…to be partly financed by oil monies – Vice President
The People’s Progressive Party/Civic (PPP/C) Government will be presenting its third budget in the National Assembly next Wednesday, Senior Minister with responsibility for Finance Dr Ashni Singh announced in a statement on Friday.
The 2022 Budget is expected to be the largest budget and will outline development programmes and projects, both continuing and new, that will be executed to fulfil the Dr Irfaan Ali-led Government’s manifesto promises aimed at not only transforming Guyana but also enhancing the lives of citizens.
Vice President Dr Bharrat Jagdeo
“This budget is expected to comprise a number of critical developmental programmes and projects which will catapult Government’s agenda and take the country forward. It will also be a continuation of the fast-paced development path which served to be of benefit to citizens all across the country since the People’s Progressive Party/Civic (PPP/C) entered office on August 2, 2020,” the Finance Ministry stated.
According to the missive, the Minister had been, over the last several months, meeting and consulting with various stakeholders including Government Ministries, Private Sector and other agencies as preparations continued for the new budget.
In fact, earlier this week, Chairman of the Private Sector Commission (PSC) Paul Cheong disclosed that the Private Sector is on the lookout for areas of interest to benefit the business community.
Finance Minister Dr Ashni Singh
Crucial among these, he noted, is allocation for further infrastructural enhancement and efforts to reduce electricity costs for producers.
“We need to continue with the infrastructure development. We have an infrastructure deficit and to make things better, we need farm to market roads. I know the Government has a programme to work on the electricity. We’re hoping that it would kick off even more this year so that the business sector would benefit from reduced costs,” Cheong discussed.
With the persistence of COVID for some two years, he added that tax relief would cushion the rising freight costs currently incurred.
“Taxes, they need to look and examine. I know it’s a balancing act but lots of prices keep rising because of the COVID situation. Freight rates and you see prices keep rising so we look forward to some relief in those areas,” the PSC Chairman stated.
However, during an interview that was aired on Friday with the State-owned National Communications Network (NCN) on the budget’s framework, Vice President Bharrat Jagdeo reassured that these two areas will be heavily addressed in Government’s plan for the 2022 fiscal year.
He noted that infrastructure for future growth will be one of the dominant areas in the budget, adding that this not only includes new highways and roads but also new power grids and ICT enhancements.
Oil funds
Moreover, with Government now preparing to present its fiscal plan for 2022, it was also revealed by VP Jagdeo that the budget will be partly financed by Guyana’s earnings from the oil and gas sector. He explained that by tapping into the oil monies, it will reduce the country’s reliance on external borrowing.
“The fiscal deficit this year, in this budget, would be lower than the fiscal deficit in last year’s from a financing perspective. That means we’d have to borrow less because some of the oil and gas revenues will go towards replacing the high level of borrowing that we have had,” he noted.
With Guyana spending more now, Jagdeo pointed out that the deficit would widen as the big capital projects come on stream but the financing of the deficit would reduce since the country would not be borrowing to fulfil that financing need.
“A significant part of the borrowing, starting with APNU/AFC – $90 billion every year – was coming from the domestic market. It now leaves more funds in the domestic market for Private Sector lending. So, there is no upward pressure on the interest rates there. In fact, the banks have to be a bit more aggressive to seek out people to lend to because they don’t have this easy way of lending to the Government… that’s simply because we have decided to use part of the oil and gas proceeds to finance the deficit,” the Vice President explained.
This will be Guyana’s first withdrawal from the Natural Resource Fund (NRF) since the country started collecting revenues from oil production in early 2020.
Production in the Stabroek Block offshore Guyana started in December 2019 and to date, some US$607 million has been earned. The monies are currently being held in the Fund at the Federal Reserve Bank in New York.
Only last month, Government passed updated NRF legislations that outlines the process for Government to make withdrawals from the Fund, chief among this is the fact that it has to be approved by Parliament.
However, while there are restrictions on making withdrawals from the Fund to deposits made in the previous fiscal year, the first schedule of the Natural Resource Fund Act 2021 allows an exception in the first year, giving the Government the latitude to withdraw the total balance in the Fund at once.
The PPP/C Government has contended that such a withdrawal is pertinent to addressing Guyana’s pressing development needs.
Meanwhile, the 2022 Budget will be the second full-year budget for the PPP/C Government as well as the second budget to be presented by Minister Singh.
The first budget was an Emergency Budget presented in August 2020. This saw the immediate reversal of a number of punitive taxes instituted by the former A Partnership for National Unity/Alliance for Change (APNU/AFC) Government among other significant measures while last year’s budget comprised several developmental projects in a number of sectors.
Then the 2021 Budget was presented in February 2021 under the theme “A Path to Recovery, Economic Dynamism, and Resilience”. It included funding for the construction of various housing schemes and expansion of existing ones, investment in the revitalisation of the country’s sugar industry, programmes in partnership with the Private Sector and other stakeholders for investment in the tourism and hospitality sector, the construction of a number of new roads and other infrastructure as well as a number of cash grants to citizens that assisted them after the destruction of crops and livestock during the devastating flood of June 2021, a seven per cent increase to the public sector and cash grants throughout the year which allowed for the stimulation of the economy.
Additionally, the 2021 Budget provided for large injections into the health sector and assistance to frontline health sector workers (vaccines and other health supplies) as the country continued to battle the COVID-19 pandemic.
According to the Finance Ministry, the developmental programmes included in the previous budgets all represented the fulfilment of promises made by the PPP/C Administration in its 2020 manifesto.
It was noted that the PPP/C Government remains committed to ensure that it fulfils every promise made to the citizens of Guyana and for which it was elected to office.
