Dear Editor,
The 2012-2016 Country Programme Evaluation report for Guyana is out, and the IDB wasted no time outlining the lethargic and slothful pace of project implementation by the current administration. According to the report, between 2015 and 2016, disbursement fell dramatically and for the first time Guyana recorded a negative cash flow. To fathom the downsizing in disbursements, from 2006 to 2013, average allocations to Guyana totalled US$51.3 million. In 2016, however, that amount fell to a mere US$14 million. According to the report, the poor performance was directly linked to weak institutional capacities of executing agencies, especially in procurement and monitoring and evaluation. Ironically, in 2016, the period under review, the government spent, on average, $3.5 million in employment costs on every $1 million of capital projects implemented. That is 66% or $1.4 million more when compared to 2014.
With respect to the Guyana’s economy, the report applauded the economic performance prior 2014. From 2011 to 2014, the country achieved one of the highest GDP growth rates in the Caribbean, at 4.9%, in tandem with one of the sharpest declines in Debt-to-GDP ratio, from 65% to just over 50%. The tone of the report, however, changed diametrically with respect to post 2014 economic performance. According to the report, Guyana’s fiscal position is expected to worsen in the coming years due to the huge increase in the budget deficit. It must be noted, from 2016, the budget deficit increased from 4.4% or $31.7 billion to a projected 5.4% or $43 billion by the end of 2018. Exacerbating this gloomy forecast is the fact that, by end 2018, almost 79% of the total cost of the budget deficit will be met by domestic borrowing. Thus, not only will this further reduce the competitive stance of the private sector through crowding out, but to date, the government has done absolutely nothing to promote the development of the private sector. Even the bank recognises this.
Given the fact that Guyana’s private sector is predominantly centred around mining and agriculture, the future development is bleak given the imposition of over 200 tax measures. With respect to the imminent windfall of oil resources, and what is perceived as the only way forward for the private sector, the government continues to ignore calls on legislative protection geared to ensure oil companies utilize domestic goods and services. This critical piece of legislation could be the “silver bullet” that will ensure the growth of infant industries and the manufacturing sector as a whole. Given the current feeble manufacturing sector, which according the 2018 half year report declined by 2.4%, oil resources might be counterproductive instead of beneficial, due to the widely perceived Dutch disease theorem. According to the theory, a weak manufacturing sector becomes uncompetitive as exchange rates appreciate, due to the increase in oil revenue. Compounding this outcome, as government ramps up spending in the non-tradable sector (construction, services etc.), the value appreciates with respect to the non-resource tradable sector (manufacturing). Thus, a corollary of this would be high wages in the non-tradable sector. As manufacturing shrinks, low skilled workers would seek employment in the non-tradable sector, prompting a labour shortage. To counter this outcome, manufacturers would now be forced to offer higher wages. As profit margins shrink, manufacturers would have to eventually rely heavily on a government subsidy for survival. Thus, it could be rationally concluded that if the government continues to ignore our private sector, oil resources might be more of a curse than a blessing. The inevitable would be a “premature deindustrialisation” for Guyana.
In sync with the LCDs, a well-crafted and strategic macroeconomic development document, Guyana, through the Inter-American Development Bank, was able to secure US$437 million in investment, across seven key sectors: sustainable energy, natural resources management, private sector development, public sector management, water and sanitation, security and health. At the end of 2016, however, US$236.1 million was yet to be disbursed. Of the total unallocated amount, according to the bank, US$135 million was pending for the water and sanitation, and transport sector. Given the alignment with the country’s development challenges, even the bank found it “unclear” and perplexing as to why these projects were not included as priority areas given their sheer size and historical importance. Specifically, the Sustainable Agricultural Development Programme, a $15M US investment earmarked to increase productivity among medium and small farmers while improving the sanitary and phytosanitary (SPS) standards and access to meat processing facilities, was yet to be initiated.
Yours faithfully,
Mohamed Irfaan Ali MP
