The Purpose of A Budget

A budget is intended to take stock of the social, political and economic problems confronting the country and propose fiscal & economic measures to ameliorate them. A budget that doesn’t take these into consideration is a budget of futility. For many years the annual budget has been presented late to this National Assembly for various reasons we were told. How come now we have a national flood emergency, the budget is presented early? There’s something topsy-turvy and illogical about that state of affairs and does not auger well for sound economic management in Guyana. In fact it is an affront to the intelligence of this House and the nation as a whole.

The Rationale for A Budget Ignored

It is therefore my view that after more than a month it was reasonable to expect that with the resources available to the state, an impact assessment of the flood disaster should have been incorporated into the 2005 budget, as the flood would affect economic growth, inflation, Government’s spending, exports and more. So, for the 2005 budget to be meaningful, it should have taken stock of the difficulties the country faces. Apart from the flood disaster, Guyana has to deal with other major issues such as the stagnant economy, the possible loss of preferential markets for our main commodity, sugar; the coming on stream of the CSME, preparations for national elections in 2006 & border disputes. Given these realities I have no choice but to declare the 2005 budget – irrelevant.

Issues Relevant to the 2005 Budget

The budget therefore has to be viewed against this background; and in relation to other relevant issues such as the continued loss of skills, the inability to attract sustained foreign direct investment, continued capital flight, high levels of crime & insecurity, narco-trafficking and organised crime (including trafficking in persons), continued internal conflict of a racial, political & industrial nature, rampant activity in the parallel economy and border smuggling. Further more, for a budget to be meaningful it should be anchored to a development strategy but as we all know the NDS, which the Government itself has advertised as the development framework for the country was not even mentioned in the budget this year.

Impact of the Flood Disaster on the Economy

The first task I have today is to disabuse the minds of those in the Administration that they have several months in which to get done a socio-economic assessment on the flood disaster. They do not! Not if the intention is to lessen the impact of the disaster and truly assist the large number of the poor and powerless, that the flood revealed we have in this country. The flood assessment therefore should have been already completed. Secondly, it is crucial that an independent ‘Trust Fund’ be established to manage all disaster relief/reconstruction funds, which should ideally be administered by a broad based group of persons. This will not only ensure transparency and financial propriety but will also significantly reduce issues of discontent in the society.

Two Main Budgetary Priorities

From our perspective there are two main social and economic priorities this year’s budget has to consider. The first is Economic growth. The second is the creation of jobs. Over the past seven years of this Administration the economy has grown at less than 0.5% for the period 1998-2004 as compared to 7 % growth between for the period 1991-1997. This is a depression that has lasted for seven years without being fixed! And it worries us that Government’s internal review process or the PPP/C’s has not questioned why the country’s economy continues to stagnate. According to Go-invest, over the same period we’ve had high levels of investment, yet the economy performed poorly. Surely, this is proof that something is wrong with the economic management of the country. Investment under the PRSP is projected at 27-28 % of GDP, yet growth is at a miserly level below 0.5% on average between the periods 1998-2004.

Economic Stagnation in Relation to High Levels of Investment Puzzling

This situation is puzzling the Multilateral Financial Institutions as well as other economic experts in the society where even though there is said to be, a high level of investment in Guyana, economic growth is still poor. When I listened to the various ministers deliver their glowing reports on development here, development there and everywhere then juxtapose them with the long list of projected targets not achieved the picture becomes very worrying indeed.

Economy Failed to Meet Projected Targets

First, Real GDP- it was projected that the economy would grow by 2.5% but in fact grew by 1.6%. Sugar output was projected to grow to 8.6% but actually achieved only 7.6%. Rice production was projected to increase to 8.3% but in fact declined by 1.4%. Mining/Quarrying was projected to grow by 3% but in fact declined to minus 6.6% due to Omai winding down. To make matter worse in Appendix V on page 60, the 2005 budget projects less exports for this year than for last year at US$533M compared to US$559.8M.

