Dear Editor,
Reference is made to `APNU+AFC spent $1.2 trillion over five years – Ashni Singh’ (SN online Dec 5) and `Jordan says $4.2B contingencies spending was ‘unforeseen’’ (SN Dec 6). As I put on my economist hat and go through the figures, my conclusion is the numbers reflect soaring, reckless spending and irresponsible behaviour of those in charge of government finances. The huge deficit is deeply worrisome as the consequences to the economy would be devastating for years to come forcing the Ali government to put a squeeze on spending.
Just to crunch the numbers: Over five years, $1.2T was spent with a deficit of $130B (money spent beyond what was collected in revenues) or borrowing it – equivalent of US$650M. That is a per capita debt of $173K (US$866). One also reads that the coalition went into overdraft in the central bank — found $16B surplus and left office with an overdraft of $93 billion which means it spent $109B. In addition, government granted Guysuco a $30B NICIL bond of which some $17B was drawn down between 2017 and 2020. Even though spent on Guysuco which owes it, it is a government debt. There was no capitalization project at Guysuco with that $17B; factories were not rehabilitated and movable equipment disappeared. It was spent mostly on new (non-field) staff added after the closure of estates in 2016. In addition to the above deficits, the government owes $12B to GPL. When all added together, that is a further $29B in arrears making total deficit of G$159B (or almost US$800M) over five years or a per capita debt of over US$1K. We also learned that government incurred US$400M in foreign debt over this period to fund various programmes. But the above deficit is not a true reflection of government borrowing. Overdraft was ballooning at the Central Bank. There is $70B Treasury Bills that the Bank of Guyana issued from around 2017; that info is in BoG semi-annual report. Economists would know that T Bills are issued for fiscal purposes to reduce a deficit on paper. The T Bills were issued to absorb excess liquidity in the banking system and were bought up by commercial banks with government paying the interest rate. The T Bills were hiding the amount of true spending. That money should be counted as deficit because it is also due for payment; BoG simply rolls it over and commercial banks don’t object because of surplus cash in the economy as the interest as well as the principal capital are guaranteed by the state. The banks can’t find private lenders. So it is better to lend it to government at a low interest than sitting in bank vaults.
Evidently, under the APNU-led coalition, overdraft or deficit increased significantly. It seems similar to what transpired during the Hoyte/Burnham regimes. During the change in administration in October 1992, it was revealed that there was an overdraft of some $45B which in today’s dollar value would be in excess of $90B. The Jagan government had to erase that deficit through savings and very tight monetary spending in order to accrue money just to pay interest.
The coalition returned with the same kind of extravagant spending as under the PNC regime that was removed from office by the US in 1992. As Jagan did, the Ali-led government would have to pursue tight spending over the next five years in order to gain fiscal and monetary balance. It means that the oil revenues for the next five years would have to be used to pare down the deficit and also to pay interests similar to what happened post 1992 by the PPP administration when revenues from exports were used to reduce the debt of some US$2.2B.
What happened during the five years of the coalition was unacceptable. One recalls that the coalition had threatened to bring criminal charges against then Finance Minister Ashni Singh for spending money without parliamentary approval. But worse happened under the coalition between December 2018 and July 2020. Money was expended without authorization. There should not have been any deficit for that period of time since the government was in caretaker mode following its defeat in the no confidence motion of December 21, 2018. Former Finance Minister Winston Jordan should have known better than to go into deficit spending because he was once Budget Director through May 2015. Only one twelfth of the budget should have been spent monthly without any deficit. There were no capital projects. Emergency work could be undertaken. But we read that over $1B spent on the Covid Hospital did not meet basic requirements. And the sea defence breaches were not completed in spite of the huge amounts expended. Money was just handed out to friends and cronies for work not done.
The deficit is highly irresponsible spending. It was a runaway train. While it is not known how the $1.2T was spent or what necessitated such high expenditures, what is clear is that there was a lot of wasteful, unaccounted spending as reported by the Auditor General from 2016 to 2019. Payroll doubled between 2015 and 2020. Virtually none of the funds was for new capital projects. Infrastructure projects and the airport were funded from foreign borrowing. It is incredible that no one attempted to rein in spending or eliminate least unjustifiable spending or scrap unnecessary programmes.
In light of the abuses at the treasury during the coalition, it is incumbent that Government and or BoG issue daily reporting on borrowing, overdraft, and issuance of T Bills. A forensic audit is urgently needed on the $1.2T spending. Special attention should be focused on the $4.5B deficit spent from November 2019 to July 2020.
Yours faithfully,
Vishnu Bisram (PhD)
