Introduction
The rather extensive sub-theme of the 2020 Budget was “Protecting our People in a COVID-19 Environment, Strengthening Democracy and the Rule of Law, Incentivising Growth and Job Creation, Enhancing Welfare”. The theme itself was Our Plan for Prosperity. The APNU+AFC Government similarly had an extensive subtheme under the theme the Good Life. The Agenda of the Government was presented under fifteen headings and making up more than half of the Minister’s speech.
The two central objectives of the Agenda were identified as a) containing of the pandemic, strengthening our public health response and capability, and b) simultaneously finding avenues for stimulating economic growth.
1. Macroeconomic Outlook
● The review and update of medium and long-term strategies of Budget Agencies in light of the health and economic crises resulting from the pandemic grounded in the tenets of the Low Carbon Development Strategy (LCDS).
● Decreasing reliance on debt, having regard to the volatility inherent in petroleum revenues and a conservative ramp up in spending of new revenue. See Ram & McRae Comment #1.
2. Improved Governance and Institutional Reforms
The updating of the constitution, the establishment of the Ministry of Parliamentary Affairs and Governance, and the re-establishment of the Ministry of Local Government. See Ram & McRae Comment #2.
3. Public Administration and Public Financial Management
Job creation through human resource management and equal access via scholarships; using technology to improve public administration; reducing the complexity of doing business in Guyana and improving transparency in the procurement process; reducing financial volatility; maintenance of the resilience of the Banking Sector; reviewing and full implementation of the Law Reform Commission; and review of the AML/CFT structure.
4. Supporting Private Sector Development
Creating and maintaining a friendly business environment by improved power supply, tax and other incentives, and the establishment of industrial parks or estates for manufacturing; small business support; reversing VAT on electricity, water, machinery and equipment, exports, and materials; and investment promotion by the re-organisation of GO-Invest.
5. Transformational Infrastructure
Improved electricity supply including solar and wind systems for off-grid communities; improved transport networks, identifying airports, roads and bridges, and river transport: including an upgrade of the Lethem road and an Ogle to Diamond by-pass; the use of Information and Communications Technology for development in education, health, industry and agriculture; liberalizing the telecommunications sector; the utilization of ICT for educational systems in light of the COVID-19 pandemic. See Ram & McRae Comment #5
6. Sustainable Tourism
7. Investing in Our People
Investment in the health sector in light of the COVID-19 pandemic was paramount; education and improving human resource by the construction and rehabilitation of schools across the country. In light of the COVID-19 pandemic, the delivery of education remotely; housing; access to potable water across coastal, urban, and hinterland communities. See Ram & McRae Comments #7
8. Social Protection and Vulnerable Groups
The delivery of key services to the most vulnerable groups. Elderly are of particular focus being the most high-risk group during the COVID-19 pandemic.
9. Culture, Sports and Arts
10. National Security
Four critical areas of focus: protecting Guyana’s sovereignty and defending its territorial integrity; strengthening Guyana’s multilateral diplomacy; improving Guyana’s regional, hemispheric and international presence; and the diaspora.
11. Public Safety and Security
The reduction crime, prison reform, strengthening the security forces and the removal of backlog in our court system were highlighted as critical. See Ram & McRae Comment #9.
12. Natural Resource Management
Efficient management and support of the extractive sectors while maintaining sustainability and protecting the environment. In relation to the Petroleum Industry, the Government has committed to:
i. Immediately engage the oil and gas companies in better contract administration/renegotiation.
ii. Establish an arm’s length SWF insulated from political interference.
iii. Define by legislation how funds will flow from the SWF into the budget.
Oil revenue will be directed into, among other things, social and economic infrastructure, targeted cash transfer to Guyanese and vulnerable groups, and to supplement tax reductions for Guyanese businesses and individuals.
13. Agriculture and Food Security
14. Labour and Decent Work
Reverse the unemployment rate over the next 5 years and create 50,000 jobs by establishing a stand-alone Ministry of Labour. See Ram & McRae Comment #8
15. Hinterland Development
Ram & McRae’s comments:
1. Some of these objectives might seem contradictory. The programme is ambitious and may be difficult to achieve with only a “conservative ramp up in spending of new revenue” while decreasing reliance on debt. Major projects like Amaila to which the Government is committed will have to be financed by debt. As revenue increases, the country’s debt capacity will increase and once projects demonstrate favourable financial and economic returns, they should not be postponed.
