Part 2: A RESPONSE TO THE FORMER FINANCE MINISTER
The former Minister of Finance sought to assassinate the 2020 emergency budget in the Saturday edition of Stabroek News, dated September 11, 2020, but he failed miserably in so doing. It is unfortunate that the former Minister’s ramblings can only be characterised as an unimaginable incomprehension of how the economy works, arguably so; and how to resuscitate a broken economy.
The former Minister stated that “the Government’s 2020 budget has eroded the revenue base of the country, while enormously inflating the deficit”, and that “the budgetary measures are private-sector oriented, rather than for the people.”
First, it appears that the former Minister is using financial terminologies carelessly, to the extent where he completely ignored the state of the economy, and more so the treasury, even from the pre-COVID period under his tenure, which the Government of the day has now inherited. That is to say, the former Minister left a bankrupt treasury (absolutely no liquid cash in the Government’s bank account) compared to over $80 billion liquid cash he inherited in the bank in 2015.
Second, the budget was delivered within 30 days, less than half the time in a normal budget cycle under the former Minister’s tenure; and, more importantly, it’s an emergency budget in the context of having survived a period of political turmoil for five months. This, coupled with the COVID-19 health pandemic, also induced unprecedented financial and economic hardships on both the business sector and households. This means that businesses would have generated less revenue, and would obviously pay less taxes. In fact, the economic impact of the COVID-19 pandemic was dealt with extensively by this column over the last five months. Consequently, in a period of such economic circumstances, governments have a responsibility to revamp the economy, despite the level of current debt, by borrowing to inject money into the system.
If one were to examine in detail the caveat of the budget, it is largely a budget to stimulate both investors’ and consumers’ confidence in the economy, so that companies will be encouraged to invest more, and in turn create more jobs, so that persons who were out of a job due to COVID can find themselves back to work and earning a salary.
Further, a private sector-oriented budget is also a people’s budget because it is the private sector that creates jobs and generates wealth; from whom employees, who are consumers, earn an income and pay their taxes; and, more importantly, the private sector is the largest tax payer, meaning it is the largest source of income for the Government.
A private sector-friendly budget also creates the enabling environment for entrepreneurship to thrive, thus empowering people to invest in their own businesses, which also creates more employment. In fact, the budget allocated more than $300 million for small businesses to benefit from grants and loans.
Further, the former Minister made a politically-inclined comment, which is rooted in ignorance at best, in regard to economic policymaking: that the policies administered in the budget would benefit only the ruling administration’s supporters. This is a most nonsensical and unscholarly assertion coming from someone who is supposed to be a trained economist.
It is worthwhile to note that the budget removed the imposition of VAT on a series of items, including electricity, water, building and construction materials, mining equipment and agricultural equipment; reduced licence fees by 50%; removed corporate tax on private education and health care; removed VAT on all-terrain vehicles for mining, forestry, agriculture and manufacturing; and the list goes on. All of these fiscal measures cannot possibly and practically go towards the benefit of a particular group of people in society.
In addition, measures such as the mortgage interest relief being increased from $20 million to $30 million would benefit every home owner and potential home owner with a home loan of up to $30 million, not a particular group.
The same goes for the low-income loans’ bracket, which increased from $8 million to $10 million. These measures will automatically benefit Guyanese from all walks of life: low income, middle income and the wealthy. These policies are designed to encourage investment from the private sector, boost confidence, and create thousands of jobs within the economy by empowering people all across the country to have their own business; and would offer them opportunity to build, design, and own their own homes, from the lowest income to the highest income. This is empowerment which the people undeniably and irrefutably were denied over the last five years.
Finally for today, the former Minister spoke about the size of the budget, suggesting that the expenditure is excessive and must be accounted for. This is very disingenuous of him for the simple reason that more than 50% of the budget had already been spent while he was acting as caretaker Finance Minister, and well before the current Government took over; and therefore it is former Finance Minister who ought to have accounted for some $160 billion, most of which was expended outside of the legal remit under his tenure, quite destructively and irresponsibly.
To be continued…
About the Author:
JC. Bhagwandin is an economic and financial analyst, lecturer and business & financial consultant. The views expressed are exclusively his own, and do not necessarily represent those of this newspaper and the institutions he represents. For comments, send to [email protected]