De facto Govt spent $135B from treasury in 2020 – VP Jagdeo

— reports Central Bank overdraft: $84B

Vice President Bharrat Jagdeo has revealed that the previous APNU/AFC coalition had engaged in a series of corrupt spending that has left an overdraft at the Central Bank.

Speaking during a recent press conference, Jagdeo noted that the People’s Progressive Party/Civic (PPP/C), even while in opposition, had anecdotal evidence of not only the economy declining but had also suspected State resources were being wasted and utilised for purposes they’re not intended.
He noted that although there was no budget for 2020, by mid-year some $116 billion was exhausted from the treasury.
When extrapolated, the Vice President pointed out that the expenditure is already $135 billion so far this year, that is, recurrent releases through the one-twelfth provision; while revenue earned during that period was shrunk to some $111 billion.
On the capital side, he disclosed that there was some $34 billion approved.
“Last year just before the elections, the Government went on a corrupt spending spree and many of the Ministries awarded contracts although they knew they didn’t have money to fulfil the contracts… So, $21.7 billion rolled over from last year on the capital side into this year’s budget. So that means that the new Government is starting now with $21.7 billion already spent or catered for and that now reduces your allowance on the capital side by nearly $22 billion. That is unjust rollover projects,” Jagdeo posited.

The Vice President went on to reveal too that former Finance Minister Winston Jordan had issued a loan of $10.7 billion to the Guyana Power and Light (GPL) to procure Wartsila generation sets. He described this as an illegal disbursement, noting that the financial laws do not cater for such a sum to be disbursed from the Consolidated Fund for capital projects.
“This was in my view an illegal disbursement. Nowhere in our financial laws would they allow the Minister of Finance to disburse from the Consolidated Fund, $10.7 billion in a loan for capital expenditure. This was used to pay for some Wartsila plant that they were buying.”
“How could you justify a release of $10.7 billion in loan to GPL from the Consolidated Fund when you don’t have a budget… The Wartsila plant can’t be emergency either; they’re not here as yet and won’t be here for a long while… So that was another disbursement that would have to be reflected in this year’s budget too,” Jagdeo asserted.
However, apart from these “corrupt” spending, Jagdeo also disclosed that in relation to COVID-19-related activities, on the capital side, a total of $1.134 billion was released to the Health Ministry, while $150 million went to the various regional administrations – a total of $1.284 billion.
This means, he outlined, that the emergency budget that the new PPP/C Government is currently preparing will have some $34 billion on the capital side, and $135 billion overall, spent already.
“These are things that are hamstringing us in ensuring that we can pass a budget with a lot of room for help because so much expenditure are already been committed or expended,” he lamented.
Moreover, Jagdeo – a former President and Finance Minister – noted that these large expenditures by the coalition were done with borrowing from the Central Bank, which now has an overdraft of $84 billion that the new Administration will have to clear at some point.
“But that’s not the only borrowing. They borrowed from the Private Sector for the financing of the budget; that is, for fiscal purposes through the issuance of Treasury Bills – another $70 billion. So, you’re talking about another $150 billion of financing. That’s about US$750 million of financing for budgetary purposes. That’s the extent of the domestic borrowing… It might not be everything but just to give you a picture of the level of the borrowing that took place,” he stated.
To this end, Jagdeo pointed out that the new Government will now have to look at expenditure to date, both on the recurring side and on the capital side, which he said are “downright illegal”.
“The Attorney General will have to advise us on whether we will have to give approval in the Parliament for the expenditure that was made illegally, and how we will address that matter because you would normally put it in the estimates. So he will have to advise us how we will approach this matter because I’m inclined not to approve – when we go to Parliament not to support the approval of any expenditure that has been incurred illegally or outside the provisions of our laws and Constitution,” Jagdeo contended.
The Vice President announced on Friday that they are currently working on preparing an emergency budget to take the country towards the end of the year with emphasis on tackling the COVID-19 pandemic and starting the reopening of the economy. The budget is expected to be completed in three weeks.
As of mid-year, while the oil economy grew by 45.9 per cent in Guyana, the non-oil economy declined by 4.9 per cent due to the impact of the coronavirus.
“If you take out oil and gas, our economy shrunk by 4.9 per cent – nearly 5 per cent – in the first half of the year. So clearly it requires a lot of help. These sectors of the economy need a lot of help to resume positive growth and these are the sectors of the economy that have the greatest linkages to other sectors and they’re labour-intensive sectors of our economy,” Jagdeo stated.
He outlined that by mid-year, most of the traditional but significant sectors had suffered growth reduction.
The wholesale and retail trade shrunk by 14 per cent; transport by 25 per cent; accommodation by 33 per cent; bauxite by 42 per cent; and other mining by 57 per cent. These are just some examples of the state of the economy.
As such, the Vice President, whose role is assisting President Irfaan Ali, contended that a series of measures will be required in the new budget along with a new approach to reserve the decline of these sectors in the non-oil economy.