The Government of Guyana Financial Plan 2021
The current balance projects a surplus of $2,609 million, a reversal of $23,046 million over revised 2020. Current revenue of $266,023 million represents an increase of $38,918 million 17.1% over the latest estimate for 2020 of $227,411 million.
Budgeted current expenditure is $256,685.3 million, an increase of $15,090 million (6.2%) while Interest Expenditure is budgeted at $6,729 million, an increase of $485 million 7.8% giving a Current Balance of $2,609 million compared with latest estimates for 2020 of ($20,437) million.
Capital Revenue and Grants are budgeted at $10,406 million compared with $7,562 million for 2020. Budgeted Capital Expenditure is $103,248 million which is some $27,133 million over 2020. After Debt Repayment of
$16,419 million, an overall deficit of $106,652 million is projected, compared with a deficit of $103,004 million in 2020, 29% of which is expected to be financed by borrowings from external sources and 71% from domestic sources. Of the current expenditure, personal emoluments account for approximately 33%. Debt service as a percentage of current revenue is projected at 8.7% in 2021, an increase from 8.5% in 2020.
The main elements of the 2021 Plan are:
Total current revenues are projected to increase by $38,918 million to $266,023 million or by 17.1%. Of this, the Guyana Revenue Authority is expected to account for revenues of $242,091 million or 91% of total revenue, an increase of $23,761 million or 10.9% when compared to 2019 however the most recent normal year the increase is 7%. Roughly half of this increase is projected to come from ‘Other’ which includes rent, royalties, dividends, transfers, etc.
2021 will see a widening of the deficit from $103,004 million to $106,652 million.
Of the GRA’s collections, Internal Revenue is projected to account for $123,757 million compared with $113,161 million in 2020, a 9.4% increase, while Value-Added and Excise Taxes are expected to earn $93,701 million compared to $83,830 million in 2020, an increase of 11.7%. Collections by the Customs and Trade Administration are anticipated to be $24,633 million, an increase of $3,293 million or 16%.
An examination of revenue projections for full year 2021 show Companies Taxes increasing by 7.62 %, Personal Tax by 9.24 % and Self Employed by 12.17 %.
Despite the proposed changes in VAT legislation, overall VAT collections are projected to increase by 7.6%, expectedly with VAT on Imports increasing by a higher percentage than domestic supplies.
Excise Tax payable mainly on vehicles, alcohol and tobacco is projected to increase by 18% with a significant share of the increase being generated from imports. Other current revenue is expected to double across the revenue sources including miscellaneous.
Total current non-interest expenditure is projected to increase by $15,090 million from $241,595 million in 2020 to $256,685 million for 2021. Personal emoluments of $79,563 million represent an increase of 10.7% or $7,711 million over the revised figures for 2020. As a percentage of current non-interest expenditure, personnel emoluments account for 31%, Other Goods and Services 27% and Transfer Payments 41%.
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 $103,248 million represents a projected increase of $27,133 million or 35.6% over revised 2020 of $76,115 million. The top five ministries in terms of capital expenditure are:
1. Ministry of Public Works
2. Ministry of Finance
3. Ministry of Housing & Water
4. Ministry of Agriculture
5. Office of the Prime Minister
Interest expenditure is projected to increase by 7.8% or $485 million to $6,729 million. Domestic interest is projected to increase by $274.9 million or 20.8%, while interest on external debt is projected to increase by $789.9 million or 16%.
The principal element of debt repayments is projected at $16,419 million (2020: $13,080 million), made up of domestic debt repayments of a projected $3,800 million (2020: $2,040 million), while external debt repayments are projected to increase to $1,579 million (2020: $11,040 million).
Ram and McRae’s Comments
When in 2010 the country recorded its first $100 billion budget there was much acclaim, yet since that year, the pattern of rising deficits has defined every budget. In 2020 and 2021, the deficits are (40.1%) and (45.4%) of current revenue.
Prior to the Budget, the Government introduced legislation increasing the ceiling of both domestic and external debt. Hopefully with increased oil revenues the pattern will be reversed and Guyana will become a net investor of funds.
The 2020 Estimates (Details of Capital Expenditure)
2020 Budget focus drew attention to expenditure of $267.4 million by this previous administration on a range of matters including a gas to shore study. It would be a sad and costly waste if such a study is completely ignored by a subsequent administration.
