Dear Editor,
The budget presentation provided more of what the citizens of the country needed in terms of money in their pockets. The increases and additions to disposable income is a plus in the budget presentation. Continued investment in drainage and irrigation, renewable energy and the further pursuit of carbon credits for our contribution to solving the climate crisis will prove to be a strength of the 2025 budget if focus is maintained and effective implementation is achieved. The planned improvement in the health sector as mentioned in the presentation should be applauded and as increased attention is also given to preventive care the more important it will become to also invest in community clinics. The government should also be applauded for the budget provided for free education and student benefits. Being able to sustain the benefits offered in the education sector will ensure adherence to the constitution and provide the needed human resources for continued economic development. As water treatment becomes more commonplace throughout Guyana, we must also allow for investment in the recycling of plastics. This will add to our green economy and benefit our ecotourism sector. Having drinkable water coming into our homes across the country is also a phase of development that the government must continue to strive for in the national budget. Thus, reducing the need for bottled water and the volume of plastics in need of recycling. CRG thanks the Ministry of Finance for its hard work and commitment to Guyana’s economic growth. The PPP/C continues to make the improvement in the standard of living of families and workers in Guyana a top priority.
As for additional opportunities for improvement, the overall concern raised by the budget is the sustainability of the spending and the sustainability of the increases being provided to our citizens. It is great what the government has planned for families, workers and businesses. Let’s make sure that we can continue to receive these benefits even after the oil and gas sector has passed its usefulness. For example, the funds received by the oil and gas sector for 2024 will cover the approximate cost of the Gas to Energy project including the interest charged. That’s one of the estimated 20 years of the sector being spent on one project. Phase 2 of the Gas to Energy project is also being planned and was mentioned in the budget presentation. This raises questions as to its cost and importance versus the sustainable lower energy cost options that renewable energy can now deliver. The budget’s support of a stronger renewable energy strategy should be revisited. Investment in sea defence continues to be timid, and given the magnitude that the negative impact of flooding can have on economic activity, it is important that investment in this area be increased. The government should consider shifting part of the infrastructure budget, and reallocating the funds for phase 2 of the gas to energy project to this very important initiative. In totality, an investment of $1B USD for 2025 should be allocated to ensure a truly transformative project is pursued to improve our sea defence during 2025.
It was not apparent from the presentation that the results of a recent fiscal audit and recommended improvements were incorporated in this year’s budget. The poor project management that had led to cost overruns, excessive waste and concerns of corruption have not been adequately addressed in the budget presentation. Instead of tempering spending a budget increase has been provided that allows for further infrastructure investment prior to improved controls being introduced. The interest being charged on loans are coming at the expense of earnings from the Natural Resource Fund (NRF), which could be earning similar or more attractive returns. The earnings from the NRF would support the sustainability of the favourable disposable income initiatives being provided to citizens.
With the exception of the forestry sector, investment in the various sectors of the economy was not accompanied by new trade agreements for value added goods, which would have helped improve the profitability of the sectors and shift the economy away from the volatile low margin commodity markets. Sugar is a great example of where the government has a lot to do in terms of market entry in order to improve the viability of the industry. Similarly, the bauxite industry’s increasing production has not been capitalized on to support the oil and gas sector with value added products. A missed opportunity that should be relooked at in the 2025 budget. Although investment will occur in the agriculture sector, no mention of investment or trade agreements being established to support a push towards the highly profitable organic agriculture market was made. Another missed opportunity in this year’s budget.
The long-term fragility of the economy does cry out for improved revenue generation and supports the public call for a contract renegotiation with Exxon. Although the budget is being financed without the need for new taxes it does cost the nation earned income from the NRF. The ambition of the current administration is admirable, but must be supported by higher earnings. Independent of which party is in power, our citizens will come to expect the fiscal benefits and subsidies being put in place to be permanent as the economy develops. This makes it imperative that prudent fiscal management occurs and that we initiate the request to renegotiate the current contract with Exxon. A quarterly review of spending by each ministry and the auditing of government expenditure is no longer an option that can lag spending for long periods of time. Prudent fiscal management requires that the audit process becomes current with the budget process, especially where the bulk of the spending occurs. Earnings from the Natural Resource Fund must also take priority over obtaining loans, and self-funding of our growth must become an achievable target. The exception being only when the forecasted costs surpass the earnings growth. Otherwise, we must stay cash flow positive and aim for a balanced budget. Upon reviewing the capacity constraints in the economy, human resources being a major component of this constraint, such an objective should be easily doable and achievable. Therefore, we must be very selective as to which projects and initiatives we undertake.
The current approach being pursued does place such a strategy at risk when one considers the loan terms from Exxon & Exim Bank, the management of the decommissioning funds and the earnings level of the NRF. Surprising to most investors will be the weakness of the currency, the recorded inflation and the exceptionally strong growth of the economy. The recorded growth of Guyana does support a stronger Guyanese dollar, but the markets have shown otherwise. Coface, who is a “global leading player in trade credit risk management” has rated Guyana a C in both Country Risk and Business Climate, with corruption being cited as a weakness. We must as a Nation improve our risk profile to be able to fully capitalize on the economic growth being achieved. The mentioned investment in the security sector is a good step towards improving both the perception and reality in Guyana. Our aim should be to achieve an A rating by the end of the next election cycle.
Best regards,
Mr. Jamil Changlee
Chairman
The Cooperative Republicans of Guyana
