Mr Lucas has agreed to serve as a columnist with the Stabroek Business and will be contributing articles on economic, financial and development matters.
By Rawle Lucas
Adamant
About two weeks before Guyanese took to the streets to celebrate the 40th Anniversary of becoming a Republic, the administration served up its now familiar menu of domestic policies and planned expenditures for 2010. Under the theme of “Consolidate, Transform, Sustain”, the administration set out its domestic priorities and the framework for pursuing them. In doing so, the administration also made clear that it was intent on continuing down the economic road that it has been travelling since assuming the reigns of power. The premise for staying the course in 2010 is the 2.6 percent growth that the economy experienced last year and the diverse range of industries that contributed to the reported success. So adamant is the administration about maintaining the same policy course of 2009, it speaks of guarding and protecting the stability of the economy in 2010 as a top priority.
Much Promised, Little Delivered
The administration expects Guyanese to be pleased with the success it reported about the economy in 2009. No doubt there is expectation too that the enthusiasm of Guyanese should be heightened with the administration committing itself to using the 2010 budget to help Guyanese realize their potential. But, even with the Mashramani events and back-to-back holidays, those disclosures meant little and euphoria was not ringing across the Land of Many Waters. Newspaper reports and comments by Guyanese convey a feeling of unease and apprehension about the likely benefits of the domestic priorities and expenditures planned for this year. Maybe, Guyanese have grown weary of the broken promises that keep coming their way year in and year out.
Guyanese have heard repeatedly for the last five years the same menu of activities that has done little to alter many social and economic dimensions of their lives. Guyanese have come to realize too that much is promised but little is given. In 2008, the administration promised economic growth of 4.8 percent but delivered 3.1 percent. In 2009, the administration promised economic growth of 4.7 but delivered 2.6 percent. This year the administration promises growth of 4.4 percent and no one knows if to believe. The administration keeps missing its growth targets by extraordinarily wide margins, 36 percent in 2008 and 45 percent in 2009. These reflect a pattern of missed opportunities and leave Guyanese with very little assurances that the target for 2010 will not be missed by a wide margin again.
Good Game
While the administration speaks a good game about improving the quality of life of Guyanese, the impact of its efforts is yet to be understood. The focus on health, education, water, sanitation, drainage and irrigation, safety, security, and justice are understandable and deserve support and encouragement. Though often viewed in the context of social programmes, they carry enormous economic impact. Positive outcomes in these areas are beneficial to people and add to quality and expectancy of life. But for all the money spent, achievements in many of these areas are still to materialize. The areas of security and justice, for example, still do not give Guyanese a feeling of comfort or satisfaction. The money to be spent propping up unprofessional conduct offers Guyanese no guarantee that they would not be the next victim of a horrible unsolved crime or an unfair judicial decision.
Matters are being complicated further by the low-carbon development focus introduced as an independent dimension of economic life in the 2010 budget. While a low-carbon development strategy contains advantages for Guyana, its manner of development and introduction to Guyanese leaves much to be desired. It treats Guyanese as if they are marginal units to the rights of their own resources. If the recent experience of the miners offers any lessons, it is that their use of the land is seen as incidental and not integral to the development of the country. The responsible stewardship of the forests by Guyanese for centuries is being diminished. Like the budget, the low-carbon development strategy shows little faith and confidence in the people of Guyana.
Growing Encroachment
Such shortcomings demonstrate the inability of the administration to understand the link between its domestic policies and the growing budget deficits facing Guyanese households and the investment gap of the private sector. The blind spot of this administration is its growing encroachment on the budgets of Guyanese households and private businesses.
After showing some restraint, the administration has moved its share of consumption spending from 24 percent in 2005 to 27 percent in 2009. The marginalization of private investment is even starker. Ever since 2005, the administration has been on an aggressive drive to increase its dominance over private investment. In the five years prior to 2005, the public investment by the administration averaged 38 percent of total investment spending in Guyana. From 2005 to 2009, the share of investment spending by the administration grew to an annual average of 48 percent. In effect, it took away about 10 percent of the resources that could have been used by the private sector to generate growth and employment in the economy and accorded it to itself. With such behaviour, the edict is clear. This administration knows best, notwithstanding the evidence to the contrary.