A review of the revenue projections in the Volume 1 of the Estimates does not indicate profit oil and royalties from petroleum, perhaps because of the constraint imposed by the Natural Refund Act which has not yet been operationalised. More troublingly, Table 1 of Medium-Term Central Government itself does not show any line item for Oil Revenues. Whether this omission was due to uncertainty of how to treat the revenue is for some other reason it serves strange that we take oil proceeding in balance of payments analytics/ restricted or not.
In announcing the budget measures, the Minister claimed that the annualised cost of the measures announced in Budget 2020 exceed $40 billion and that the additional measures for 2021 will cost an additional $10 billion, making a total of $50 billion. Despite this the Minister is projecting increased revenues of 17% which is difficult to reconcile with the $50 billion.
Introduction
Based on the priorities of the Government as set out in its Policies and Targets, the Cabinet, which recommends the Estimates, seeks the approval of the National Assembly for the allocation of the funds. As the pie chart above shows, spending is done by Budget Agencies including Ministries and Departments, Constitutional Bodies, Regions and via subventions and subsidies made through various Ministries. Certain spending is automatic and does not require parliamentary approval: as the Constitution states, these are direct charges although in many cases, the actual amount is often a matter of some negotiation. In this section, we look at the allocations to the principal Budget Agencies largely by examining the details contained in Volume 1 of the National Estimates.
In order of spending, the top five Budget Agencies are the Ministry of Health, the Ministry of Finance, the Ministry of Home Affairs, the Ministry of Education, the Guyana Defence Force followed by the Ministry of Agriculture.
Ministry of Health
The Ministry of Health has eight programmes for which expenditure of $33,797 million is allocated. The single largest Programme is Regional and Clinical Services expected to spend $21,030 million. The two largest items of expenditure are wages and salaries of $5,604 billion and subsidies and contributions to local organisations amounting to $11,810 million, principally to the Georgetown Public Hospital Corporation. This Ministry will employ 4,257 persons of which less than 20% are contract employees.
Ministry of Human Services and Social Security
The Ministry has three Programmes for which is budgeted to cost $26,218 million. Of the three Programmes, Programme 392 Social Services is apportioned $25,067 million of the total budgeted. Under this Programme, Old Age Pensions and Social Assistance makes up the single largest item of expenditure of $23,590 million or 94% of the amount apportioned.
Ministry of Finance
The two Programmes under the Ministry of Finance are Policy and Administration and Public Financial Management Policies and Services for $21,061 million and $12,203 million respectively. The two largest items of expenditure of policy and Administration are Other Employment Costs and Subsidies and Contributions to Local Organisation. The principal subvention recipient of the Ministry of Finance remains the Guyana Revenue Authority which is slated to receive 84.4% of the Ministry’s subvention budget. Under Program 32, the major expenditure are statutory pension and gratuities of $5,774 million and provision for pension increases of $4,362 million.
Ministry of Home Affairs
The Ministry of Home Affairs has six Programmes, budgeted to cost $20,321million. Of this sum, the Guyana Police Force accounts for 71% or $14.385 million, of which wages and salaries account 52%. Of the balance, Overhead Expenses account for $2,923 million and Transport, Travel and Postage account for $1,983 million.
Ministry of Education
The allocation for the Ministry of Education is $19,789 million across six programmes including one each for Nursery, Primary, Secondary and Post-secondary education. Secondary Education is allocated $5,347 million while Post-secondary education and Primary are allocated $4,834 and $4,592 million respectively.
Ministry of Agriculture
The Ministry of Agriculture is allocated a total of $11,313 million across four programmes, the largest of which is Agriculture and Development and Support Services which is allocated $9,677 million or 86% of the total allocation. Out of this, the National Drainage & Irrigation Authority (NDIA) receives $6,615 million and the National Agriculture Research Institute receives $1,218 million.
Ram & McRae Comments
On our understanding of the law, is that it provides that the payment of the Old Age Pension be means tested. If this payment was targeted, genuine recipients could see their payment increased substantially.
Capital Expenditure
Central Government's capital expenditure for the year is budgeted at $103.2 billion or 27% of the total budget expenditure. The allocation is 35.6% above the latest estimate 2020 and 55.8% above 2019 capital expenditure.
The top five allocations from the Capital Budget are discussed below.
