are provisions of the Inter-American Convention Against Corruption (IACAC) and United Nations Convention Against Corruption (UNCAC) to which Guyana is a signatory.
In last week’s article, we highlighted the key provisions of the Natural Resource Fund Bill which was laid in the National Assembly the week before. In passing, we had referred to last Monday being Budget Day 2019 because it was on this day the Minister of Finance presented the national budget for 2019. Members of Parliament have had a week to study the budget proposals in preparation for the general debate which begins today. The Assembly will then resolve itself into the Committee of Supply to consider the detailed proposals by individual Ministries, Departments and Regions and to vote on them.
In today’s article, we highlight the performance of the economy in 2018 and the key budget proposals for 2019, as contained in the Minister’s budget speech.
Real GDP Growth Rate
In 2017, Guyana recorded a modest GDP growth rate of 2.1 percent. The projected growth rate for 2018 was initially pegged at 3.8 percent. However, at the end of the first quarter, the figure was revised to 3.4 percent, given the lower-than-expected performance in gold and sugar. By the end of June 2018, economic activity had picked up, resulting in a half-year GDP growth of 4.5 percent, and an upward revision of the projected annual growth rate of 3.7 percent. The latest projection is that by the end of 2018 the economy will grow by 3.4 percent.
Balance of Payments
This is the net effect of trade in goods, services and capital between a country and the rest of the world. A positive balance means that the value of exports exceeds that of imports. It has the benefit of boosting production and hence employment. On the other hand, a negative balance indicated that the country is a net consumer rather than a net producer. If this negative balance persists, it has the effect of increased borrowings and hence the country’s indebtedness. It can also put pressure on the country’s exchange rate.
The balance of payments has three components – the current account, the financial account and the capital account. The current account essentially reflects transactions in goods and services for short-term consumption. On the other hand, the capital account reflects transactions of a capital nature, or investments, which have long-term implications.
At the end of 2017, Guyana’s balance of payments reflected a negative balance of US$69.5 million. This deficit is projected to widen by US$111.2 million to U$180.7 million by year-end. The current account deficit is also expected to widen by US$166.5 million from of US$297.3 million at the end of 2017 to US$463.8 million. On the other hand, the surplus on the capital account is projected to increase by US$55 million from US$228.0 million to US$283.0 million. The overall balance of payment deficit will be financed by: draw-downs of US$104.1 million from Bank of Guyana reserves; debt relief of US$179 million; and debt rescheduling of US$58.7 million.
Inflation is expected to be 2.0 percent, slightly below the 2.4 percent projected.
The interest rate on small savings at the end of October 2018 was 1.04 percent while that on borrowing was 10.1 percent. These are expected to remain stable by year-end with a marginal decrease in respect of the borrowing rate.
The official exchange rate between the U.S. dollar and the Guyana dollar stood at US$1 = G$208.5 as of October 2018, a one percent depreciation over the rate at the beginning of the year. The mid-market rate was US$1= G$212.80.
The total public debt is expected to increase by 0.8 percent by the end of 2018 from US$1.67 billion to US$1.68 billion, the external portion accounting for US$1.3 billion, a 4.6 percent increase, or US$56.5 million, over the balance at the end of 2017. The total debt to GDP ratio is expected to be 44.4 percent by year-end, compared with 47.0 percent at the end of 2017. If account is taken of the G$30 billion bonds issued to the National Industrial and Commercial Investments Ltd. (NICIL) that the Government had guaranteed, the public and publicly guaranteed debt would be as much as 60 percent of GDP.
Salary increases retroactive to January 2017 and free of income tax, were announced, as follows:
– 7.0 percent to public servants earning less than $100,000 per month;
– 6.5 percent to those earning between $100,000 to below $300,000;
– 5.0 percent to those earning between $300,000 to below $500,000;
– 3.0 percent to those earning between $500,000 to below $700,000;
– 2.0 percent to those earning between $700,000 to below $800,000;
– 1.0 percent to those earning between $800,000 to below $1,000,000; and
– 0.5 percent to those earning $1,000,000 and above.
The minimum basic salary for a public servant has also been increased to $64,200 per month.
Budget Measures and Targets for 2019
The budget proposals for 2019 amount to $300.7 billion, compared with $267.1 billion for 2018, a 12.6 percent increase. However, the latter amount does not include supplementary estimates approved during the year. Total revenue expected to be garnered is at $216.9 billion while central government expenditure is projected at $261.0 billion. It is evident that the year 2019 will be another year of deficit budgeting which will result in a further deterioration in the negative balance on the Consolidated Fund, currently estimated at over $160 billion.
The personal income tax exemption threshold will be $780,000 or one-third of income, whichever is greater. Investments in renewable energy will attract a write-off over a two-year period while small businesses and non-commercial companies will benefit from a reduction in income and corporate tax to 25 percent. In addition, remigrants will be given up to $5 million exemption on the importation of vehicles and can purchase vehicles locally within six months of arrival in the country. There will also be an increase in old age pension from $19,500 per month to $20,000 while public assistance will move from $8,000 to $9,000.
The exemption from filing a property tax return will increase to $40 million. The first $20 million in excess of this amount will be taxed at 0.5 percent while the remainder will attract a tax of 0.75 percent.
The real GDP growth rate for 2019 is forecast to be 4.6 percent while inflation is projected at 2.5 percent. The balance of payments is expected to reflect a surplus of US$15 million mainly due to the expected outturn on the capital account of a surplus of US$366.6 million. The current account deficit is also expected to be reduced to US$361.2 million.