Guyana’s performance on several economic indices is cause for worry. From the state of the foreign reserves to its ranking on Human Development Indices, former Minister and economist Irfaan Ali believes that the country was being mismanaged on a serious scale.
Economist and Member of Parliament, Irfaan Ali
Commenting on the economic health of the country, Ali pointed to tax collection and the contraction in various traditional economic sectors. When it comes to the increased tax collection, Ali noted the effects this has had on ordinary families.
“Since taking up office in 2015, the Government has failed miserably in managing the nation’s key traditional sectors of rice, sugar, bauxite and timber. Tax collection has increased by more than $45 billion. In other words, since taking up office, this Government took away an additional $271,000 in disposable income from each family.”
The effective tax rate increased by more than eight per cent, Ali added, pointing that contrary to claims of reduced taxes by the Government, if one took into account the 200-plus new tax measures, this Government increased taxes by more than eight per cent.”
Guyana Times had reported findings from the recently-released 2017 Auditor General Report, which had showed that the Guyana Revenue Authority (GRA) collected more taxes than was even anticipated.
In the end-of-year budget and reconciliation report, it noted that the projected revenue for 2017 was $186 billion. Instead, Government actually collected $195 billion in current revenue. This figure includes duties, as well as levy, personal income and withholding taxes.
The highest earnings came from the internal revenue category. Personal income tax collection grew by $2.5 billion. This, according to the Government, is because substantial arrear payments were recovered from self-employed persons through various initiatives. One of the initiatives the GRA has been implementing is a tax amnesty.
Non-performing loans
Ali also delved into non-performing loans, noting that these have increased considerably. This, he noted, is indicative of businesses failing and defaulting on their loan repayments. Another economic symptom, Ali pointed to, was the drop in average return on equity of the major commercial banks.
“Return on equity of our major commercial banks in Guyana fell from an average of 22.3 per cent in 2014, to 3 per cent in 2017, which is a sign of acute economic hardship,” the former Minister related.
“The gold reserve fell from $25 billion in 2014 to $3 billion, as of September 2018. Government deposits at the Bank of Guyana fell from $21.4 billion in 2014, to an overdraft of $61 billion as of September 2018,” he said, adding that this was a sign of overspending.
In addition, Ali pointed to the decline shown by the international reserve at the Bank of Guyana. He related that this fell from US$652 million in 2014 to US$447 million, as of August 2018. This, Ali stated, is indicative of trying to make up for falling foreign currency earnings from traditional exports.
“In 2018 thus far, the Government used up in excess of US$137 million. Forestry and bauxite sector loss in excess of US$37.8 million and US$86.6 million in foreign exchange, during the period 2014 to 2017, which is $25.8 billion.”
Ali also noted that to finance the Government budget deficit, the State borrowed $22.7 billion between the years 2014 and 2017 domestically, an increase from previous years. He described this as funds that could have otherwise gone to local investors to expand their businesses and create jobs.
