In last week’s article, the data showed that Government’s current consumption expenditure for the period 2015-2018 increased by a whopping 48 per cent when compared to the previous four-year period; capital expenditure for the period 2015-18 actually fell by 8.65 per cent or $18 billion relative to the period 2011-14. To that end, the essence of this analysis validates the contentions that while over the last four years Government expenditure has undergone massive increases compared to the period under the previous administration, such expenditure is largely concentrated in unproductive areas that could be deemed wasteful spending owing to weak institutional frameworks to ensure value for money projects. In fact, as can be seen from the numbers, Government expenditure on real capital projects has actually declined by 8.65 per cent or $18 billion compared to the last four years.
It is perhaps not enough to emphasise that this is a worrying trend, especially in a developing economy context – wherein for the period 2011-14, 30.5 per cent of government total expenditure was allocated towards capital projects, while for the period 2015-18, 21 per cent of government’s total expenditure was diverted towards capital projects, a decline of 10 per cent relative to the previous period. It means, therefore, that though Government’s revenue has grown exponentially in the last four years by some 41 per cent, much of it has gone into the financing of consumption goods and services, thereby, bloating the size of the public sector and a much larger government, rather than diverting more resources towards funding new capital projects that will enable sustainable future economic development and prosperity.
July 28 Economy & Finance
Extending on this analysis today, the author has opted to examine total expenditure over the period, disaggregated to show public and private expenditure in consumption and investment, together with a comparison of average GDP and inflation growth rates for the two periods 2011-14 and 2015-18. In these respects, the above data has revealed that average GDP growth rates for the period 2011-14 was stronger compared to the period 2015-18— which weakened by -1.63% in 2015-18 relative to 2011-14.
Total private expenditure increased by $223.8 billion or 9.23 per cent in the period 2015-18 from $2.4 trillion for the four years period 2011-2014. This was driven largely by increases in private investment by $406.2 billion or 125 per cent in the period 2015-18 – which can be safely deduced that this outturn was largely because of oil & gas related activities in the economy where ExxonMobil, in particular, has injected billions of dollars into the economy to its sub-contractors for services utilised in its operations. Conversely, private consumption has fallen by 8.68 per cent or $182.4 billion.
Total public expenditure, on the other hand, increased by $214.2 billion or 43 per cent relative to the corresponding period; while total private expenditure increased by a meagre 9.23 per cent. The alarming revelation of total public, when disaggregated, has shown that public investment fell by $35 billion or 14.34 per cent in the period 2015-18 compared to the period 2011-14 while public consumption has increased dramatically by almost 100 per cent or $250 billion from $256 billion for the period 2011-14 to $505 billion. This level of massive increases is equivalent to the entire national budget for 2017— which was $250 billion— and can thus be interpreted to say such that: for the period 2015-18, Government has expended an entire year’s budget on consumption expenditure alone. This is extremely worrying as it points to weak fiscal discipline on the part of central government, while noting that public investment has declined by some $35 billion coupled with a huge decline in private consumption. The private investments are all largely driven by oil and gas related activities in the economy – thus, this is nothing to be excited about other than it being an indicator that Guyana has already been permeated by the so-called “Dutch disease syndrome”.
Suffice it to state, therefore, there is a wide debate as to how Government will expend monies from the oil wealth, and, this analysis has actually revealed a worrying trend that leaves much to be desired. Massive increases in consumption expenditure will almost certainly fuel hyperinflation.
In next week’s article, the author shall examine public and private expenditure relative to GDP and the major sectorial performances over the two periods.
