2007 facts Size of the Budget: $119.3Bn, 8.5% Increase
* Growth in real GDP of 5.4% compared to a target of 4.9%, half-year annualised growth of 5.8% for the first half of the year and growth of 5.1% in 2006
* Overall balance of payments deficit of US$1.4M compared with a surplus of US$42.9M in 2006 and a projected surplus of US$41M for the year.
* The 91-day treasury bill rate decreased from 4.16% in 2006 to 3.9%
* Inflation rate of 14.0% compared to a target of 5.2% and 2006 rate of 4.2%
* Depreciation of the Guyana dollar to the US$ was a modest 1.28 per cent. Average market mid-rates for US$ appreciated by 0.18% but in relation to the Canadian dollar, pound sterling and the euro there was depreciation of 13.8%, 5.4% and 8.9% respectively.
* Increase in current revenue collections by 28.6% from G$62.5B in 2006 to G$80.3B
* Minimum public sector wage of $28,415 per month compared to $24,828 in 2006
* Growth in sugar 2.7 per cent, mining & quarrying 22.7% (bauxite 51.6% and raw gold 15.7%), engineering & construction 5.7 per cent, transportation & communication 13 per cent, and distribution 9 per cent. The manufacturing sector grew by 1% with increases in plywood, paints, stockfeeds and electricity generation while rum and flour production reported reduced output.
* Major sectors with declines were rice 2.9 per cent, forestry 11.1% and diamond declaration 21 per cent.
* Exports increased by 16.4% to US$680.9M compared to an increase in imports by 20.1% to US$1,062.5M, contributing to a trade imbalance of US$381.7M up from US$299.8M in 2006
* Current account deficit of US$231.9M (2006 US$250.3Mn) and net inflows on the capital account of US$238.7M (2006 US$268.6M)
Targets – 2008
* Inflation of 6.8% with growth in real GDP of 4.8%
* Current revenue of $81.7B, an increase of 1.7% over 2007
* Balance of payment surplus of US$3.6M
* Current expenditure (excluding interest) of $68.0B, an increase of 16.2% over 2007
* Overall deficit of non-financial sector to decline from $16.6B (7.6% of GDP) to $14.1B (6% of GDP)
* Increase in overall deficit after grants to $11.4B or 4.8 per cent of GDP
* Capital expenditure is projected to decrease by 4.8% to $40.9B.
The global economy
2007 Global facts
The Minister reported global growth of 4.9% in 2007, continuing a trend over the past three years. Despite financial instability in sub-prime mortgage markets, the US economy moved along at a rate of 2.2% while the Asian giant China had double-digit growth of 11.4 per cent.
In the Caribbean the greatest threat was inflation causing heads of government to hold an emergency meeting of Caricom heads to discuss, inter alia, the Jagdeo initiative including an agreement whereby Guyana would offer land to other member states to engage in agriculture production.
Growth in the global economy is expected to be lower at 4.1% in 2008 with fears of a recession in the United States, while growth of 6.9% is projected for emerging and developed economies by 6.9 per cent.
The domestic economy
2007 Local facts
Target 2008 Actual 2007 Target 2007 Actual 2006
Real GDP growth 4.8% 5.4% 4.9% 4.7%
Inflation rate 6.8% 14.0% 5.2% 4.2%
Current account US$ 246.3Mn US$ 231.9Mn US$ 175Mn US$ 181.4Mn
deficit of the balance
of payments
There was an increase of 5.4% in real GDP from a positive growth of 4.7% in 2006 against a projected 4.9 per cent. Half-year performance reported by the Minister of Finance during November was 5.8% with significant performance in the agriculture, mining, engineering and construction and service sectors.
While sugar production grew by 2.7% over 2006, there was a shortfall of 18,518 tonnes, attributed to less favourable weather patterns and industrial confusion. In rice, 23,061 acres were lost because of the effects of heavy rain resulting in a decrease in output of 2.9 per cent. The forestry sub-sector which has been affected by weather and stricter regulations had negative growth of 11 per cent.