Significant indications of Economic Stagnation

In addition, the budget projects to import the same value of fuel & lubricants as was imported last year, despite the expected rise in prices. The amount listed in the budget for last year was US$169M and for this year US$170M. How can growth take place with the use of less energy and power? Another signal of economic stagnation is the fact that there is high liquidity in the banks indicating that they do not have bankable loans. Indeed, the main plank of the economy, sugar declined in output last year and is now far less than what it was at its the peak three decades ago when output was at an all time high of 370,000 tonnes. The Services sector had a modest target of 3% but delivered less at 2.3%. Last year the Minister gave a commitment to work towards an inflation rate of 4.5% but delivered an inflation rate of 6.5%. On the Balance of Payment deficit front his stated targeted was US$5.4M but delivered an actual balance of payment deficit of a whopping US$45.4M, which is only partly accounted for by the establishment of an escrow account for GUYSUCO.

Political and Industrial Performance also Poor over the Period

On the political and industrial fronts the situation is just as bleak since crucial political issues contained in the 1998 Herdmanston Accord are still outstanding. A number of Constitutional reform measures are still to be enacted, the procurement commission, rights commissions, arrangements to improve race relations are yet to take effect, equal opportunity legislation and sustained dialogue between the two major political parties remain in limbo. Meanwhile, the social and industrial climates leave a lot to be desired.

Government’s Score Card

That Mr. Speaker is the scorecard of the Administration. The opposition could hardly be blamed for those failures since they were totally excluded for the entire budgetary process. All we do is judge the Administration on what it places before us. To the extent that the performance falls short of their stated intention, it forces GAP-WPA to speak to the realities. But by doing so, we are made to be overly critical of the Government that leads us to believe that we are speaking to the deaf. We argue that the administration is not the sole repository of wisdom and expertise in Guyana and hope that they would desist from persisting in a policy of exclusion of our best brains; desist from offering mediocrity and an ad hoc approach to our serious social, political and economic problems. Here’s an example of what I mean – Last year’s budget was premised on the Poverty Reduction Strategy Paper (PRSP) but this year no mention at all was made about the targets of the strategy.

Under the feedback review exercise, the PRSP the report makes the point that if the critical element of credibility of the consultation process is to be achieved, Government must address issues raised by stakeholders. Yet we see no evidence that this advice was taken on board. Given this fact I present here for the benefit of the House, the interpretation of the word “Consultation” as stipulated in the Constitution of Guyana. Quotation from TITLE 10 cap. 1:01: –

“ “Consultation” or “meaningful consultation” means the person or the entity responsible for seeking consultation shall –

(a) Identify the persons or entities to be consulted and specify to them in writing the subject of the consultation and an intended date for the decision o the subject of consultation;

(b) Ensure that each person or entity to be consulted is afforded a reasonable opportunity to express a considered opinion on the subject of the consultation; and

(c) Caused to be prepared and archived a written record of the consultation and circulate the decision or entities consulted.”

Clearly, what passes for consultation in this Administration falls far short of the Constitutional requirement when proposals made by the labour movement for a plan to minimize tax evasion are ignored; when their advice to Government about how to modernize the Inland Revenue Department and Customs & Excise Department to expand declining revenues is also ignored as was their advice to move the threshold for the payment of income tax to $45,000: – per month. Imagine a Government that stakes claim to being people oriented ignoring the recommendation for the establishment of a minimum wage and a recommendation to commission a study on the National Insurance Scheme that has been teetering dangerously on the brink for several years now. As for the private sector – well their proposals seem to have suffered a similar fate.

