Yesterday, we offered a perspective on considering Budgets in general, and with the Budget Debate kicking off this afternoon, we want to offer a framework for considering the substance of this year’s Budget based on the general objectives that governments seek to achieve. Unlike the early years of our republic, of recently the governments have been taking a more pragmatic rather than ideological approach to its budgetary (i.e. fiscal) policies as they moved away from socialism as the theoretical formulation to direct economic development.
Overall, the total budgeted amount is a historic GY$781.9b under the theme: “Improving Lives Today, Building Prosperity for Tomorrow”. Augmenting revenues from duties and taxes, which have not been increased, $209 billion was transferred from the Natural Resource Funds. In a developing economy such as ours, one of the primary objectives would be to promote the growth of the economy creating more paying jobs to improve the lives of the citizens. In one seminal initiative, the government budgeted $43.3 billion to facilitate moving the landed Natural Gas to the Wales Development Zone, where it will fire a 300MW generating plant to halve the cost of electricity.
This will reduce manufacturing costs and make the goods produced more competitive. $24.6 billion was allocated to kick off the latter project in addition to a Liquified Natural Gas facility. $4 billion was injected into Guysuco to stabilize its operations in addition to the reopening of the Rose Hall estate. The infrastructural program, which also promotes growth in the economy by facilitating transportation, included $5.2 billion towards the New Demerara Fixed-Span Bridge and $131 billion towards roads and bridges in all 10 Regions.
A second initiative, and one most closely watched in poor countries, is the “reducing of inequalities in income and wealth”. This is generally achieved by imposing greater taxes on the rich and passing it on to the poor. However, there were no additional taxes imposed yet the poor was assisted because of the oil revenues transfer. Some of these measures include the Income tax threshold raised from $65,000 to $75,00 monthly; old-age pensions from $28,000 to $35,000; Public Assistance from $14,000 to $16,000; Student Grants from $25,000 to $35,000 and a further $10B for Part-Time Jobs programme.
Another objective of the Budget is to maintain economic stability, in which the inflation rate looms very large along with the related interest rates in the banking sector for loans to businesses. Because of supply-chain disruptions due to the Covid pandemic and the Ukraine War, inflation has reduced the purchasing power of the citizenry. At the macro level, the Bank of Guyana utilizes two instruments in the conduct of monetary policy. These are Reserve Requirements. Open Market Operations.
Are interest rates on business loans too high? The cash grants and other income increases mentioned above should assist citizens but since the causes are exogenous, this will remain a challenge. The government has maintained the exemption of shipping costs for taxation on imports to assist. In local agricultural production, the government has a welter of waivers of taxes, duties on machinery etc, to reduce the cost of food production.
The reduction of regional disparities in another objective of budgets and as mentioned above the infrastructural spending was tailored to achieve this. Because of the inaccessibility of our interior regions air transport is critical and in addition to the road investments $1.6 billion has been allocated for upgrading interior airstrips. Notably, $1.8 billion has been budgeted for solar PV lighting systems for 30,000 households. Additionally, 15% of the carbon credits sold to Hess – this year amounting to $2.3Billion will be distributed to hinterland projects. In a similar manner, there are job creation projects in other regions.
In Guyana, recognising that health is a fundamental right, the largest component of our health sector is state-owned and the Budget allocates $84.9B for new hospitals, training health workers, and modernizing the sector in all the regions. Education is recognised as critical in the new economy being created and as such the $94,4 billion expenditure reflects the government’s commitment to this end.
Let the debate be informed.
