With large injections of revenue from the oil and gas sector, Guyana is expected to grow its economy by 47.5% while inflation is pegged at 4.1% for 2022, according to Senior Minister in the Office of the President with responsibility for Finance Dr Ashni Singh.
Singh announced the projection when he presented the country’s first budget utilizing its earnings from the oil and gas sector. Budget 2022, pegged at $552.9 billion is a whopping 44.3% larger than last year’s and 36.6% above total expenditure for 2021. It is important to note that this budget is partly financed by the US$607.6 million ($126.7 billion) in earnings from activities offshore Guyana.
Last year’s budget was $353.8 billion but the government also approached the National Assembly for supplementary provisions to cater for expenses it didn’t budget for.
The budget, themed “Steadfast Against All Challenges, Resolute in Building Our One Guyana”, was presented to the House yesterday and during his 5 hours 15 minutes speech, Singh said it is fully financed without the implementation of any new taxes.
“Real GDP is projected to grow by 47.5 per cent, a rate of growth which no other country in the world is currently projected to achieve in 2022. This reflects the coming into operation of the second FPSO vessel, the Liza Unity, which will significantly ramp up oil production.
“The non-oil economy is expected to continue registering strong growth, currently projected at 7.7 per cent this year, driven mainly by rebounds in rice growing and gold mining, and continued expansion in construction activity and wholesale and retail trade and repairs,” he informed.
In 2021, the economy grew by 19.9% overall while the real GDP growth in the non-oil economy was registered at 4.6%. Singh boasted that last year’s numbers would place Guyana among the top three fastest-growing economies worldwide.
He added that the non-oil productive sector’s growth is commendable and reflects the “delicate and dynamic policy balance struck between aggressive containment of COVID-19 on the one hand and phased reopening of the economy on the other hand.”
Providing the anticipated sectoral growth, the Finance Minister said that the agriculture, forestry and fishing sector is expected to expand by 8.9% this year, driven by growth across all subsectors. This is a stark contrast from last year when the sector contracted by 9.1% owing to reduced output in the sugar, rice and other crops sector. Improved performances were recorded in the forestry, fishing and livestock subsectors.
The major driver for the contraction of the sector was decreased production and damage owing to the unprecedented floods during the first half of 2021 but according to Singh that is expected to improve.
Value-added
In 2022, it is estimated that sugar will grow by some 11.8% with the Guyana Sugar Corporation (GuySuCo) targeting 65,000 tonnes of sugar. Last year, the floods and other factors caused GuySuCo to produce 58,025 tonnes of sugar which saw a 34.7% reduction in its value-added revenues.
This year some $6 billion has been allocated to help GuySuCo’s ongoing investment in field and factory operations to turn around the industry. The sugar corporation is expected to improve operations at Albion, Blairmont, and Uitvlugt estates to upgrade and mechanise field operations and expand packaging capabilities.
“In anticipation of improved production levels, the Guyana Sugar Corporation (GuySuCo) will be concentrating its marketing efforts on shifting from the low-value bulk-sugar markets to more bagged and packaged sugar products. To this end, these products will increase from 34 per cent in 2020 to 64 per cent of total production in 2022,” the Finance Minister informed.
The rice industry was also heavily affected by the 2021 floods that caused it to contract by 20.5% with total paddy production amounting to 859,993 tonnes resulting in 558,995 tonnes of rice being produced. This translated into 5.5 tonnes of paddy being harvested per hectare.
Nevertheless, Singh said with the intervention of the government the sector is forecast to expand by 25.1% with the introduction of new high-yielding varieties and increased replanting efforts. To further boost the sector, the government would be improving the drainage systems and expanding research on new high yielding varieties, and seed production.
In 2022, a total of 185,000 hectares is slated for cultivation with plans to expand by 8,000 hectares to 193,000 hectares by 2026, according to the Minister. The Guyana Rice Development Board (GRDB) is expected to expend over $300 million in plant breeding, agronomy, plant pathology, entomology and value-added products as part of its research and development thrust. An additional $20 million is budgeted for the procurement of a seed dryer for Black Bush Polder which will benefit more than 600 rice farmers in the area.
