2020 Policy Issues and Targets The Government of Guyana Financial Plan 2020
Balance of Payments
Overall balance on the balance of payments is expected to reflect a lower deficit in 2020 of US$21 million. The current account deficit is expected to contract by 53.9 % to US$361.2 million while the capital account is projected to have a surplus of US$810.6 million in 2020.
On the trade side, merchandise exports are expected to increase by 58.4% to US$2.5 billion, while merchandise imports are expected to decrease by 22.6% to US$2.3 billion.
Ram & McRae’s comments
The trade statistics emphasise and are distorted by the huge numbers in the oil and gas sector. To ensure that the rest of the economy is properly managed, a new model of our economy will have to be constructed.
The main elements of the 2020 Plan are:
Total current revenues are projected to decrease by $14,109 million to $226,476 million or by 5.9%. Of this, the Guyana Revenue Authority is expected to account for revenues of $214,548 million or 94.7% of total revenue, a decrease of $11,445 million or 5.1% when compared to 2019. 2020 will see a widening of the deficit from $40,028 million to $95,517 million.
The Government envisages the decrease of tax revenue by G$ 13,509, all in light of declined business activity due to the COVID-19 Pandemic. The only source expected to see an increase is Internal Revenue which anticipates a marginal increase of $3.4M.
Of the GRA’s collections, Internal Revenue is projected to account for $107,728 million compared with $104,331 million in 2019, a 3.3% increase, while Value-Added and Excise Taxes are expected to earn $84,729 million compared to $96,547 million in 2019, a decrease of 12.2%. Collections by the Customs and Trade Administration are anticipated to be $22,691 million, a decrease of $2,424 million or 9.7%.
An examination of revenue projections for full year 2020 show Companies Taxes increasing by 6.42 %, Personal Tax by 5.78 % while collections from Self Employed are expected to decline by 24.7 %.
Despite the proposed changes in VAT legislation, overall VAT collections are expected to remain steady with 2019 but with Imports declining by $4 billion while VAT on Domestic supplies are expected to increase by a similar amount. The major tax change is in relation to Excise Taxes which are expected to decline by $11.8 billion or 26.9 % which the Minister explained as due to low collections from the importation of petroleum products.
Total current non-interest expenditure is projected to increase by $32,343 million from $207,683 million in 2019 to $240,026 million for 2020. Personal emoluments of $74,823 million represent an increase of 9.1% or $6,272 million over the revised figures for 2019. As a percentage of current non-interest expenditure, personnel emoluments account for 31%, Other Goods and Services 29% and Transfer Payments 40%.
Transfer payments are payments from the Government to individuals, organisations or other levels of Government made with the specific objective of furthering Government policy or programme delivery and for which the Government does not receive directly any goods or services.
Capital expenditure of $72,070 million represents a projected increase of $5,808 million or 8.8% over revised 2019 of $66,262 million. The top five ministries in terms of capital expenditure are:
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4.
5.
Ministry of Public Infrastructure
Ministry of Finance
Ministry of Public Security
Ministry of Agriculture
Ministry of Presidency
Interest expenditure is projected to increase by 1.3% or $75 million to $5,946 million. Domestic interest is projected to decrease by $47 million or 4.5%, while interest on external debt is projected to increase by $122 million or 2.5%.
The principal element of debt repayments is projected at $11,514 million (2019: $11,777 million), made up of domestic debt repayments of a projected $280 million (2019: $280 million), while external debt repayments are projected to increase to $11,233 million (2019: $11,497 million).
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Ram & McRae’s Comments
While the Ministry of Finance consistently ranks at or near the top, the expenditure is not all incurred within the Ministry. For 2020, it includes payments for GRA $6.6 billion (2019: $5,885) and Statistic Bureau $637 million (2019: $884 million); other subsidies and contributions to local organizations comprising mainly of $509 million (2019: $518 million); “other employment costs” which includes provisions for public service salary increases of $6.3 billion (2019: $6.2 billion) and pension increases of $3.8 billion (2019: $3.3 billion). The subvention of Guyana Security Council has increased from $110 million to 231 million in 2020 or by 1.1%.
There are 280 employees under the agency of which 107 are contract employees. Significantly, in the year of a major pandemic, the Health sector accounts for over $31 billion of the current expenditure. Over the remaining three months of the year, the Ministry of Health is allocated $13.4 billion, under six programmes excluding Policy Development and Administration. Other charges make up $11.4 billion of this total while employment cost is a more modest $2 billion.