2. It is unclear what updating the constitution means but any constitutional reform will require extensive consultations and agreement between the country’s two major parties. That will take us at least into the medium term. Meanwhile, the Government will have to find a way to work with the leaders of the APNU by including them at every reasonable opportunity. Immediately, the Government has to allocate more resources to local government bodies and permit greater autonomy.
3. The Natural Resource Fund Act has been the subject of some criticism and may need some revision. However, over-protection is better than loose protectionand whatever changes are made, they must ensure that the Fund is utilised with succeeding generations in mind.
Not unrelated to the Fund of course, is the review of the 2016 Petroleum Agreement which operates too much in favour of the oil companies. If this isallowed to stand, Guyana will not be able to make any legislative changes affecting EXXON for the next four decades.
4. While the Speech is critical of SARA, the Minister did not reveal Government’s intention with regard to the Agency. It will have to tread carefully in this regard and must consider whether SARA is part of the anti-money laundering landscape.
5. A number of the measures are already reflected in the spending agenda or the proposed legislative framework.
6. Interestingly, the Amaila Falls Hydroelectricity Project, which was a flagship plan in the PPP/C Administration is not included as part of the Transformational Infrastructure
7. Housing has been one of the PPP/C’s success stories and it is expected that this will be resumed. However, whether low cost or otherwise, housing requires expensive infrastructure which the CHPA and the Housing Ministry cannot now afford. It will require considerably more allocations by Parliament.
8. The creation of 50,000 jobs is a Manifesto promise and is extremely optimistic. What needs to be done now is to raise the national minimum wage to a level that gives all our workers a decent standard of living.
9. Successive governments have failed in their primary duty of protecting its citizens and their property.
Targets
Overall real growth is projected as being between 48.4% and 51.2%, while the non-oil economy is expected to contract by between 1.4% and 4.3%.
Due to the uncertain and volatile economic situation, the Minister was only able to present ranges for all entities. The primary industry groups are addressed separately below. In the absence of absolute figures, we have been unable to present our customary graphical presentations over the period 2019 to 2020.
Agriculture, Fishing and Forestry
As a whole, the agriculture, forestry and fishing industries are projected to decline by between 0.1 % and 2.3 % in 2020.
Sugar is expected to grow by between 10 % and 15.4 %. Expansion is also expected in rice, with forecasts for second crop production anticipated to result in growth of between 2 and 3.5 %.
The livestock industry, which contracted by 2.3 % at the half-year, is expected to rebound in the second half to realize growth of between 0 % and 2.4 % in 2020.
The other crops subsector is forecasted to contract by between 1 % and 3 %, reflecting an improvement in the second half of the year.
Forestry is projected to contract by between 11.8 % and 15 %, an improvement over the half-year contraction of 20.8 %; and, fishing is projected to contract by between 3.5 % and 10 %, above the contraction of 12.1 % at the end of June.
Mining and Quarrying
The mining and quarrying industries are expected to expand by between 320.6 % and 324.3 % in 2020, driven by the petroleum industry, and, to a lesser extent, the gold mining industry.
The gold mining industry, which expanded by 2.1 % at the half-year, also experienced some setbacks. While large scale production is expected to continue to dwindle in the second half, the output of small and medium scale miners, in response to higher prices, is expected to bolster production, pushing growth to fall between -2 % and 0.7 %.
The bauxite industry saw a contraction of 42.3 % at the half-year and is expected to contract by between 40 and 51 % in 2020. The other mining industries expect a contraction of between 20 % and 30 %.
Manufacturing
The manufacturing industries contracted by 0.2 % at the half-year. While the Minister indicated that the full year is expected to improve, no overall percentage was given for this anticipated improvement.
Balance of Payments
Overall balance on the balance of payments is expected to reflect a lower deficit in 2020 of US$21 million. The current account deficit is expected to contract by 53.9 % to US$361.2 million while the capital account is projected to have a surplus of US$810.6 million in 2020.
On the trade side, merchandise exports are expected to increase by 58.4% to US$2.5 billion, while merchandise imports are expected to decrease by 22.6% to US$2.3 billion.
Ram & McRae’s comments
The trade statistics emphasise and are distorted by the huge numbers in the oil and gas sector. To ensure that the rest of the economy is properly managed, a new model of our economy will have to be constructed.
