Dear Editor,
I read comments (GT Dec 5) of Finance Minister Ashni Singh of the huge deficit incurred by the coalition during its five-year tenure. As I put on my economist hat and went through the figures, my conclusion is there was soaring, reckless spending and irresponsible behaviour of those in charge of Government finances. The huge deficit is deeply worrisome as the consequences to the economy would be devastating for years to come, forcing the Ali Government to put a squeeze on spending.
Over five years, $1.2 trillion was spent with a deficit of $130 billion (money spent beyond what was collected in revenues) or borrowing it – equivalent of US$650 million. That is a per capita debt of $173K (US$866). One also reads that the coalition went into overdraft in the Central Bank — found $16 billion surplus and left office with an overdraft of $93 billion which means it spent $109 billion.
In addition, Government granted GuySuCo a $30 billion NICIL bond of which some $17 billion was drawn down between 2017 and 2020. Even though it was spent on GuySuCo which owes it, it is a Government debt. There was no capitalisation project at GuySuCo with that $17 billion; factories were not rehabilitated and movable equipment disappeared.
It was spent mostly on new (non-field) staff added after the closure of estates in 2016. In addition to the above deficits, the Government owes $12 billion to GPL. When all added together, that is a further $29 billion in arrears, making a total deficit of $159 billion (or almost US$800 million) over five years or a per capita debt of over US$1K. We also learnt that Government incurred US$400 million foreign debt over this period to fund various programmes.
But the above deficit is not a true reflection of Government borrowing. Overdraft was ballooning at the Central Bank. There is $70 billion Treasury Bills that Bank of Guyana issued from around 2017; that info is in BoG semi-annual report. Economists would know that T Bills are issued for fiscal purposes to reduce deficit on paper. The T Bills were issued to absorb excess liquidity in the banking system and were bought up by commercial banks with Government paying the interest rate. The T Bills were hiding the amount of true spending. Evidently, under the APNU-led coalition, overdraft increased significantly.
It seems similar to what transpired during the Hoyte/Burnham regimes. During the change in Administration in October 1992, it was revealed that there was an overdraft of some $45 billion which in today’s dollar value would be in excess of $90 billion. The Jagan Government had to erase that deficit through savings and very tight monetary spending in order to accrue money just to pay interest; some 92 per cent of export earnings were used to pay the interests on the foreign debt.
The coalition returned with the same kind of extravagant spending as under its previous carnation of the PNC regime that was removed from office by the US in 1992. As Jagan did, the Ali led Government would have to pursue tight spending over the next five years in order to gain fiscal and monetary balance. It means that the oil revenues for the next five years would have to be used to pare down the deficit and also to pay interests similar to what happened post-1992 by the PPP Administration when revenues from exports were used to reduce the debt of some US$2.2 billion.
What happened during the five years of the coalition was criminal. Responsible individuals must be held accountable. One recalls that the coalition had threatened to bring criminal charges against then Finance Minister Ashni Singh for spending money without parliamentary approval. But worse happened under the coalition between December 2018 and July 2020. Money was expended without authorisation. There should not have been any deficit for that period of time since the Government was in caretaker mode following its defeat in the No-Confidence Motion of December 21, 2018.
Jordan should know better than to go into deficit spending because he was once Budget Director thru May 2015. He knows how important it is not to bankrupt the treasury or violate rules relating to caretaker status. Only one-twelfth of the budget should have been spent monthly without any deficit. There were no capital projects.
We read that over $1 billion spent on the COVID-19 hospital did not meet basic requirements. And the sea defence breaches were not completed in spite of the huge amounts expended. Money was just handed out to friends and cronies for work not done. Payroll doubled between 2015 and 2020. It is incredible that no one attempted to rein in spending or eliminate least unjustifiable spending or scrap unnecessary programmes. In fact, I recall being told of a memo issued by one Michael Joseph (brought by Jordan from St Lucia as a political appointee), Secretary to the Treasury, instructing public servants to keep their mouth shuts on deficit spending. Thus, information on wasteful spending could not be made public to stop the runaway train.
International lending institutions denied applications for loans or grants for COVID-19 as the World Bank and IDB recognised that the APNU Government could not be trusted. Even COVID-19 grant was held back; the country began receiving substantial grants and loans after the change in Administration.
In light of the abuses at the treasury during the coalition, it is incumbent that Government and or BoG issue daily reporting on borrowing, overdraft, and issuance of T Bills. A forensic audit is urgently needed on the $1.2 trillion spending. Special attention should be focused on the $4.5 billion deficit spent from November 2019 to July 2020.
Yours truly,
Vishnu Bisram (PhD)
