The government can afford more than 5% for public servants, former Auditor General Anand Goolsarran says following an analysis of the government’s finances.
In a column appearing in today’s Stabroek News, Goolsarran scrutinized government expenditure in recent years, monies that it has in bank accounts and the increased revenues from the Value Added Tax (VAT) before arriving at his conclusion.
He also raised the question of why there has been an annual imposition of a salary hike for public servants without resort to arbitration.
In the second of his two-part series, Goolsarran posed the question of whether the much-criticised 5% awarded was a question of affordability. He addressed the financial performance of the government and found that for the years 2010 to 2012, the government registered an average operating surplus of $18.9b after taking into account all expenditure including the servicing of the public debt. For this year, the projected operating surplus is a whopping $39.8b. The only factor not taken into account is depreciation as the financial statements of the government do not include fixed assets. Goolsarran projected from the capital expenditure that around 50% of the allocation would pertain to the replacement of assets and this would then reduce the projected operating surplus for 2013 from $39b to $35b as a result of the excess of capital expenditure over capital revenue.
“Therefore, on the basis of actual financial performance in the last three years as well as projections for 2013, it is clearly evident that the Government can afford a higher increase in wages and salaries”, he stated.
Goolsarran then addressed the question of the government’s cash position. He said that there were a total of 18 government bank accounts which were listed as inactive as at December 31, 2012 with a total of $50.4b compared to $58.7b.
“On the assumption that the special account balances are funds that are transferrable to the Consolidated Fund, the total of all Government bank accounts held at the Bank of Guyana would give a positive balance of $54.625 billion as at 31 December 2012. The corresponding figure as at the end of 2011 was $63.082 billion. Is this further evidence of affordability?” he asked.
He further pointed out that not all public revenues are paid into the Consolidated Fund as there is a proviso in Article 216 of the constitution. He said that a significant amount of revenue related to dividends from public corporations as well as the proceeds from the sale of state assets is retained by the government holding company NICIL and this is what is facilitating expenditure of the type for the Marriott Hotel.
Another example he said is the Guyana Lottery Company proceeds which are kept in a special account at the Office of the President. “In both cases, the revenues, expenditure and unspent balances are not reflected in the public accounts of Guyana. This significant omission renders the public accounts incomplete and inaccurate”, he asserted.
He then homed in on the question of the public debt which he said was $394b at the end of 2012 and comprising overseas debt and Treasury Bills. He asked if this debt should be considered in the matrix of affordability. He noted that unlike companies and businesses a government does not go into liquidation if it experiences financial difficulties over an extended time. While the financial picture is incomplete, Goolsarran asserted that the overriding consideration is the ability of the government to service its debts as they became due.
He pointed out – as had been done before by others – that in 1992, the repayment and servicing of the public debt accounted for 70% of the current revenue and not the 94% that the PPP/C government has always claimed that it inherited. Despite this burden, Goolsarran said that the country weathered the storm as a result of the structural adjustment programme that had been initiated by the Hoyte administration in 1989. By 1997 and following a series of international debt forgiveness initiatives, repayment and servicing accounted for 53% of revenues. This figure further fell to 31% in 1999. Goolsarran further argued that the introduction of VAT in 2005 saw a significant increase in current revenue. He noted that of the $130b revenue in 2012, 26.1% came from VAT. As a result, servicing and repayment of debt accounted for only 8.7% of current revenues. Despite this, he said that wages and salaries as a percentage of total current expenditure remained at approximately 25%.
His conclusion was that the government’s financial performance and its cash position debunk the argument that only 5% could be afforded for public servants.
“It is unfortunate that the Government continues to ignore the pleas of the Union for better wages and salaries. The failure to invoke arbitration proceedings because of the deadlock with the Union on the quantum of the increase also reflects badly on our system of governance. One hope that the protest marches that are currently taking place against the five per cent increase will bear some fruit so that public servants, especially those at the lower end of the scale, can benefit from improved wages and salaries. After all, public servants keep the engine of government spinning, and a highly motivated workforce is an indispensable ingredient for upholding good governance practices, and the highest degree of transparency and accountability that are so badly needed in this country at this time”, Goolsarran declared.
In the previous week’s column Goolsarran had demolished as incredible the government’s argument that the annual allocation in the budget for the revision of wages and salaries was not only for increases but also to cover staff promotions and new recruitment. As a result, he said that if one were to consider the average increase approved by the National Assembly over the 2008-13 period (13.7%) versus the average increase granted by the government over the same period (5.7%) there would have been a saving of $11.043b which the government has not properly accounted for. In today’s column, he said that the details of payments made that are unrelated to the revision of wages and salaries approved by the National Assembly are being eagerly awaited.
