Govt accused of trying to outstrip and crowd-out private sector

– MP says Govt spending an obstacle to sustainable growth

The opportunity of accessing cheap credit due to high liquidity in the banking sector by private investors is no longer a possibility, and private investment is vastly being crowded out by Central Government, former Minister and Opposition Member of Parliament (MP) Irfaan Ali has observed.

In raising those points, Ali stated that Government is attempting to outstrip and crowd out the private sector since assuming office in 2015, an action he described as troubling. The former Minister warned that this could largely impact the country’s economic growth and the way business is done in Guyana.
“Thus, so far, it is conspicuous that since taking up office, this Government has attacked every source of funding at its disposal to satisfy its growing budget deficit,” he told this newspaper.
Based on the latest monetary survey, when compared to 2014, of total domestic credit to public sector, Central Government has increased its share by 245 percent, or $69.3 billion. The private sector, on the other hand, had taken a mere 8 percent, or $17 billion.
“This is an indication of a burgeoning Central Government, whose agenda, unequivocally, is to outstrip the private sector of much needed resources. Monies that could have otherwise benefitted private investment, whether in the form of home construction, expansion of business, etc., are now usurped by the Central Government,” he added.
Supporting this argument is Guyana-born, overseas-based Financial Analyst and columnist Sasenarine Singh, who said there is urgent need for change in how Government spends its budgets.
Singh said that, in 2017, Government spent about $1,333,000 per average household on mainly itself and on travel and pageantry projects, and idle, not productive investments.  According to him, very little was spent on building up the productive capacity of the six sisters (rice, sugar, etc.)
“We all know the Government does not earn these revenues, they take arbitrary decision to say they will tax you so much, and ‘we shall borrow so much in your name,’ to spend mainly on these pageantry, non-value-added projects. But this is the fact: every dollar the Government spends was earned by someone in the private sector, or is going to be paid back by the citizens of this country, as they are called upon to pay the loan,” he explained.
Singh said the more Government spends, thus crowding out the private sector, the less value the additional spending creates. At one-third of the size of the economy, total Government spending is well past the point where additional expenditures add value, he pointed out.
“This excessive level of spending explains why, during the periods when the Government’s share of the economy was generally growing, economic growth was slower and household incomes stagnated. Isn’t this the truth for 2014, 2015, 2016, 2017?  It is a fact,” he added.
He said if one is to compare today to periods when the Government’s share of the economy was flat or declining, when previous presidents curtailed the ratio of the public sector spending as a share of the national economy, economic growth was robust and household incomes grew.
“So this crowding out of the private sector will have a catastrophic effect on economic growth, growth in new jobs and increase in the wealth of the people.  And this high nonsense being sold that oil revenue will solve it all is just that — utter rubbish — because it will not change the economic fundamentals of the nation, not being productive enough. The right action is to incentivize the private sector and put them in the front seat of the investment vehicle,” he posited.
In 1993, the Gross Domestic Product (GDP) per capita was US$586 per person. By 2013 it has expanded over 500 percent. People saw real growth in the cash in their pockets during those years between 1993 and 2013. But since 2014, it has flattened, as Government spending rapidly expanded but is not backed by a corresponding expansion in productivity and value of production, he explained.