Dear Editor,
The disclosures being made concerning the current state of the Nation’s finances should produce a shift in our investment posture. Given the high level of debt and the reduction in forecasted revenue due to pro-investment policies such as the reduction in VAT, we must consider a more conservative spending policy based on a rebound in our economic indicators. Said simply, we must spend less than we earn during this period.
The spending of $1.2 Trillion over the last 5 years as stated by the Ministry of Finance compared to revenues of $992 Billion was in a high local tax climate, a strong global economy and the absence of a pandemic for most of the period.
Leading indicators such as GDP, housing starts and consumer spending must be used to help determine the level of investment that the government will make in non-revenue generating projects. As stated before in an earlier letter the revenue generating projects such as investments in the energy and agricultural sectors should take priority and have a clear return on investment to help the timing of the reinvestment cycle.
What is of increasing concern is the unforeseen expenditures and the exposure to dry or non- commercially viable wells and low oil prices. By establishing an aggressive national savings rate of 20% to 30% and investing our Sovereign Wealth Fund (SWF) in a similar manner to that of Norway (7% to 20% expected growth) we should be able to cover the potential increase in debt while stabilizing the economy and eliminating the deficit. Considering these factors, a national expenditure over the next five years within the range of $600 to $650 Billion while saving an additional $120B to $180B should mitigate any economic headwinds faced. Taking such a conservative approach to economic development will also help protect the Nation against future economic shocks such as another pandemic.
Yours faithfully,
Jamil Changlee
Chairman
The Cooperative Republicans of
Guyana
