…cites IMF report which recommends moderate spending
While specific focus has been placed on the International Monetary Fund’s (IMF) recent report following a visit here, where they predicted real economic growth of 3.4 per cent for 2018, Opposition Leader Bharrat Jagdeo has said the report also highlights the dire state of affairs here.
Opposition Leader Bharrat Jagdeo during the press conference on Wednesday
Jagdeo made several references to the report, which was released on May 9. He said the heavy borrowing from the Bank of Guyana (BoG) is a major concern. The IMF has stated the importance of settling Government balances at the BoG, which will be achieved by the issuance of Treasury Bills.
“It probably is around $50 billion. It could be more…we (Government) are financing a significant part of our operation from borrowing from the banking system. Now that in the long-run will affect all our debt profile and once you borrow from the domestic and central banking system, it has implications for the macro economy,” he explained.
The financial institution also stated its support for prudent towards private external borrowing but has encouraged Government to rely to the extent possible on development banks, including non-concessional financing, and to follow-up on their plans to develop the domestic bond market.
The team met with Finance Minister Winston Jordan, Natural Resources Minister Raphael Trotman, Central Bank Governor Gobind Ganga, other senior officials, representatives from the Private Sector, the Opposition party, labour unions, and other key stakeholders during its visit here.
They reported that inflation remained subdued at 1.5 per cent at the end of 2017, largely driven by food items, while core inflation was close to zero and cautioned that scaling up public investment without addressing remaining shortcomings could undermine its effectiveness.
Another important observation made by Jagdeo was the fact that the IMF also recommended moderate spending increases and the consideration of an expenditure review which could provide opportunities for safety net reform and more effective action on inclusive growth.
He told a press conference on Wednesday that this same concern was raised when the IMF team met with him and other members of the Opposition. He said during that meeting it was emphasised that national budgets are increasing in size, but are not delivering growth or improving the welfare of Guyanese people.
He added that it is possible to reduce Government expenditure or reallocate monies in the 2018 Budget, without increasing the overall deficit, and ensure that there is economic growth and improvement.
Other comments made by the IMF, according to him, stresses the need for more to be done to address the local state of affairs. He noted that the actual growth rate for 2017 impacts on the calculation of macro-economic variables, used to plan for the future, all of which will now have to be recalculated.
Initially, Government had projected that Guyana’s economy would have grown by a 3.8 per cent growth rate for 2017. This projection was reduced to 3.1 per cent. It was then revised downwards again to 2.9 per cent. The actual performance, 2.1 per cent, was recently disclosed.
In 2018, the IMF said Guyana’s deficit is projected to widen to 5.4 per cent of Gross Domestic Product due to the cost of restructuring the sugar industry, including severance payments to displaced workers, as well as an increase in infrastructure related capital expenditure. The IMF has warned that the financing of short-term deficits should be carefully managed due to debt sustainability concerns.
Declining economy
The Opposition Leader spared no effort in chastising Government for listing ‘continued economic growth’ as an achievement in a review of its three years in office. Jagdeo said the growth rate revealed by Finance Minister Winston Jordan tells a very different story altogether.
“The economy is on the decline and this Government has no idea how to arrest that decline. They have not outlined a plan for the future. They do not have a plan to stimulate job creation and investment flow,” he said, adding that the growth in the productive sectors have either declined or remained stagnant.
Further, Jagdeo highlighted that “The economy is in bad shape.” He cited the performance of major sectors according to final 2017 figures, which were revised in February 2018, which show that: the agriculture sector only grew by 0.4 per cent, sugar contracted by 25.2 per cent, other crops only grew by 2.4 per cent and that the mining and quarrying sector contracted by 8.8 per cent.
Guyana’s last best growth rate was 5.2 per cent in 2013. But since then, it never surpassed that figure. Records show growth rates in 2014 was 3.8 per cent, 2015 at 3.2 per cent, and 2016 at 3.3 per cent.
Opposition Leader and former President Jagdeo has repeatedly criticised Government for what he described as their lack of vision to present a substantial economic policy. Jagdeo, an economist, had also warned Government against borrowing large loans which could put Guyana in greater debt. (Samuel Sukhnandan)
