Presented on Friday under the theme `A Path to Recovery, Economic Dynamism and Resilience’, the 2021 budget offers some of the customary concessions to the cost of living burden.
Back in the finance seat, Minister Ashni Singh announced that the old age pension will rise to $25,000 per month from $20,500 and public assistance will increase from $9,000 per month to $12,000. He costed these two measures at $4.5b. Water tariffs are to be reduced by 5% across the board and the Value-added Tax zero rate is to be restored to key food items including wheaten flour, “basic breads” and cooking oil among others. For the second consecutive PPP/C budget, however, there was no adjustment in the income tax threshold, a measure that the working class has come to see as a pivotal tool in improving their finances while at the same challenging central government to spend less or to derive revenue from other sources. This omission occurred despite the fact that COVID-19 has battered household finances for the last year and this will likely continue for the next six months and even beyond.
While the budget does set out an array of transformational projects that can catapult development in the country, there were silences and unanswered questions that should inject notes of caution about the year ahead.
While Minister Singh properly tethered his budget to the manifesto promises of the PPP/C, noticeably absent was any type of calculus as it relates to the biggest promise made by now President Ali – the creation of 50,000 jobs over five years. Understandably there was no prospect of this being addressed in the splintered-year 2020 budget. Surely, however, in the first full-year budget of the administration the public is entitled to an accounting of how this target of 50,000 jobs will be met.
There was hardly any reference to job creation except for when Minister Singh referred to the planned established of the Wales Development Authority (WDA) which he said could employ well over 3,000 persons. Since taking office, the government has rehired hundreds of workers in the sugar industry but the numbers are nowhere near the 7,000 persons who were callously exiled to unemployment and penury by the former APNU+AFC administration. The PPP/C government is clearly expecting the private sector to generate the lion’s share of the 50,000 jobs as evidenced by the numerous projects that have been fast-tracked since August last year. However, there is no guarantee that these various hotel projects, among others, will take off in light of the uncertain climate in tourism and travel. The government is clearly also banking on the construction sector delivering thousands of jobs. During the budget debate, one presumes that Minister Singh will elaborate on job creation.
As had been feared, the government presented budget 2021 without having activated or replacing the Natural Resource Fund (NRF) Act. This Act is meant to provide the fiscal framework for rising revenues from the nascent oil and gas industry. Aside from the sovereign wealth fund which it seeks to create, the NRF also sets out the maximum that should be spent from oil earnings and is intended to create fiscal discipline. The NRF was completely ignored in Minister Singh’s presentation unless it was garbed in the following words that the government was “exploring a revised petroleum fiscal regime”. The deficits projected in the 2020 and 2021 budgets – $90.5b and $100b respectively – expose a disaffiliation from the fiscal discipline engendered in the NRF, a concern that countries with new-found oil wealth must be especially wary of.
Allied to the present disinterest in the NRF is the clear signal to ExxonMobil to maximise oil extraction despite the threat that could be posed to the environment and notwithstanding the fact that the government is yet to fashion a depletion policy for oil and gas.
The Finance Minister said in part “Mr. Speaker, while oil and gas may bring many opportunities, like any other extractive sector, it also brings with it its challenges. In addition, the window of opportunity for the extraction of this resource is finite, added to which the global shift to renewable resources places additional pressures on the long-term timeline…it is expected that the Stabroek Block licence holder will continue with their aggressive and so far very successful exploration programme, and maintain their schedule of works for field development such as with Payara”.
This overt signal to ExxonMobil to speed along oil output jars with the recent problems on its offshore production platform where it is now flaring unacceptable amounts of gas and is even more troubling given the government’s dismissal of Dr Vincent Adams, the highly-qualified head of the Environment Protection Agency who had been trying to have ExxonMobil toe the line.
There had been much anticipation of the government’s plans for the sugar industry, another major manifesto promise, in the first full year of this term and quite surprisingly the only allocation is $2b for “critical capital works”. This appears to be a holding pattern for the government to triangulate options. The Minister spoke about the sugar industry without once mentioning the Skeldon estate whose factory remains a major fly in the ointment to revival plans.
To drive down energy costs, create jobs and bring development to the depressed community of Wales on the West Bank of Demerara, the government appears intent on creating a gas-to-shore hub in the community along with the pipeline and other infrastructure. This could indeed be a transformational project but caution has to be the watchword. This project must be properly founded on peer-reviewed studies and must be financially feasible and self-sustaining. With an expected outlay of hundreds of millions of US$ there is no room for error and PPP/C governments are yet to show the capability of managing complex undertakings – the Skeldon factory being a prime example.
Execution capacity will also be a severe challenge to the plans of the government and the private sector as skills particularly in engineering and associated fields are in short supply. One hopes that the Engineer’s bill will be given due and swift consideration to help lift the standard of work in the public infrastructure sector.
As has unfortunately become the norm in this deeply divided polity, Minister Singh presented many of the issues he addressed in Manichean terms. We are good and they are bad. The truth and the reality are far more complex and textured. He adverted to the Amaila Falls Hydropower Project in this way: “When the APNU/AFC government came into office, they squandered whatever funds were available, and brought the release of the rest of the funds already earned by Guyana to a halt. This culminated in the last payments from Norway being suspended. On top of this lost opportunity, a successor Guyana/Norway agreement for the period from 2015 to 2020 never materialised. Almost US$30 million for existing projects has not been disbursed. More than US$135 million that was earned by Guyana is sitting in bank accounts outside our economy. The Amaila Falls Hydropower Project (AFHP) which would have used US$80 million of LCDS financing to leverage hundreds of millions of US dollars of private investment by major foreign investors was derailed. And, the opportunity to grow our payments from forest climate services after 2015 was never taken. Together, this is one of the most shameful economic legacies of the APNU/AFC government, and it falls to this PPP/C Administration to repair the damage”.
The reality is that the previous PPP/C government itself failed to present bankable projects to multilateral financial institutions to utilise the Norway funds. Moreover, the 2011 – 2015 PPP/C administration had not laid out a convincing case for the Amaila project. It now has a second chance to get it right. It should also be noted that the APNU+AFC government had unlocked the US$80m tranche with a promise of green energy spending until the attempt to rig the March 2nd 2020 general elections created new impediments.
It is ironic that Minister Singh should say that US$135m earned from the Norway agreement is parked in bank accounts outside of the economy when an even larger amount – over US$200m is in the Federal Reserve Bank of New York from oil and gas proceeds and this government is yet to enable possession to be taken of it.
Perhaps notice might also have been taken of Minister Singh’s airy declaration that with the government’s “holistic” plan for agriculture the country is well-poised to “claim its long outstanding position as the food basket of the Caribbean” – a task that proved stunningly elusive for PPP/C governments between 1992 and 2015.
There is promise of transformation in the 2021 budget but it is left to be seen how this unfurls and whether it is attended by the highest standards of good governance.
