Last week, we reviewed the status of financial reporting and audit of non-Central Government entities which number 180 and comprising public enterprises, statutory bodies, municipalities and Neighbourhood Democratic Councils (NDCs). We stated that of the 100 public enterprises and statutory bodies, 58 were audited and reported on, as per 2022 Auditor General’s report. It is unclear what was position in respect of the remaining 42 entities. We noted that most of the accounts audited relate to backlogged years although the concerned entities are required to have their audited accounts presented to the National Assembly within six months of the close of the fiscal year. It is not clear how many of these entities have complied with these requirements.
Additionally, the accounts of several entities were in such a bad shape that the auditors were unable to express an opinion on them in terms of fair presentation and compliance with applicable laws, regulations, circular instructions and contractual obligations. Despite this, there was no evidence of any action taken to bring about respectability as regards the financial performance and state of affairs of these entities. We have stated on several occasions that in the private sector the slightest adverse comment from the auditors is likely to bring about changes in the management structure of the concerned entities.
We must also not over-emphasise that proper and timely accountability and transparency for financial stewardship at both the central and local levels are an essential part of democratic norms and values. One recalls the joint statement by the ABC (United States of America, the United Kingdom and Canada) countries calling for local government elections to be held by 1 August 2014 since they were overdue by some 17 years. In that statement, the ABC countries noted that international development agencies have long recognized the tangible benefits of local democracy going beyond the act of casting a vote, and that elections would bring ‘much needed reinvigoration into local government entities’. They argued that:
Effective and efficient public administration coupled with healthy local governance can drive development efforts. Local government institutions bring government closer to the people, fostering greater inclusion, civic responsibility, empowerment and participation…It is only when people have transparent and accountable institutions at all levels of government – national, regional, and local, will they have confidence in their future.
The State entities for which disclaimers of opinion were given include: the Guyana Sugar Corporation (GUYSUCO), Transport and Harbours Department, Guyana Rice Development Board, and Guyana Post Office, among others. We have already commented on the financial accountability of GUYSUCO in our previous two articles. As will be noted, the corporation’s performance in the first half of 2024 has declined significantly, despite the enormous amount of funds it has been receiving from the Treasury to assist in it in meeting its operational expenses as well as its infrastructure development programme. The Transport and Harbours Department is ten years in arrears in terms of financial reporting and audit. A similar observation is made in respect of Guyana Livestock and Development Authority, and the Maritime Administration Department, which have not had their accounts audited and reported on since 2012 and 2006, respectively.
In relation to the financial reporting and audit of the municipalities, we noted that the Linden Town Council and the Georgetown City Council were 38 years and 18 years in arrears, respectively, while the Bartica, Mahdia, Lethem and Mabaruma Town Councils have not had their accounts audited since they were established. The majority of NDCs were also significantly in arrears in having their accounts audited and reported on.
On 28 August 2024, the Minister of Finance issued the 2024 Mid-Year Report on the execution of the annual budget and the performance of the economy. The report was prepared in accordance with Section 67 of the Fiscal Management and Accountability Act which requires the Minister to present to the Assembly within 60 days of the end of the first half-year of each fiscal year, a report on the year-to-date execution of the annual budget and the prospects for the remainder of that fiscal year. The report is to include:
(a) An update on the current macroeconomic and fiscal situation, a revised economic outlook for the remainder of the fiscal year, and a statement of the projected impact that these trends are likely to have on the annual budget for the current fiscal year.
(b) A comparison report on the out-turned current and capital expenditures and revenues with the estimates originally approved by the Assembly with explanations of any significant variances.
(c) A list of major fiscal risks for the remainder of the fiscal year, together with likely policy responses that the Government proposes to take to meet the expected circumstances.
In today’s article, we provide a summary of the main points of the report.
Real GDP growth
An overall real Gross Domestic Product (GDP) growth of 49.7 percent was recorded for the first half of 2024, compared with 59.5 percent for the corresponding period last year. This was due mainly to the continued enhanced performance of the oil and gas economy which accounted for approximately 75 percent of the GDP growth.
Non-oil GDP growth was 12.6 percent, compared with 12.3 percent in the first half of 2023. This was mainly due to the growth in the manufacturing sector, which accounted for 27.5 percent, driven by the expansion in the construction and the oil and gas sectors. The construction sector expanded by 43.7 percent in the first half of year due mainly to the Government’s Public Sector Investment Programme (PSIP) as well as private sector investments across several sectors, including accommodation and food services and real estate activities. Rice production also grew by 17.9 percent. However, the sugar, livestock, gold and bauxite production recorded declined by 60.4, percent, 7.8 percent, 10.3 percent and 20.0 percent, respectively.