Ministry of Public Works
Under Public Works there are six major road projects. A sum of $1.06 Billion is budgeted for the design and construction of road link between East Coast and East Bank. For the completion, construction and rehabilitation of roads and drains in Regions 1, 2,
4, and 6-10 an amount of $1.1 Billion is budgeted. Completion, construction and rehabilitation of sea and river defences and payment of retention has a budget of $3 Billion. For the construction of a ferry vessel and rehabilitation of stellings at Kumaka, Morawhanna and Port Kaituma an amount of $1.2Billion is allocated. The CJIA Modernisation Project is allowed a budget of $2.5 Billion for two boarding bridges, two fixed links and completion of facilities.
The Ministry of Finance is budgeted to receive $11,677 million across two Programmes, under Programme 31 Policy and Administration, $11,586 million or 99% of the total is allocated. The two largest allocations under this Programme are $8,085 million or 70% towards the Project – Low Carbon Development Programme. The project also entails renewable energy interventions and $1,300 million to the Guyana Revenue Authority (GRA) for revenue management system, buildings, software, vehicles, furniture and equipment.
The Ministry of Housing and Water is allocated a total of $8,918 million.
Ministry of Agriculture
A budget of $8,177 million is being allocated. Under which 7,374 million or 90% Is being apportioned to Programme 212 Agriculture Development and Support Within this Programme, $3,250 million is being allocated for completion, construction and rehabilitation of drainage and irrigation structures and pump stations. Also falling under the agricultural development and support services is a provision of $432 million for rural agricultural infrastructure development. There is a contribution to GUYSUCO of $2 Billion which is $5 Billion lower than the latest estimate for 2020 of $7 Billion. In addition, a sum of $832 Million to the Integrated Agriculture Development Programme for enterprise and agriculture development initiatives.
Office of the Prime Minister
The Office of the Prime Minister is allocated a sum of $5,690 million of which $4,934 million or 87% is apportioned to Programme 23 Power Generation. Under this programme, $1,800 million is being spent on institutional strengthening and upgrading of electrification systems.
Ministry of Education
The Ministry of Education is budgeted to receive $5,456 million. Policy Development and Administration, Secondary Education and Post-Secondary/Tertiary Education are the three largest programmes apportioned $1,650, 1,293 and $1,285 million respectively or 77%.
Ministry of Health
The Ministry of Health has eight programmes for which expenditure of 5,291 million is allocated. The two largest Programmes are Disease Control – Communicable Diseases of $2,128 million and Regional and Clinical Services of $1,878 million. Under the programme ‘Disease Control – Communicable Diseases - $1,750 million is apportioned towards the project titled ‘COVID-19 Response Programme’, for the reduction of transmission of the disease and adverse effects on citizens. Major project allocations under the Programme ‘Regional and Clinical Services’ would include Ministry of Health – Buildings, GPHC, Equipment – Medical and Modernisation of Primary Health Care System of $370, $600, $450 and $350 million respectively.
Other Capital Expenditure worthy of note include:
- Ministry of Local Government and Regional Development of $2,680 million, of which $2,519 million or 93% is allocated to Local Government Development; 97% Ministry of Amerindian Affairs of $1,577 million, of which $1,543 million or is allocated to Community Development and Empowerment;
million Ministry of Tourism, Industry and Commerce of $920 million, of which $883 or 96% is allocated to Business Development, Support and Promotion; $3,171 Ministry of Human Services and Social Security of $3,307 million, of which million or 95% is allocated to Policy Development and Administration;
Guyana Ministry of Home Affairs of $4,093, of which $2,273 56% is allocated to the Prison Service.
An analysis of expenditure per person using the 2012 Census as the basis is as follows:
The region with the highest capital expenditure is understandably Region 4 which accounts for approximately 42% of the population.
Although Region No. 4 appears to receive the lowest direct allocation per person, agencies such as the Georgetown Public Hospital Corporation (GPHC) are located in this region and receive allocations outside of the regional administration. The GPHC is slated to receive $11.8 billion, an increase of 10% over the revise figure for 2020 of $10.7 billion.