The Private Sector

I recently heard two prominent personalities in the business community express the view on national television that the private sector has also been under performing. The impression I got from listening to them is that the sector operates based on the belief that to speak truthfully about the Guyana reality and about their own predicament would put them in jeopardy with the Administration. This, I believe has contributed in no small way to the lack lustre performance of the sector over the years. In this context, Government’s refusal to publish the names, enterprises and investors who were granted fiscal incentives is cause for concern. The Minister owes this House an explanation for rejecting their proposals especially for an exit strategy from the IMF and the call for a ‘social compact’ among other measures proposed.

Correlation Between Economy and Policies

The Finance minister does not seem to appreciate that there is an obvious correlation between policy measures and economic results. I say this because a historical review of budgets over the last six years revealed a pattern of abandonment of fiscal and developmental measures. In 1999 there were ten specific fiscal measures, two of which compensated labour. In the year 2000 economic measures had been reduced to four. In the year 2001 there were down to three. In 2002 there were six, in 2003 – four fiscal measures and one that benefited labour while in 2004 and 2005 there were none.

Reappearance of the Commercial Court

I see the establishment of a commercial court is in vogue this year, regrettably the court seems to be an idea to be played with by Government having disappeared and reappeared in budget presentations in recent times.

Public Debt

The Minister’s focus has been mainly on the stock of external debt, which has decreased by 1.25% to US$1.08Bn due to debt write-off, while the domestic public debt is showing exponential growth over the twelve-year period that PPP/C Governments have been managing the economy. This is costing the country billions of dollars annually but seem to bother the Administration little. Many persons in and out of this house have expressed justifiable concerns about this but to no avail. Budget Focus by Ram & McRae said on page13.

“ It seems that the government has no policy or guidelines that set out the principles and conditions under which the government borrows. Government borrowings can easily become intervention, which may harm the market and distort the allocation of resources.

One way of minimizing this danger is to place caps on the amount the country may borrow either internally or externally as a means of reining any tendency to over-spend.”

Borrowings for 2005 will by far be the highest for the decade giving impetus to the call for a cap on borrowings.

Go-Invest and the Creation of Jobs

On the issue of Go-invest and the creation of jobs – We are told that Go-Invest facilitated $G9.3Bn. in investment. Last year Budget Focus raised the question of Go-Invest grossly overstating the cost of a fruit juice investment and suggested that they might be doing so again with Barama’s US$35M sawmilling investment the Finance Minister claims will create five hundred jobs that amounts to G$14M per job. If one does the math according to the budget on pg. 19, Go-invest will create jobs at a cost of over G$15M per job. These numbers suggest that there is reason to question the gullibility of the Finance Minister as well as the investment promotion agency.

When one takes into consideration the generous tax concessions being given out for these investments that strain the credulity of the Guyanese people, this House ought not to be surprised if the question of fictitious investments raises its ugly head in the society as a real possibility with some of these investments being bandied about in the absence of credible evidence to support them. Consequently, we call on Go-invest to publicly lists by name and size the investments they say they have succeeded in capturing for an investment weary environment.

GUYSUCO

Finally, on the issue of Guysuco – Last year, the Finance Minister made mention of a Guysuco plan to lower the cost of production of sugar from seventeen cents to nine cents per lb by the year 2007, a claim knowledgeable persons in the society believe to be a fiction of someone’s imagination, which not even the management of Guysuco has made bold to make. Where is that today?

The Cricket Stadium

On the matter of the Cricket Stadium I submit for consideration by the Administration the fact that construction experience in Guyana suggests that there are limits to local building capacity, which is likely to cause the construction of the Stadium to exceed the available time even if steel fabrication were to be done overseas. For example it took approximately three years to construct the CARICOM building that cost US$11M therefore, it is reasonable to conclude that it would take more than the available twenty months to construct the cricket stadium that is estimated to cost approx. US$30. A simple math calculation would show that Guyana’s construction capacity in dollars is approx. US$4-5M per year. At that rate the stadium would take approx 6 yrs. to complete. That, is the price Govt. will pay for destroying the construction industry with the questionable public tendering system that continues to frustrate many contractors forcing them out of the sector and the country.

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