The National Budget for 2020, referred to as an ‘emergency’ budget, encompassed a variety of fiscal measures designed to quickly revamp the economy. First and foremost, the PSC acknowledges the context in which this budget was prepared – that is, after five months of political turmoil with the national elections which was then compounded by the economic and financial impact of the COVID-19 pandemic. In these respects, the PSC wishes to commend the Government of Guyana for the preparation of the budget in such a short period of time in the given circumstances.
Second, for a country to be without a national budget for nine months into the year; this can also wreak havoc to the economy given that in Guyana’s context, government spending accounts for about 40% of GDP. To this end, governments typically spend money on capital projects such as major infrastructure works, the building of roads, bridges, public health care and education among others. Governments also spend on the procurement of consumption goods and services. Therefore, with the injection of government spending in these areas, this spending helps to sustain local businesses that supply the government with these goods and services as well as the contractors, engineers and the labour force operating within areas where public investments are undertaken whether it’s the construction of building infrastructure or new road networks.
An assessment of some of the key fiscal measures in Budget 2020:
1. Reversal of VAT on Electricity and Water………….will result in more disposable income for households and reduced operating costs for commercial enterprises.
2. Mortgage Interest Relief………..will now allow mortgage holders to benefit from interest relief of up to $30 million……..
3. Increase limit for low income loans for corporate tax relief in banking sector from $8 million to $10 million.
Will allow greater access to low income housing. Enhances ability to borrow for low income housing up to $10 million at the low-income interest rate which is between 4 – 6 percent.
Will enhance job-creation: the banking sector will see an increase in home mortgages; the construction sector, hardware supplies, contractors, labourers, will also see an increase in sales.
4. Allocation of $4.5 billion for household relief of $25,000 per household. Immediate relief to vulnerable households affected by the COVID-19 pandemic. Will also help to revive the retail and distribution sector.
5. Removal of VAT on building and construction materials
Will reduce the cost of housing, boost construction and hardware sectors. Can also lead to the creation of jobs and stimulate investment into these sectors.
Removal of 25% Corporate Tax on Education; Removal of 25% corporate tax on health and medical supplies intended to make education and health care more accessible. These measures will also result in more disposable income for households and savings.
6. Removal of VAT on machinery and equipment; all-terrain vehicles for mining, forestry, agriculture and manufacturing.
These measures are expected to reduce acquisition costs and boost investment into these sectors. This in turn, will contribute to job creation. The banking sector will benefit from increased lending in these sectors.
7. Change of log export policy to allow saw millers to export logs……… will create the enabling environment for small loggers to grow and access new markets.
8. The $15,000 cash grant for school children
Will help to cushion expenses for low income households with children.
9. Measures to support senior citizens: increase of old age pension from $20,500 to $25,000.
$4.4 billion injected annually in the hands of consumers will find its way back into the economy supporting commerce.
10. Reversal of land lease fees and water charges to 2014 rates; reversal of land taxes and drainage and irrigation charges back to 2014 rates; removal of VAT on fertilizers, agrochemicals, pesticides, and key inputs in the poultry industry and zero-rating of poultry industry; tax incentives on investment in Agro-processing facilities, cold storage and packaging.
Will encourage more investment while reducing overhead costs for farmers.
11. Allocation of $5 billion to help recapitalize GuySuCo.
The move to revamp some of the closed estates will help to resuscitate these village economies and the supporting industries. This will help to drive commerce in the business sector and contribute to the inflow of foreign exchange (from the exportation of sugar) which is important to help maintain a stable exchange rate.
12. The allocation of $800 million to support the Amerindian communities; measures to reduce travel cost to hinterland regions
Will help rebuild hinterland communities and provide sustainable jobs in those communities. The reduction of travel costs to the hinterland will reduce cost for goods shipped to these regions; Taken together, the budget contains adequate fiscal measures designed to put more disposable income in the hands of householders.