Contrast these with the several critical legislations which through neglect or ignorance have largely fallen into disuse for which ironically, we use the English word desuetude! The country’s only widescale social security scheme has seen very little amendment since its passage in 1969. The same can be said of the Co- operative Societies Act and the Friendly Societies Act, the bedrocks of rural communities for decades prior to our enlightenment. Law must reflect society and must therefore be subject to amendments, replacements, creativity and change. It is foolhardy to assume that the drafters of legislation with their roots in a different time and different place had the divine foresight to legislate for centuries and decades into the future.
It is expected that the Law Reform Commission through its continuous work will remedy this attitude and for this reason we withhold our opinion on its proposed composition. However, we make the following recommendations such change and creativity for Guyana’s future namely:
1. Intellectual Property: Currently such legislation is practically non-existent. We are only too well aware of the theft of the work of our calypsonians and the name Demerara Sugar. As our economy modernizes and to protect our artistes, sportspersons, producers, designers, writers and manufacturers the country needs such legislation.
2. Immigration: Guyana has archaic laws which are not conducive to a modern, open society. We recall for example, the issues with the Haitians, dual citizenship, etc. Robust provisions to encourage expatriates, foreign investors, refugees and asylum seekers to relocate with ease while at the same time having avenues to contribute to Guyana’s economy.
3. Social Security: Performance of true intention of the drafters of the National Insurance and Social Security Act to ensure and not deny the working population of Guyana to receive financial benefits in their old age, and prohibiting the Scheme’s Board from denying claims for the slightest infractions by contributors.
4. Family Law: Removal of fault-based divorce, and greater enforcement of child maintenance and spousal support to secure and protect the family.
5. Co-operatives Societies Act: Ram & McRae believes that co-operatives have a role to play particularly in rural, and close communities. They have largely fallen into disuse and are often associated with poor governance and abuse.
6. Non-Governmental Organisations: When the Companies Act was being reviewed, the intention was to have separate legislation for Non-governmental organisations and not-for profit organisations. More than twenty years later and despite a draft of Insolvency Act being produced for CARICOM countries, there has been no progress.
7. Company Law: Updating provisions on directorships, unanimous shareholders’ agreements, insolvency, winding up, external companies and measures to enhance the governance and management of corporate entities.
Given the backlog of work to be done, the task is indeed formidable and will require considerable professional and technical resources. Pivotal to its success is the availability of persons with the knowledge, the experience and expertise to make up the Commission including a full-time Chairman. Moreover, there are ongoing issues of petroleum, the environment and labour, the latter of which is addressed as another essay in this section.
Unfortunately, the Budget makes inadequate provision for the kind and quality of work that needs to be done and as is the norm, we will turn to the international community and the multilateral financial institutions for help.
Long Term Impact of Covid-19 in Guyana
Like in the 2020 Budget, the impact of the COVID – 19 Pandemic featured highly in the 2021 Budget. The new Government has settled in and has formulated, in its own way, a national response including the equipping of an infectious disease hospital inherited from its predecessor.
Guyana, like countries around the world responded in varying ways, influenced by their financial resources and the policies of their governments. In the period since the last Budget the Government has been paying out $25,000 per household and costing, according to a release from the Government some $5.921 billion at the date of the Budget. We are not aware of any impact study of the COVID – 19, nor has any report been published of how the Pandemic affected the lower income families and the tens of thousands of families in Region 4 who are yet to receive their COVID – 19 relief. While there have been criticisms of certain features of the Government’s COVID Relief measures such as the absence of targeting and the restriction of the sum to a single household, the Government also helped in preventing additional hardship by continuing to pay public sector employees their full remuneration.
This was matched by some private sector employers who in a large measure continued to pay their employees. Unfortunately, the unskilled and lower income employees were not so lucky. A sales assistant, labourer, or fast-food employee cannot work from home and probably lost some significant share of their income and struggle to meet their needs, including paying their rents. Like with the economic impact, there has not been any assessment of the impact on the health and welfare of the lower income and the economic class in which the over eight thousand cases of COVID – 19 which Guyana has recorded.
How long the Pandemic will last is uncertain and Guyana can count itself lucky that it does seem to have escaped the really harsh effect as some other countries and places such as neighbouring Brazil and the United States. And that is despite the fact that we have not enforced the mitigation measures as strictly as we should. Yet the economic impact cannot be overstated. The closing of the borders dramatically halted the operations of entities in the hospitality sector and caused the closing of doors of houses of worship, schools and businesses. The 7.3% decline in the non-oil economy is testimony to the pandemic’s impact. Even the best of studies however will not provide a particularly accurate assessment of the impact on the economy as a whole and in any case, it is doubtful whether any of our academics or economists will take on this task.
