The Government’s projected Financial Plan for 2013 is summarised and tabled on page 26. The current balance projects a surplus of $44.6 billion, an increase of $28 billion over the prior year actual. This apparently improved position is due to non-receipt of LCDS money. After capital receipts and expenditure, the plan projects an overall deficit of $33.7 billion compared to a deficit of $31.8 billion in 2012.
The main elements of the 2013 Plan are:
Total current revenues are projected to increase by $32.5 billion to $162.8 billion or by 25% (see comment 1 below). Of this, the Guyana Revenue Authority is expected to bring in revenues of $125.7 billion or 77.2%, an increase by $7.4 billion, or 6.3% over 2012.
Of the GRA’s collections, the Internal Revenue is projected to bring in $50.4 billion compared with $48.6 billion in 2012, a 1.0% increase while Value-Added and Excise Taxes are expected to earn $61.3 billion compared to $56.8 billion in 2012, an increase of 7.7%. Collections by the Customs and Trade Administration are anticipated to be $14 billion, an increase of $1.2 billion or 9% over 2012.
INCOME TAX REVENUE ($ million)
Total Current non-interest expenditure is projected to increase by $4.1 billion from $108.4 billion to $112.5 billion for 2013. Personal emoluments of $39.4 billion represent an increase of 11.7% or $4.6 billion over the revised figures for 2012.
In 2013, capital revenue and grants are projected to decrease by $341 million to $12.3 billion of which HIPC and MDRI will contribute $1.2 billion while Project and Programme funds are also projected to decrease by $527 million.
Capital expenditure of $85.7 billion represents an increase of $29.2 billion or 51.8% over 2012 of $56.4 billion. The big ticket items of capital expenditure include the ICT project on which a further $4.9 billion will be spent in 2013; $10.3 billion on upgrading and expanding the electrification system and $20 billion for LCDS projects; and $5.3 billion for the CJIA expansion project. China is providing the financing for the ICT, the electrification and the CJIA projects. The Estimates indicate that $4.5 billion has already been advanced by the Chinese to the Chinese.
Interest expenditure is projected to increase by 8% or $420 million. Domestic interest is projected to decrease by $367 million or 14%, while interest on external debt is projected to increase by $787 million or 30%.
The principal element of debt repayments is projected at $5.0 billion (2012 actual – $4.6 billion), made up of domestic debt repayments of a projected $1 billion (2011 actual – $993 million), while external debt repayments are projected to increase to $4.0 billion. During 2012, domestic and external debt service as a percentage of current revenue remained at 3.1%in comparison with 3.1% in 2012.
The projected overall deficit of $33.7 billion is proposed to be financed by external borrowings of $27.6 billion and from domestic sources by $6.0 billion.
Ram & McRae’s Comments
i Revenue from personal income taxes is set to decrease by 5.5% while collections from the self-employed are set to increase by 15.9%. It is our belief that significant evasion of taxes occurs with the self-employed and better administration of this area would result in a windfall of revenue that could in turn be used to further reduce the rate of the tax to 25% as currently seen in certain Caribbean islands.
ii The changes proposed to the rate and tax brackets of the property tax will have no effect on 2013. We anticipate a significant increase in such taxes in 2014 as a result of the rebasing of property values to January 1, 2011. This rebasing will result in the private sector incurring significant expenditure for professional valuators in 2013.
iii The Minister made no mention of the proposed clampdown on the use of Styrofoam containers, presumably through increased taxation, or the amendment to the law in respect of Environment Tax tabled in the National Assembly during 2013. Collections from the environment tax are expected to increase by a minor 5.3% and we hope that some of these funds could be used to keep the capital city clean.
iv The Minister chose not to disclose or discuss the domestic debt which at December 31, 2012 stood at $93,461.9 million or roughly US$450 million. If this is added to the external debt of $1.359 million, the total government debt is US$1,809 million, over 70% of GDP. Many economists regard this as a danger sign. If the government is aware of this the best they are doing about it is juggling the rice sales and the PetroCaribe petroleum debt.
v Average cost of borrowing on domestic debt is 2.38% which is considerably higher than the current Treasury Bill rate and suggests some scope for reduction. Average cost of external debt is 1.7% but Amaila debt is at 8.5%.
vi Ram & McRae is unaware of the feasibility studies on the several capital projects to be financed and would hope that the National Assembly requests such information before the debate on the estimates begins.
