Projecting GDP growth of 4.9% this year, Minister of Finance Dr Ashni Singh yesterday announced a budget of $100 billion for 2007, which is 2.9 per cent less than last year’s instalment and includes a slight increase in the income tax threshold from $25,000 to $28,000 monthly.
The minister said the budget was slightly smaller because there would be a reduction in capital transfers to Guysuco as a result of the advancement of the Skeldon sugar factory project.
He said the country’s economy grew by a “commendable” 4.7% last year. “Not only does this reflect underlying buoyancy, in light of the various challenges encountered, but it also reflects resilience and maturing of the economy,” he said.
The income tax threshold has been raised from $300,000 to $336,000 per annum with effect from January 1, 2007 and Singh said every taxpayer will benefit from this measure, which will remove approximately 16,000 persons from the income tax net. This effectively means that these persons were earning less than 28,000 per month.
Real GDP is projected at 4.9 per cent in 2007. “This growth will be fuelled by the anticipated stronger growth in sugar, the recovery of the mining and quarrying sector as well as activities in connection with Cricket World Cup (CWC) and other major events to be held this year,” he said.
In the agriculture sector, sugar production is targeted at 285,000 tonnes, an increase of 9.8 per cent. Output of rice is projected to expand by 4.6 per cent to 321,259 tonnes. Growth in the forestry sub sector is expected to remain strong, and has been budgeted at five per cent, while output of livestock is projected to grow by two per cent. The fishing sub sector is expected to increase by two per cent.
The minister said the mining and quarrying sector is projected to grow by 3.6 percent, reversing two successive years of negative growth as a result of the downturn in gold and bauxite mining.
He said that bauxite output is budgeted to increase marginally by 0.2 per cent to 1,542,000 tonnes, as the industry continues to undergo a period of restructuring. “However, gold declaration is targeted to increase by 2.5 per cent to 205,000 ounces, while diamond output will rise by 4.5 per cent to 345,000 carats.”
The sector of engineering and construction is targeted to increase by five per cent, “reflecting heightened construction activities in preparation for CWC 2007, expansion in housing, and the large public sector investment programme.”
According to the minister, manufacturing is budgeted to grow by another four per cent in 2007. The sector of transport and communications is expected to rise by ten per cent, reflecting substantial investments in the sector by the two operators in the communications sub sector.
He said too that the distribution sector is budgeted to increase by four per cent, in response to rising demand for ancillary services as a result of CWC 2007 and other activities. “Strong growth is also anticipated in other services, six per cent; financial services, 4.3 percent; and rent of dwellings, two per cent.”
Inflation
The minister announced that for 2007, the inflation rate has been projected at 5.2 per cent, “taking into consideration the outlook for inflation of our main trading partners, the projected average international price for oil, and the growth in domestic money supply.”
Balance of Payments
The current account deficit is projected to narrow by 3.5 per cent to reach US$175 million, mainly because of an anticipated rise in merchandise imports.
He said the favourable balance of payments position that was returned last year is expected to be sustained in 2007, largely on account of a narrowing of the current account deficit.
Exports
Singh announced that merchandise exports are expected to increase by 3.9 per cent to reach US$625 million. He said all of the major categories of exports are expected to contribute to this favourable performance, with the momentum being particularly strong in bauxite (8.5 per cent), rice (4.4 per cent), and timber (6.7 per cent).
Merchandise imports are projected to grow by 5.1 per cent to US$930 million, reflecting a rise in the value of oil and non-oil imports.
Receipts from services provided to non-residents are expected to rise, with the influx of tourists expected this year. “Private transfers are expected to maintain the upward trend, with the Bank of Guyana continuing its efforts to improve data collection on workers’ remittances and in-kind transfers,” he said.
Singh said the capital account is expected to realise net inflows of US$235 million, largely influenced by substantial debt relief under the Multilateral Debt Relief Initiative (MDRI) and an increase in foreign direct investment (FDI). The latter, he said, will be concentrated mainly in the mining, telecommunication and forestry sectors. “These developments are expected to realise a surplus of the overall balance of payments of US$41 million.”
Non-Financial Public Sector Targets
With regard to the operations of Central Government, Singh said the fiscal position is budgeted to improve considerably in 2007. He said current revenue (net of rice levy) is projected to rise by four per cent to $64.9 billion, of which the GRA is expected to collect $60.8 billion.
“Customs and trade taxes have been budgeted at $5.8 billion while Value Added and Excise taxes should realise $24.8 billion. Collections from internal revenue have been set at $30.4 billion, about the same as that in 2006. This is mainly as a result of the abolition of some taxes in light of the introduction of VAT, and an adjustment to the income tax threshold.”