Current Expenditure for the Ministry of Education is spread among the four levels, i.e. nursery, Primary, Secondary and post-secondary education; Policy Development and Administration and training and development. Over 3,000 persons are employed in the Ministry with about 37% in the senior technical grade and a mere 3% being contracted employees.
The Ali Administration has reverted to the Ministry of Home Affairs (Agency 51) which captures three months of expenditure for the year 2020 while the Ministry of Public Security (Agency 54) captures nine months of expenditure for the year 2020. This switch in Ministries is identical to what took place in 2015 when the PPP/C ceded power to the Coalition. Agency 54 – Ministry of Public Security includes the Police Complaints Authority, the Prison Service, the Fire Service and CANU along with the Police Force.
This Ministry of Public Security employed 7,996 persons compared with 5,682 in 2015. Employment by the Ministry of Home Affairs by the new administration is projected at 8,140 which has increased by 1.8%. Average employment cost per person under the old Ministry of Public Security was $1.063 billion per month while as Ministry of Home Affairs the employment cost had projected to $1.4 billion.
In addition to Ministry Administration, Agency 21 -The Ministry of Agriculture is responsible for three programmes; Agriculture Development and Support Services, Fisheries, And Hydro Meteorological Services. Of the $10,046 million appropriated current expenditure $8,458 million was expended on contribution. $5.7 billion is allocated to the National Drainage and Irrigation Authority and $1.2 billion to NAREI, 84% of total appropriated current expenditure for the Ministry. The sole source of revenue of the National Drainage and Irrigation Authority is the Central Government. We are advised that there is no record in Parliament any financial statements have not been tabled for the NDIA.
Capital Expenditure
Central Government’s capital expenditure for the year is budgeted at $72 billion which is 10.5% above the revised 2019 and 21.9% of total 2019 expenditure.
Ram & McRae’s Comments
Vice President Jagdeo sought to explain the balance of the capital expenditure budget available to the new government and suggested that $22 billion was available beginning August 1, 2020.
The single largest expenditure under Agriculture and Support Services is the Capital contribution of $3 billion to GuySuCo. Usually for each capital expenditure there is Project Profile setting out, among other things, the description of the Project and its benefits. This omission ought to be rectified.
Some $1,445 million is being spent on institutional strengthening and upgrading of electrification systems. In fact, the total project cost is $17.63 million of which $8.199 million was spent prior to ‘2020’.
Guyana Power and Light also features under Contributions to Local Organisations involving a $10,782 million loan to the Corporation. Similar to the $300 Million to GuySuCo there is no further information to any of the estimates.
A provision of $ 1.2 million under Project Title “Low Carbon Development Programme” includes, among other things, Amerindian Land Titling and the institutional strengthening of the Department of Environment Office of Climate Change and Project Management Office.
In addition to the $5.7 billion of operating subsidy the NDIA is also being allocated a Capital Grant of $1,160 million for drainage and irrigation structures, not all of which are genuinely capital projects. Under Public Infrastructure there were two mega road projects. These were the miscellaneous roads project ($2,082 million) and the Highway improvement East Coast Demerara project ($2,599 million). The Ministry of Public Works is projecting to expend $1,320 million on sea and river defence works while the Ministry of Public Telecommunication had a provision of $3,130 million as a National Broadband project.
Under Local Government Development, some $460 million is provided as Capital Subvention for Municipalities and Neighbourhood Democratic Councils Profile of this allocation are quite limited.
Under the Ministry of Health Capital programme there is a provision of $2.9 billion for COVID response initiative. There is no capital project profile for this expenditure, the benefit of which is the reduced transmission of disease. The Georgetown Public Hospital Corporation is stated as receiving $7,446 million under the Ministry of Public Health and a $3,289 million under the Ministry of Health. Confusingly, there are two statements of revenue and expenditure for the Corporation.
In this section we consider the measures announced by the Minister, analyse them, evaluate their impact and discuss the extent to which they provide useful economic benefits to stakeholders. Section six of the 2020 Budget Speech contains some thirty-two Budget measures. This follows the forty-five in 2019 and twenty-five in 2018. The proposed changes are subject to statutory amendments. Those concessions in relation to School children and pensioners will take effect from the first of January 2021while the other measures come into effect from the 1st of October 2020.
We now look at these measures and offer our comments.