Businesses were closing doors, facing bankruptcy under APNU/AFC’s tax impositions – Pres Ali

In reflecting on the state of affairs in Central Government and the challenges facing businesses when the PPP/C administration took office in 2020, President Irfaan Ali noted that immediate intervention was needed to restore the country from the verge of collapse.
Recounted the period his Government left office in 2015 to the period it was re-elected into power in 2020, the Guyanese Head of State reminded of the major depletion of resources at the Central Bank, and of an overdraft of over 500 percent during the APNU/AFC’s governance. At that time, he said, the deficit in Central Government moved from $9.3 billion to almost $30 billion in just four years.
“The new Government came in 2015 with $25 billion in gold reserve, and in 2019 it moved to $800 million. This represents a decline of 97 percent in our gold reserve at the Bank of Guyana,” he said. “Equally worrisome was the Central Bank overdraft at the Bank of Guyana had increased by more than $114 billion, or 540 percent…
“This is what we came in and met. This is the reality of what the new Government met,” Ali related.

He recalled the imposition of over 200 new taxes and the destruction it wreaked on private businesses and consumers. The effective tax rate in 2015 was 15 percent, but was raised to seven per cent, meaning the average person had to pay an average of 22 cents earned on every dollar.
“What were the net effects of these new taxes that were introduced? Of course it led to an increase in tax revenues and duties, from $136 billion in 2014 to $226 billion by the end of 2019 – an increase of 66 percent,” he explained.
According to him, these new taxes created a significant strain on businesses, some of which were forced to close their doors; while medium enterprises were facing bankruptcy.
“The level of private consumption in 2019 compared to 2014 was reduced by more than $77 billion. This was the net effect. That is why the businesses were feeling the effect. This is why businesses were closing their doors. Medium-sized businesses were going into bankruptcy because the net effect of the more-than 200-plus taxes was that private consumption declined by $77 billion…
“This is what led to the destruction of small and medium-sized enterprises,” the Head of State voiced.
He lamented that, in the time when Guyana had discovered oil and a massive economic boom with construction was expected, credit to the Private Sector was on the decline. This was compounded by declines in areas such as agriculture and manufacturing.
“The decline in domestic credit to the Private Sector is seen in the amount of credit allocated to agriculture, manufacturing, and the construction sector respectively. Between 2014 and 2019, credit to agriculture declined by $1 billion, credit to manufacturing declined by $3 billion, and credit to construction declined by $3 billion,” the President noted.
In the banking sector, non-performing loans increased from an average of seven percent in 2014 to 14.8 percent in 2019. “What this means is that not only were the banks receiving significantly less on their investment, but that investors were finding it extremely difficult to service their debts,” he explained.
The Ali-led PPP/C administration took office in August 2020 on the heels of a five-month-long election that threatened the democracy of the country. In addition to repairing those damages, the new Government had to contend with the challenges of the COVID-19 pandemic as well as the cascading effects on global supply chains which impacted the cost of living.
Notwithstanding, the Government introduced a series of measures aimed at alleviating the burdens faced by the population.