Negligible and Insufficient
The weakness of the 2010 budget starts with the apparent unwillingness of the administration to make any commitment to pursue policies that would lead to sustainable employment opportunities for all Guyanese. Pockets of job creation have been occurring in Guyana. While important to a lucky family, job creation has been negligible and insufficient to fulfil the aspirations of most of the jobless. The official unemployment rate in Guyana is given as 11 percent. According to data found in the annual reports of the Bank of Guyana, that figure does not count the nearly 50 percent of the labour force that wants to work but cannot find a job.
The budget did not address that issue last year in any serious way and it has not addressed it again this year as a variable to be solved in the equation of life in the Guyana economy. For many, it is hard to understand why the administration keeps shying away from job creation as a national priority. The administration knows Guyanese consumers contribute more than half the growth in the economy and that the more earned income that is available to them, the stronger the economy will become and the faster it will grow. It is somewhat surprising too that, even with its disclosed confidence in the modified tax collection system, the administration is unwilling to use tax policy to spur investment and employment. That unwillingness should reduce any expectation by private businesses that the administration would be making any serious effort to tackle what it calls the traditional vulnerability of limited diversification, one of three goals of the 2010 budget.
Per Capita Cost
The few who have jobs are being made to carry the burden of the administration’s planned excesses. The millstone hangs around the neck of all working Guyanese, but households with one breadwinner bear the greatest burden. Typically, the administration measures its economic outcome on a per capita basis to indicate how well off Guyanese are as a result of its policies. That same willingness to share similar information on the cost side is often lacking for fear that the people might understand how terrible it is to depend on this administration. Guyanese should realize though that the plan to spend G$142 billion this year would cost each of them approximately G$187,000. The nearly 11 percent increase in spending over 2009 that the administration has budgeted for is 11 percent less money available to each Guyanese to spend. This is equivalent to every Guyanese working at least three months without pay. With prospects like that, the situation of a family with a single breadwinner does not look good.
An Inconvenient Truth
That reality by itself gives Guyanese the right to ask for justification for the proposed increase in expenditure. An explanation becomes even more imperative when projected financial returns are matched with cost. Using 2009 as an example, the administration requested an 8.1 percent increase in spending. The fear expressed last year was that the additional money in the hands of the administration would not produce the best results for the Guyana economy. It was felt that by transferring that much more money to the administration, the private sector would lose the opportunity to help grow the economy by between 4 and 7 percent. The worst fears were realized. Though private businesses increased their spending by 6 percent, Guyanese households were forced to reduce their purchases of goods and services by 16 percent. That is the evidence reported in the National Accounts by the Guyana Bureau of Statistics, an inconvenient truth never publicly acknowledged or explained to the Guyanese people in the budget speech.
All appeared nice and rosy from the budget presentation to Parliament but the net effect of the change in consumer spending was a decline in private sector spending by 10 percent. In addition to all the other inconveniences that Guyanese families experienced last year, the kitchen cupboard was mostly left bare. Knowing this truth about the impact of the administration’s policies on the family budget also helps to add context to the 6 percent increase in spending by private businesses. With Guyanese households cutting their purchases by 16 percent, it could well be that the 6 percent increase in private investment really means a 6 percent increase in unsold goods. That likelihood does not bode well for investment and employment in 2010.
Gaping Hole
The preceding outcome explains the lack of euphoria among Guyanese. Having learnt about the contents of the 2010 budget and that the administration intends to pursue the same policies as last year, Guyanese know that this year could be a rough one. They know also that they will be deprived of an additional 11 percent of income that will leave them with a gaping hole in their budgets. As the implications of this deficiency soak in, they might just realize that the policies of this administration are never really about them.
