Introduction 2021 BUDGET

Budget Speech 2021 was presented by Dr. Ashni Singh, who recently returned to Guyana after a number of years in international employment following the 2015 elections. Except for the venue, Dr. Singh was in familiar territory, having presented the Budgets for the years 2007 – 2014 as the head of the Ministry of Finance. In portfolio allocations following the 2020 elections, President Irfaan Ali has retained responsibility for the Ministry with Dr. Singh nominally operating within the Office of the President. Once again, acknowledging the impact of the COVID - 19 pandemic, the parliamentary sitting was held at the Arthur Chung Convention Centre.

Dr. Singh was his usual articulate self. It must be acknowledged too, that Bishop Juan Edghill, the pro-tem Finance Minister, who makes no claim as an economist, did a more than creditable job while exercising some of the functions of the Finance Minister pending Dr. Singh return. Budget date was about average for the PPP/C, Dr. Singh himself having presented four Budgets (2007 and 2009-2011) earlier than on this occasion.

The circumstances and atmosphere of the 2021 Budget presentation were more normal than on the last occasion. Unlike Budget 2020 which covered a mere three months in the year, the 2021 Budget covers a full year and timely passage should see an earlier start to execution of the substantial Capital Programme announced by the Minister. And in 2020, even as the Speech was being read, there was unrest in West Coast Berbice, protesting the gruesome murders of two youths from the area. On the last occasion too, the global pandemic was accompanied by uncertainty and gloom in the international economy while the price of oil was in the doldrums. Several months on, a number of vaccines have been tested and there is cautious optimism that the world may have turned the corner.

Then too, there appeared a disagreement between the Government and Esso Exploration and Production Guyana Limited over the Payara Development Plan with the PPP/C signaling its intention to renegotiate the 2016 Petroleum Contract signed by its predecessor. Not only has Guyana given the oil giant everything it wanted, but since then, oil prices are rebounding in anticipation of widespread vaccination and herd immunity in major countries and regions of the world leading to some normalcy in the international economy.

At a territorial and sovereignty level, the border issue with neighbouring Venezuela seems also to be heading in Guyana’s favour with the International Court of Justice ruling that it has jurisdiction in the matter.

We understand that consultations were held with the smaller Opposition political parties which contested the March 2, 2020 elections and that meetings were also held with the Private Sector Commission representing the business sector and with representatives from Labour.

The private sector is reported to have asked for a reduction in Corporate Taxes, fiscal incentives for Construction and Hardware Companies/Employees, such as the application of zero-rated VAT to ready mix cement, the removal of VAT on mobile data plans, the removal of VAT on all fast foods and the granting of agricultural lands to food companies that wish to practice backward integration.

The Guyana Trades Union Congress (GTUC) on the other hand, is reported to have asked for the reduction in national borrowing, strict enforcement of the work permit rule, the reduction of concessions given to the private sector, the improvement of medical services, the erasure of the National Insurance Scheme (NIS) deficit, an increase in the national minimum wage and the immediate restoration of the constitutional right to free education.

Clearly the Private Sector Commission’s (PSC) expectations had a more favourable response.

Unlike last year when Vice President Bharrat Jagdeo disclosed all the budget measures in advance of the budget, on this occasion there were no such disclosures. Apart from a commitment to dismantle the policies of the APNU+AFC government, the Vice President announced that the Budget would allow for the expansion of the productive sector. It would be unfortunate if the pattern in Guyana is for new administrations to reverse the policies of their predecessors without some objective consideration.

In the area of Oil and Gas, the Vice president in his pre-budget press conference announced the establishment of the Wales Development Authority to include the destination point for the gas to shore project which he opined would enable the rejuvenation of a community hard-hit by the closure of the Wales Sugar Estate.

While the Vice President was very critical of the flaring in oil production now taking place, the Government appears to have taken any renegotiation of the Petroleum Agreements completely off the table with the President making the case for the oil companies’ entitlement to a “fair return on their investment.”

Once again, the Budget is touted as Guyana’s largest Budget ever”, financed not by any taxes creating the largest Budget deficit ever. Given the events of the last year and the continuing COVID – 19 Pandemic, that might seem a small price to pay.

3. Sea and River Defence

For 2021, the Minister announced plans to further strengthen the country’s sea and river defence, identifying eleven areas for work, spread across the country.

E. Investing in Our People

The Minister identified nine critical areas of focus: Health, Education, Housing, Water and Sanitation, Youth, Culture, Sports and the Arts, Senior Citizens, Persons with Disabilities, Victims of Domestic Violence, and Amerindian and Hinterland Development. Four of these are discussed below.

In health, the immediate highpoint is the rolling out of COVID-19 vaccines during February, while several initiatives were announced for the development of the health sector, including the Port Mourant Ophthalmology Hospital, the Lusignan Health Centre, the National Referral Hospital and construction and retrofitting of the maternity wing of the New Amsterdam Hospital.

Education too emphasises the pandemic preparedness including the provision of PPEs and a revamped Guyana Learning Channel Trust. The Speech also disclosed plans to refashion of the University of Guyana and the establishment of an online learning institute delivering 20,000 scholarships over the next five years.

In housing and water, the plan for 2021 is to allocate 10,000 house lots and to distribute 7,000 land titles. To facilitate the infrastructure and utility works in new and existing housing areas, the Budget allocates $6 billion. Allocations to the Water subsector include funds to procure equipment and improve and expand the water supply network system across the country, to procure 20,000 water meters and for the sanitation practices and solid waste management.

For Amerindian and Hinterland Development, the Minister announced plans for the granting of titles to Amerindian villages, employing 2,000 CSOs, expenditure of $196.6 million for boats, engines and equipment, investing $1.75 billion for hinterland roads and awarding 196 scholarships.

Ram & McRae’s comments:

● The Plans for the gas to shore project do not include any marketing, economic and financial studies, apparently because the project is considered a no brainer. At a minimum, the country will have to consider the quantity of gas it proposes to take up, how much it will use in the generation of electricity and what it will do with the balance, if any.

● Transformational and prestige projects always excite but Guyana’s record with such projects has been far from uniformly successful. We recall the Upper Mazaruni Road Project of the PNC, the Del Conte road project of the PPP and the Skeldon Sugar projects and their cost to the economy.

● There seems to be an assumption that there is unlimited land available for housing in the main population and economic centers. In fact, as seen in the Success squatting saga, there is some competition for land for agriculture and for other purposes and the resolution will require a land use policy.

● The Minister did not exude the same level of confidence in the re-opening of the sugar estates and with only $2 billion allocated for GuySuCo in the Budget, one wonders whether there is some hesitation.

● The speech was short on governance, on corruption, local government elections and on constitutional reform.