We continue to express the view that the overall GDP growth must be interpreted with some degree of caution since 87.5 percent of the value of the production of crude oil does not belong to Guyana; and that greater emphasis should instead be placed on the non-oil growth as a measure of the country’s economic performance. It is the overall GDP growth that the World Bank has used in determining that Guyana is now a high income with a GNI per capita of more than US$15,000 at a time when almost 50 percent of the population lives on less than US$5.50 per day.
Balance of payments
The current account recorded a surplus of US$3,199.9 million in the first half of 2024, compared with US$64.1 million for the corresponding period last year, an increase of US$3,135.8 million.
This was mainly due to the growth in merchandise export earnings outpacing the growth in the payments for goods and services. On the other hand, the capital account recorded a deficit of US$3,395.4 million, compared with a deficit of US$238.7 million for the first half of 2023.
This significant increase in deficit on the capital account was mainly attributable to transfers totalling US$1,234.1 million to the Natural Resource Fund as well as a reduction in net foreign direct investment (FDI) from a surplus position of US$10.7 million to a deficit of US$2,907.3 million on account of FDI outflows of US$7,505.8 million relating to cost recovery from the oil and gas sector outweighing FDI inflows.
Taking into account the above, the overall balance of payments deficit (after certain adjustments) was US$184.6 million at the end of the first half of 2024. This deficit was financed by drawdowns from the Bank of Guyana foreign reserves which stood at US$711.8 million, compared with US$736 million at the end of June 2023.
Inflation
The consumer price index rose by 1.6 percent at the end of June from the position at the end of 2023. This increase was due to higher food prices, especially fruits and vegetables. According to the report, food prices continued to be impacted during the first half of 2024 by a combination of domestic and global factors. These included disruptions in domestic supply chains and increased demand spurred by economic growth and population dynamics. Climate conditions also contributed to challenges in food production and distribution. At the end of June 2024, the 12-month inflation rate stood at 4.0 percent. However, this assessment of the rate of inflation does not appear to concur with the reality of the situation where there have been persistent complaints about the high cost of living in general, and food prices in particular. The report was, however, quick to refer to the various measures that the Government had taken since COVID-19 to cushion the effects of the high cost of living. In the 2024 budget, for example, over $70 billion has been allocated to increase the disposable income of citizens, including the zero percent excise tax on petroleum products, extended freight charge reductions, and the continuation of the part-time job programme. Significant investments also continue to be made in agriculture, infrastructure, health, education, social services and housing.
Interest rates
Interest rates at the end of June 2024 remained largely unchanged, compared with those at the end of 2023. The 91-day and 364-day Treasury Bill yields were 1.10 percent and 0.99 percent, respectively, while the 182-day Treasury Bill yield increased from 0.99 percent to 1.00 percent. Commercial banks small savings rate was 0.81 percent while the weighted average lending rate declined from 8.36 percent to 8.23 percent. The small savings rate remained unchanged at 0.81 percent.
Exchange rate
The official exchange rate of the Guyana dollar to the US dollar in June 2024 remained stable at $208. The market mid-rate, however, moved to $215.1
Revenue
Central Government current revenue collections, net of the Guyana REDD + Investment (GRIF), NRF withdrawals and carbon inflows, amounted to $227.2 billion, compared with $191.4 billion for the corresponding period last year, representing an increase of 18.7 percent compared with the corresponding period last year. This was mainly due to increased tax collections as well as higher inflows from the NRF. NRF withdrawals contributed $114.4 billion to total revenue, while $834 million was deposited from carbon credit inflows in the first half of the year.
Expenditure
Central Government expenditure amounted to $375.6 billion, a 30.8 percent increase over the corresponding period last year. Expenditure on the PSIP accounted for $162.9 billion, 38 percent higher than that of the comparable period last year. Significant investments were made in power generation, security, agriculture development and support services, and the upgrading of physical infrastructure including roads, housing, water, health and education facilities.
Non-interest current expenditure amounted to $205.4 billion, an increase of 24.8 percent over the corresponding period last year. Employment costs accounted for $54.6 billion, or 19.1 percent increase over the half year position in 2023. This was due to salary adjustments for teachers, Disciplined Services and the public service.
– To be continued –
