This column wishes to extend sincere congratulations to His Excellency Dr. Mohamed Irfaan Ali, the 9th President of the Cooperative Republic of Guyana; Vice President Dr. Bharrat Jagdeo, and all the Honourable Ministers of the new Government.
The new regime has a humungous task ahead of it: to address the impacts of the COVID-19 pandemic, focus on an economic recovery plan, and get on with the business of nation building – for a country that has been badly wounded for the last one and a half years.
Your Excellency, I must commend you and your Government for the hands-on approach you have taken to combat these national issues with urgency immediately upon your being sworn in.
Whether fortunately or unfortunately, the new Government has once again inherited a broken economy and is virtually bankrupt, as had been the case in 1992, even whilst in the midst of a global pandemic. There are, no doubt, challenging tasks ahead; and at the same time, it is imperative that the Government works assiduously on a carefully-designed plan, linked to the national budget, to advance a swift recovery of the economy within six months.
Contrary to the views of a few economists, who believe that Guyana will take years to recover, the economy can rebound in six months’ time because Guyana is not a tourism-driven economy. Guyana has a thriving manufacturing sector, and is a commodity-producing economy.
The Government, also, has entered office with tremendous goodwill and the support of almost the entire world; and therefore, with the swearing in and peaceful transition that is taking place, Guyana is instantly back on the path of political stability, and investors’ confidence will soon skyrocket.
As such, in order to turn around the economy in a six-month period, there needs to be swift and significant injection of both public and private capital in the economy; and, of course, there needs to be significant foreign direct investment.
In view of the forgoing, the following recommendations outlined below can be considered in the crafting of the 2020 National Budget:
*Opportunities to rebuild the economy should start with food security. It is uncertain when the pandemic will be over, but in such times of difficulty, the growing demand for food in the region presents opportunities to scale up the country’s productive capacity and channel the appropriate investments in this sector.
*On the fiscal side, the opportunity to negotiate debt forgiveness and restructuring, in order to create the much-needed fiscal space to facilitate the rebuilding of the economy, ought to be of paramount recognition and importance.
*The current economic situation has also made it necessary to formulate creative solutions to support small- and medium-sized enterprises (SMEs), and to mitigate the impact on the labour market, in order to avert a severe social and humanitarian crisis. To this end, the Bankers Association, through collaborative efforts with the Small Business Bureau (SBB), the central bank, Ministry of Finance, and the Ministry of Business, can consider establishment of a $20 billion COVID-19 Fund to administer these relief and support measures.
The banking sector has well over $150 billion in liquid assets that can be utilised to partially finance, manage and administer the said Fund.
* However, an evaluation criterion will have to be established, and the Fund will have to be backed by Government support; inter alia, Government guarantee of the Fund. The Small Business Bureau (SBB), for example, operates a US$5 million Revolving Fund administered through the commercial banks. This fund can be recalibrated towards support measures to keep SMEs as going concerns throughout this COVID-19 period, and to keep employees on the payroll of these SMEs.
*Other unemployment support for persons directly affected by the COVID-19 can also be administered through the National Insurance Scheme (NIS). In fact, the governing structing of this Fund should include the NIS, SBB, Bankers Association, Bank of Guyana, Ministry of Finance, and Ministry of Business.
The proposed sum of $20 billion for the COVID-19 Relief Fund is premised on the analysis mentioned hereunder:
Based on the level of household non-performing loans in the banking sector, which accounts for about 17% of the total of 250,000 households in Guyana, this would give rise to approximately 42,476 households that are on the poverty line. We can safely presume, therefore, that about 25%, or 62,500 households, would need financial support as a result of their loss of income due to COVID-19.
Therefore, if we are looking at a six-month recovery plan, these households can benefit from the receipt of a monthly voucher of $40,000 per household; which would amount to $15 billion in cash relief support over a six-month period.
The other $5 billion can be utilised to support SMEs, which would, however, require retooling, business continuity planning, and crisis management training and technical support to build resilience and ensure their continued survivability.
On the other hand, companies that require relief or support in some form can have this administered, for example, by their being granted a six-month waiver of taxes; which would cost the Government about $20 billion in tax revenues.
Finally, simultaneous with implementation of the above relief measures, the Government needs to allocate resources for capital projects — for example, construction projects — drawing from its manifesto’s housing development project; which, together with anticipated foreign direct investments, would in turn help with the six-month turnaround plan.
This also means that the Guyana Office for Investment (GO-Invest) would have to look at ways to fast track the application process for tax incentives for investments.