Mining and quarrying recovered tremendously by 22.4% as bauxite and gold returned healthy performances. With heavy investments over the last two years by RUSAL, positive indicators were seen in the increases of Metal Grade 21%, Chemical Grade 31% and the high valued Refractory Grade 11% in achieving 61.4% of the 1.542M tonnes targeted for the year. Other contributions were made by Bosai Minerals of China being a 70% stakeholder in Omai Bauxite Mining Inc (OBMI) previously owned by IAMGOLD of Canada.
Influenced by high gold prices on the international market and suitable weather conditions, raw gold declarations were 268,925 carats exceeding by 33,928 carats or by 16 per cent.
The manufacturing sector had an overall decline of 1% but engineering and construction reflected in an 11% growth and telecommunications 13 per cent.
Per capita GDP for 2007 was US$1,111 compared with US$992.4 in 2006.
The external debt on the other hand declined dramatically to its lowest for decades. The decreased stemmed from debt relief from various resources including the Paris Club debt, Japan and Cuba. The implementation of the Inter-American Development Bank’s Multilateral Debt Relief Initiative (MDRI) from January 2007 cancels all debt outstanding debts incurred prior to December 31, 2004 resulting in savings of approximately US$20M.
Balance of payments
The current account on the balance of payment reflected a deficit of US$1.4M in 2007, a substantial decrease of US$44.3M over 2006. (See Table 1)
The reported private transfers representing remittances and in-kind transfers amounted to US$286.8M being US$36 million more than the export earnings from rice and sugar combined!
Banking and interest rates
There were small reductions in the 91-day treasury bills rates from 4.2% to 3.9% and the small savings rate from 3.4% to 3.2% while the weighted average lending rate merely increased from 14.5% to 14.7 per cent.
The following table shows the spread earned by the commercial banks as the financial rates continue to decline. (See Tables 2 & 3)
The exchange rate
According to the Minister there was a slight depreciation in the value of the Guyana dollar to the US dollar from revised 2006 of G$201 to G$203.5 per US dollar, an increase of 1.2 per cent.
Ram & McRae’s comments
* For the first time the Minister presented a Mid-Year Report required under the Fiscal Management and Accountability Act 2003. Even though the report was not presented until late in the year it was helpful in putting the full year performance in context.
An appreciation of the half-year performance would also have been helped if the Bank of Guyana had published, in a timely manner as they always do, their comprehensive Half-Year Report. Without any explanation the bank delayed the publication of their report until after the Minister had presented his. The bank allowed a dangerous precedent to be set, one that could compromise its independence and it is hoped that there will be no repeat this year.
* The growth in the economy of 5.4% exceeded target but given the billions spent for Cricket World Cup, both the target and the actual have to be considered modest. The most significant development was the dramatic increase in inflation from 4.2% in 2006 to 14% in 2007. At mid-year the rate was 12.2% and there were fears of an even higher out-turn.
* The commercial banking and other financial houses have considerable liquidity, which has tended to keep deposit rates low. The solution of course lies in part with the banks getting solid business plans. There was however a 19% increase in the domestic credit as the banks aggressively pursued lending opportunities.
* The domestic debt had a modest decline, the first in several years, due partly to a settlement with one of the financial h
ouses.
2007 legislation
Thirty-one (31) bills were passed by the National Assembly in 2007. Of these, thirty were assented to and have therefore become law. Major acts of business interest passed in 2007 are as follows:
1. The Gambling Prevention (Amendment) Act 2007
2. Value-Added Tax (Amendment) Act 2007
3. Income Tax (Amendment) Act 2007
4. High Court (Amendment) Act 2007
5. Deeds Registry Authority (Amendment) Act 2007
Additionally, a significant number of acts were passed to enable Guyana to host the ICC Cricket World Cup 2007.
The Gambling Prevention (Amendment) Act 2007
The act amended the Gambling Prevention Act (Cap. 9:02) to allow for regulated gambling and was referred to as the Casino Gambling Act. The Minister did not refer to casino gambling in his speech or to the proposed new hotel which many had considered as the raison d’