“In addition, a mini testing mill (polisher) will be acquired to analyse the quality of cargo rice and paddy. In anticipation of expanded production six drying floors in Regions 2, 3, 5, and 6 were constructed in 2021 and this year two additional drying floors will be added in Regions 3 and 4. Additionally, efforts to secure new markets will continue, with the British Virgin Islands, Estonia and Slovenia secured recently,” Singh announced.
The other-crops subsector, which includes fruits, vegetables and spices, is expected to grow by 2.5% despite contracting by 9.8% last year. However, livestock will continue to grow and this year’s growth is pegged at 13.6%.
Throughout Guyana, fishermen have been complaining of low catches but the fishing subsector is estimated to grow by 5.8%. Singh reported that the government has been working closely with the sector to help overcome the challenges and encourage growth.
The forestry sector is expected to grow by 13.5% which is a follow up to its 11.3% expansion in 2021. Singh said that higher forestry output will partly meet the demand for timber products from public and private sector construction activity.
“…this year we anticipate the conversion of three large concessions, equivalent to 1.5 million acres which will result in an additional 30,000 cubic metres of logs, in 2022, and approximately 50,000 cubic metres of logs, annually, for the next 4 years. Additionally, 50 new small concessions of a combined 150,000 acres will be allocated resulting in a further 20,000 cubic metres of logs. In 2023, we project to allocate another 500,000 acres, with an estimated production output of 30,000-40,000 cubic metres of logs, annually,” he announced.
He stated that Guyana has been exploring market opportunities for the export of sawn lumber to Barbados and pre-fab pieces to Ghana and other countries. He added that 120 pre-fab houses will be manufactured using local wood and exported to Ghana this year, in an effort to secure a long-term relationship with this potential market. The government will also work to resuscitate three kiln drying facilities at Essequibo, Berbice and Linden, which will support the supply of sawn lumber to the Barbados market, among many others.
2022 would also see Guyana working on finalising Guyana’s Timber Legality Assurance System which is required for the implementation of the European Union Forest Law Enforcement Governance and Trade programme in order to be licenced to access the EU and other markets.
Extractive industries
Singh said that the mining and quarrying sector is forecast to grow by 86%, driven by expansion across all subsectors, namely petroleum, gold, other mining and quarrying, and bauxite. Additionally, a turnaround is anticipated for the gold mining subsector, which is projected to grow by 12.2% in 2022 on account of higher expected declarations from one large operator, and the small and medium scale miners.
Last year, the gold sector contracted by 14.8% mainly as a result of lower output from both large and small and medium-scale producers. This year, gold declaration is anticipated to be dominated by small and medium-scale producers operating 1,054 small-scale mines and 25 medium.
“Large scale operators are expected to come fully on stream in the medium term. At Karouni (Troy), while production will be paused this year, the investor will forge ahead with exploration and development of the underground prospect. Beyond this year, investment in the Toroparu area will finally result in long-anticipated development of a full-fledged gold mine since an international mid-tier gold company has confirmed their interest in this project. Notably, development works to the tune of US$165 million are slated for 2022 and a further US$189 million in 2023, with production expected to commence in 2024,” he said.
Bauxite growth is pegged at 25.4% after a 3.8% decline in 2021 while the other mining and quarrying subsector – which includes sand, stone, and diamonds – is also projected to grow in 2022, by 8.4 %.
Continuing on the growth trend, the construction sector is expected to grow a further 10.5% in addition to the 29.8% growth is recorded last year. Manufacturing and services will grow as well.
This year, the overall balance of payments is expected to register a surplus of US$403.4 million, largely attributed to projected improvement in the current account. The current account is expected to record a surplus of US$2,441.4 million, mainly on account of higher projected export earnings.
