The Budget contained several of the proposals made to the Minister by the Private Sector Commission. It was a budget about inputs rather than outputs: billions spent but no expected results stated. It is an incomplete budget. It does not include all the moneys belonging to the Government. It does not include all the expenditure either.
Tax revenues do not reflect inflation and real growth in most sectors of the economy. Some figures stretch credulity, or perhaps are self-serving. To justify the US$58 million on the Marriott the Minister claimed that hotel occupancy is 75%. That is wishful thinking. On the other hand the reported decline of 11% in the performance in the construction sector is not supported by other information offered by the Minister such as the 76% increase in sand production.
It is full steam ahead with Amaila hydro despite the exorbitant capital cost and punitive financing charges by the Chinese contractor and funds providers. There are some serious and possibly fatal uncertainties about the project.
The country’s debt to GDP ratio is climbing inexorably. It is now around 75% and the country is still borrowing huge sums as it runs huge deficits. The overall balance as a percentage of revenues in 2012 was $31.8 billion. In 2013 it is expected to be $33.7 billion, to be financed from borrowings. The country is approaching the point where borrowings can cause growth to suffer.
The country’s international reserves measured against imports declined from 4.2 months in 2011 to 4 .0 months in 2012. The country has become heavily dependent on Venezuela for its oil imports and China for foreign direct investment.
Growth is still heavily dependent on the State which proposes to invest $85 billion on capital expenditure in 2013. Yet the Estimates indicate that private investment will exceed public investment for the first time in four years. That is doubtful.
The Minister announced some tax measures that are designed to help mainly the persons who earn well above average. For these persons the tax system will see the return of a relief other than the personal allowance. There is no relief for the person who earns less than $50,000.
A novel attempt is made to address the crisis in the NIS. It involves in part the Government subsidising the employer. This can only be a partial solution.
But the Budget fails to address the major problems facing public financial management: the diversion of state funds from the Consolidated Fund to NICIL; public funds not being placed in the Consolidated Fund; the strain on the Consolidated Fund of GuySuCo and Guyana Power and Light; the Procurement Commission and the Integrity Commission; tax evasion; tax reform and VAT; the public debt; loans being negotiated without any disclosure or accountability; smuggling and the parallel economy; and job creation.
After a week’s recess the National Assembly will meet to debate and consider the Estimate. The Government restored the cuts made to the 2012 Estimates. The Government seems willing to fight for its right to grant a subsidy to NCN or appoint any number of Contract Employees. The next three weeks will be long and bitter.
