Rationale
In last Sunday’s column, I made a call for the establishment of a statutory independent non-partisan and professionally-staffed Budget Office to be located in the National Assembly (NABO). It is my belief that this could well be one of the surest ways to dissolve the grave misgivings and distrust which surround statistics provided by the government and its agencies. If successful, this would lead to an enormous improvement in both political and economic governance in Guyana. Improved prospects for Guyana are more dependent on a qualitative advance in economic performance than perhaps anything else. The establishment of NABO would substantially improve the standing of ordinary members of the National Assembly, vis-à-vis the executive.
Based on practice in other countries, NABO would provide analysis of policies and programmes coming to the National Assembly for approval. It would also engage in budget analysis and forecasting of the economy for at least 5-10 years into the future, thereby creating budget baseline scenarios, which would help members to express more informed judgments. Further, NABO would be expected to provide independent estimation of the Ministry of Finance’s budget proposals.
However, because NABO is expected at all times to be objective and impartial in its analysis, it would not be permitted by law to put forward any policy proposals to the National Assembly. That right is the exclusive responsibility of its elected representatives.
While most of the legally structured budget offices around the world are to be found in developed economies, several developing countries have taken strides in this direction. For example, the South Korean Budget Office has listed its objectives as: 1) to review and analyse draft annual executive budgets, final accounts, public funds, management plans; 2) to estimate the cost of bills introduced by its members; 3) to provide economic forecasts, and revenue estimates; and 4) to evaluate government programmes.
Budget’s economic footprint
The confusion and mis-specification which presently surround the economic footprint of the 2011 Budget have been considerable. Basic economic concepts have not been clear in members’ contributions from both sides of the Assembly.
Thus even though the Bureau of Statistics is at pains to point out that its estimate of current and constant value (volume) GDP utilizes “the production or total gross value added produced approach for all institutional units resident in the economy,” members have challenged the data as if they were derived either from a spending or income approach. A professionally-staffed NABO could, through interaction with members of the National Assembly, dramatically enrich the quality of their all-round contributions to budget debates.
Regrettably, it is my apprehension that members of the opposition are more likely to be drawn to this proposal, than members of the ruling PPP/C.
The proposal, however, is aimed at empowering the entire legislature and to strengthen its position in a system where the “separation of powers” becomes more and more a foundation principle of political governance. Will this expectation become a reality? Will the PPP/C legislators support a call to empower its members, or will docility and willingness to please presidential powers, prevail? Will PPP/C legislators serve the interest of the National Assembly, first? Or, will they lead the charge against this proposal, which is intended both for their benefit and legislators of the opposition? I eagerly await answers to these questions and fervently hope that my apprehension is proven wrong.
The slush-sector
Before leaving this discussion on the ‘integrity’ of the data in Budget 2011 let me record my personal doubts about the budget’s estimate of an economic growth rate of 3.6 per cent for 2010. Looking at the insufficient data to be gleaned from the budget, it seems to me that the growth rate of 3.6 per cent for real GDP in 2010 is inconsistent with some real sectoral growth rates calculated from the budget data, which are considerably below this estimate.
Thus for 2010 the rebased sector, agriculture, fishing and forestry is estimated to have grown by only 0.5 per cent, (with sugar declining by 5.5 per cent); worse, mining and quarrying recorded a decline of 6.9 per cent (with bauxite declining by 9.8 per cent and “other” minerals declining by 37.2 per cent. Also we find that the manufacturing sector grew by only 0.2 per cent in 2010.
Not unexpectedly, the sector which benefited the most from the re-basing exercise has been services. Growth in this sector is now supposed to cover for any discrepancies in the numbers.
Rather than being assured by this outcome, my concern is that this now more amorphous and differentiated services sector resulting from the rebased 2006 series (with 11 sub-sectors) could emerge as a ‘slush sector,’ which provides the authorities with an ‘official’ mechanism to ensure their desired rate of growth of real GDP is achieved.
Guyana has a long tradition of this type of data manipulation by the authorities. Going as far back as the 1970s, I became so alarmed at the cost-of-living data provided by the then authorities that I labelled the consumer price index a “political cost-of-living index,” because it bore no reality to the prices confronting the broad mass of Guyanese who bought goods and services.
It was designed to portray an ‘official’ position of price stability. Nothing less than an independent Budget Office can remove the deep-seated cynicism the broad mass of Guyanese hold about official statistics.
Next topic
Next week I shall discuss the second prefatory topic, to my Budget 2011 analysis. That refers to the choices indicated in last week’s column: is the size of government in Guyana, too big, too little, or just right?
The burden of my presentation is that in Guyana, government has become too big and dysfunctional.
In its present configuration, it operates as a drag on the economy, preventing it from coming close to attaining its potential output. I shall show why this is the case.