Singh said that export receipts are forecast to increase by 79.1% to US$7,792.8 million, reflecting higher anticipated export earnings from all commodities.
“In particular, crude oil exports are projected to increase by 107.7 per cent to US$6,180.6 million amid the commencement of production from Liza Unity. Non-oil exports are forecasted to increase by 17.1 per cent to US$1,612.1 million. At the same time, imports are expected to fall by 31.1 per cent to US$2,957.1 million, as no new FPSO is projected to be imported this year,” he added.
Moreover, he said that the capital account is anticipated to record a deficit of US$2,037.9 million, reflecting the operator’s share of oil production applied to cost recovery, as well as a moderation of FDI inflows also as a result of no new FPSO being imported this year.
In 2021, the overall balance of payments recorded a surplus of US$130.2 million which was 24.4% higher than the surplus in 2020. At the end of 2021, total export earnings amounted to US$4,352 million, 68% higher than the US$2,590 million earned in 2020. This was mainly driven by oil exports growing by 179.6% to US$2,975.5 million amid increases in both volume and price. Non-oil export earnings amounted to US$1,376.5 million
Central Government Operations
The Finance Minister reported that total Central Government current revenue (net of GRIF inflows and NRF withdrawal) is projected to increase by 13.4% to $301.3 billion, within which tax collections will account for an estimated $286.8 billion. He added that internal revenue collections are projected at $152.7 billion which is 14.6% above the 2021 level.
Similarly, collections from customs and trade tax are anticipated to grow by 15.1% to reach $31.1 billion this year.
“Moreover, while collections from VAT are projected to grow by $6.5 billion, excise tax collections are anticipated to decline by $60.8 million to $46.3 billion. Non-tax revenues are estimated to grow by $3.8 billion to reach $14.5 billion in 2022 mainly on account of higher collections of royalties, dividends and special transfers from the non-financial public enterprises and Bank of Guyana profits,” Singh informed.
Singh added that the total expenditure of the Central Government is forecast at $530 billion in 2022 which is a 36.8 % increase from the 2021 expenditure.
“This is driven predominantly by the strong emphasis of Budget 2022 on public investment both to address pressing infrastructure gaps as well as to accelerate the build out of transformative infrastructure nationwide, as discussed earlier,” he explained.
Additionally, he said that the public sector investment programme (PSIP) is projected to grow by 108.7% to $217.8 billion. Meanwhile, non-interest current expenditure is projected at $302.2 billion which is a 9.9% increase.
This increase is expected to be driven by greater expenditure in all three sub-categories: transfer payments, personal emoluments, and other goods and services.
Singh told the House that transfer payments are forecast to grow by 12.1% to reach $119.8 billion, while employment costs are pegged to increase by 15.5% to $89.9 billion.
The overall deficit of the Central Government is projected at 7% of GDP, according to the Minister.
“In 2022, receipts from the non-financial public enterprises are expected to grow by 8.6 percent to reach $152.4 billion. Total operating cost for the public enterprises is projected to increase by $11.7 billion, primarily at GPL due mainly to higher anticipated oil prices in 2022, and to a lesser extent at GuySuCo, due to the rehabilitation and retooling of the grinding estates, coupled with the re-opening of three sugar estates. The overall deficit for the public enterprises is forecast at $12.6 billion, equivalent to 1 percent of GDP,” he said.
A deficit of $100.3 billion, or 8% of GDP, is projected for the non-financial public sector in 2022.
Singh told the House that Budget 2022 is a transformational one and will go down in history as such.
“It launches some of the most transformative projects in our country’s history, whose realisation is critical to resolving the bugbears and bottlenecks we have long faced, whether it be adequate and affordable electricity, a transport network that is responsive to both productive opportunities and changing patterns of urbanisation, or improved medical services for our People. Budget 2022 also lays the foundation for creation of thousands of jobs and provides for the training of our Guyanese brothers and sisters to take up these jobs,” he said.