Singh said that with respect to expenditure, a modest increase of 1.1 per cent has been budgeted in current expenditure which will reach $62.8 billion. “The budget for personal emoluments is $22 billion, while the category ‘other goods and services’ has been programmed to decline by 6.6 per cent to $18.2 billion, reflecting the non recurrence of expenditure in connection with the holding of the general and regional elections, and flood response and control measures last year.”
The budget for transfers to private sector is $15.5 billion. The minister said a marginal increase in interest payments to $7.1 billion has been projected and the government is expected to increase its savings on its current operations dramatically, from $172 million last year to $2.1 billion.
Capital expenditure in 2007 is programmed to decline by 12.2 per cent to reach $36.7 billion. “This reflects reduced transfers to Guysuco Skeldon Estate Project as a result of the planned completion of the factory this year. As a result of the developments, and taking into consideration grants of $15.1 billion, the overall deficit after grants is targeted to decline drastically to $19.5 billion (ten per cent of GDP), from $24.1 billion (13.4 per cent of GDP) in 2006.”
He said this deficit would be financed largely from net external borrowing of $18.6 billion.
Public Enterprises
The minister announced that public enterprises are expected to realise a surplus on their consolidated financial operations. He said receipts are budgeted to grow by 4.3 per cent to $88.3 billion, mainly on account of higher production and exports earnings by Guysuco.
Total expenditure is budgeted to increase by $1.5 billion to reach $79.4 billion, almost 63 per cent of which will be consumed by the
Review of 2006
The minister said that the overall position of the balance of payments continued to improve in 2006, with the surplus increasing to US$44.9 million, from US$8.1 million in 2005. He said this performance was attributed to substantial inflows of FDI and disbursement of loans for public sector investment.
The minister said all major commodities contributed to the robust activity of the export sector. “Sugar export earnings amounted to US$137 million, 16 per cent more than i
n 2005. Receipts from rice exports grew by 18.2 per cent to US$54.6 million and this is largely on account of higher volumes to the major markets.”
Earnings from the export of bauxite rose by US$4.5 million to US$67.3 million, on account of higher prices for Metallurgical Grade bauxite. And in spite of the closure of Omai Gold Mines Ltd, in the last quarter of 2005, gold export receipts reached US$114.4 million, an increase of 2.2 per cent. The minister said this was because of the prevailing high price internationally for the metal.
Timber earnings rose by an impressive 42 per cent to US$70.3 million, reflecting both price and volume increases.
In his review of 2006, the minister said merchandise imports of US$885 million were 12.9 per cent higher than the previous year. “This increase is a reflection of the continued high price for fuel as well as the growth in demand for intermediate and capital goods, in response to heightened economic activities.”
Net payment for services increased by almost US$22 million to US$113.8 million, mainly reflecting the rising cost of freight and insurance.
Private transfers rose sharply by 29 per cent to US$216 million, largely because of increased remittances and improved data gathering on in-kind transfers. Singh said these developments were responsible for the current account deficit of US$181.4 million, a considerable improvement over the projected deficit of US$199.8 million. “However, the significantly higher net inflows on the capital account, from US$180.6 million in 2005 to US$244.1 million in 2006, ensured a healthy surplus of US$44.9 million on the overall balance of payments. This improved position allowed the Bank of Guyana to accumulate reserves, which rose to US$278 million.”
In 2006, net domestic credit rose by 7.5 per cent to $42.9 billion and this the minister attributed to buoyancy and confidence in the economy. He said credit to the private sector grew by 17.9 per cent to $61.8 billion, largely driven by the upsurge in demand in the mining, manufacturing and mortgage financing sector. Credit to the mining, manufacturing and real estate sectors expanded by 176.1 per cent, 36.5 per cent and 34.6 per cent respectively.
Other areas that showed growth were the personal sector (21.5 per cent) and distribution (7.7 per cent). Net deposits of the public sector increased to $10.8 billion, or 242 per cent.
Inflation for 2006 was 4.2 per cent about half of what was recorded for 2005 and significantly better than the target of 6.3 per cent.
Drainage & Irrigation
In 2006, nearly $1.5 billion was spent on drainage, reflecting work done in Regions Two, Three, Four, Six and Ten.
The government also launched the Community Drainage and Irrigation Enhancement Programme in 2006, and over $765 million was spent in seven of the ten regions to improve their aesthetics while, at the same time, providing employment to nearly 3,000 persons in poor and depressed communities.
Singh said also that almost $112 million was expended, under the Agriculture Support Services Programme, on D&I activities in Regions Three, Four and Five.
