Optimistic 3.8% growth rate unlikely – Opposition MP

The revised Gross Domestic Product (GDP) growth rate of 3.8 percent for 2018 is undoubtedly optimistic, and again highly improbable, Opposition Member of Parliament and Economic Spokesman Irfaan Ali has said.
The MP gave reasons why he thinks that the projected growth rate that was pitched by the coalition Government is unachievable. One reason is Finance Minister Winston Jordan’s track record of erroneous projections.
However, Ali said, more than that, the wholesale and retail trade and livestock, which Jordan has described as the two trump cards for growth, are very unlikely to achieve the grossly inflated growth rates, Ali suggested.
“Reason being: wholesale and retail trade will likely be affected by shortage of foreign currencies. Two: other sectors, such as rice, timber, gold, and sugar, are

like to record worse-than-projected output levels,” the MP pointed out.
He said the deplorable condition of roads coupled with high fuel prices is expected also to further add to production cost and reduce accessibility to hinterland areas.
Moreover, given the dip in international foreign reserves at the Bank of Guyana (BoG) and the fact that in excess of US$71 million will be needed to cover the import bill of fuel and lubricants for the remaining of 2018, Ali said there is a high possibility of shortage of fuel, and other key foreign goods and services.

Domestic debt
Touching on the issue of local debt, the People’s Progressive Party (PPP) MP recalled that Jordan, in his 2015 Budget speech, made attempts to address the importance of macroeconomic stability and its critical role for the achievement and sustainability of the “good life.”
In doing so, the Minister made a commitment to ensure the maintenance of macroeconomic stability, by creating conditions to foster a positive growth trajectory while improving expenditure management.
Ali also recalled Jordan saying that this would involve the undertaking of prudent and targeted fiscal policy in order to reduce the deficit in both the Central Government and public enterprises.”
“Three years later, after fact-checking the above statement, it is conspicuous that the Government accomplished the complete opposite. By end 2018, overall deficit after grants for both Central Government and public enterprise is projected to increase to $51.5 billion, up from $36 billion in 2014, a difference of $15.5 billion. To satisfy this shortfall, approximately $41 billion will be sourced domestically,” the MP rightfully pointed out.

Foreign exchange
Pointing to another issue, Ali said the economic climate is expected to further deteriorate, with added pressure being placed on Guyana’s foreign exchange reserves.
He pointed to the 2018 Finance Ministry’s Mid-Year Report, which outlined that by end 2018, to satisfy the import bill of fuel and lubricants, another US$71 million will be needed.
Further, to satisfy the overall balance of payments deficit, that is now projected to increase by US$112.6 million or 162 percent, up from an initial projection of 14.4 percent, “A total of US$108 million will be usurped from the Bank of Guyana’s International Reserves, up from the initial projection of US$6.5 million. The huge increase in demand for foreign exchange, however, is likely to increase significantly, given the Minister’s abysmal track record of highly erroneous projections,” he added.

Balance of payment
Meanwhile, focus was also paid to Guyana’s overall balance of payments which has recorded a deficit of US$139.8 million in the first half of 2018, compared to a deficit of US$46.0 million recorded in June 2017.
Ali said that to finance this huge deficit, the Government usurped US$110 million from the Bank of Guyana’s Foreign Assets Reserve, taking the reserve to a 10-year low of US$473.4 million.
The overall balance of payments by end 2018 is projected to record a total deficit of US$182.1 million. But the Opposition MP has said it is important to note that the initial projection of balance of payments deficit was set at US$79.7 million for 2018. In other words, we have surpassed that amount by 130 percent within the first half of 2018.
“Moreover, the Current Account deficit is expected to weaken to a deficit of US$366.3 million by end 2018, down from an initial projection of US$292 million. In other words, the revised outlook for our Balance of Payments is even more ominous than initially anticipated. In short, there would be a greater need for more foreign exchange by end 2018 to cover our import bills,” Ali observed.