The danger and consequently the impact is not over and will probably last for the better part of 2021. How will Guyana remember COVID – 19 and what will be its longer-term effect? On the economy, on health, on welfare of the people, and on education? Studies from abroad show that the scarring effects of the shocks to the economy are usually short-lived as evident from the oil shock of the seventies and the global crisis of 2008. That gives some support to the Minister’s slightly disguised optimism about the economy.
As is almost always the case it is the poor who will mostly have been affected by the pandemic but unfortunately and here again there are no disaggregated statistics of cases and deaths by socio-economic class. In their report ‘The impact of COVID-19 on global poverty under worsening growth and inequality’, the World Bank, citing the Poverty and Shared Prosperity Report 2020 (PSPR2020) highlighted that in 2020, between 88 and 115 million people globally were likely to be pushed into extreme poverty as a result of COVID-19 where households or individuals could only afford to live under US$1.90-a-day the equivalent of GYD$402.
We are not that bad but quite how better is hard to measure and assess. A payment of $25,000 to households would have helped but not by much or for long. To prevent abuse, the new Administration limited the payment to households as if many families living in the same house is a matter of choice. If it were, we would not have the number of house lot applications which the Housing Ministry has to contend with.
As a new disease there is no evidence to measure the long-term impact on health although international scientists have found no severe damage and the evidence is that with few exceptions, recovery is complete. Perhaps the most significant scar is on education with poorer children not having the same opportunities and resources to access online education. Depending on the level of the student in school, the consequences of being out of school and education for a mere few months could damage one’s learning for life.
It is unclear how the Ministry of Education proposes dealing with this.
On the plus side, there have been many lessons: how we do business, shop, entertain, and work. The world will have changed as a result of the pandemic. We need to learn from and adopt the lessons and to mitigate the dangers.
Minimum Wages
Despite its long and illustrious history of trade unionism and its socialist pretensions, as a country we have signally failed to provide to our workers what could be considered a living wage. Tracing this to the problems of colonialism hardly helps when Guyana is now confronted with exploitative capitalism. It is a sad reflection that the public sector minimum wage of $70,000 per month is 59% higher than what applies in the private sector which calls itself the engine of growth. It is unlikely that anyone can live a reasonably good life (APNU+AFC) or enjoy prosperity (PPP/C) with such starvation wage and yet we do nothing about it.
It is a real stain that any Government would tolerate this situation and sad that the Budget Speech was completely silent on the matter, particularly since an increase in the minimum wage was one of Labour’s submission in the recent consultation. The situation is not only heartless but also messy and reflective of complete insensitivity and ignorance about what is described as the national Minimum Wage.
In 2013, completely oblivious of the labour laws, the then Minister of Labour upended the system of minimum wage. A national minimum wage does not exist in Guyana. Instead, minimum wage rates are set through Minimum Wages Orders made under the Labour Act and Wages Council Act. These laws provide that where rates have not been fixed by minimum wage orders, wages can be agreed upon by individual or collective agreement.
The most recent attempt at righting this shame saw the APNU/AFC government establishing a tripartite committee with representatives from the Ministry of Labour, the Private Sector, and Trade Union bodies negotiating an increased minimum wage. The current Minister of Labour would later inform that the then tripartite committee had proposed $60,000 as the new private sector minimum wage. However, he stated that the meetings of that committee were stalled and a decision was taken by the PPP/C Administration to reestablish a new committee which will immediately continue the discussion on the proposed $60,000 increase.
Almost on cue, the private sector objected, claiming that the sector does not have the ability to withstand an increase in minimum wage. On the other hand, the union representing public sector employees supported the case of the private sector employees, arguing that despite the Covid-19 slowdown, a minimum wage in the private sector of $60,000 per month minimum wage should be brought into law. Not surprisingly, the PPP/C Minister of Labour has since been silent.
The case for a minimum wage is both an economic one as well as a social one. The private sector argues that an increase in the minimum wage can hurt the very persons it is intended to help. While such an argument cannot be dismissed, it should be challenged. More money in the hands of the lower income persons will go back into the very economy to expand business and to increase employment. But this has to be an ethical issue, a human right issue.
The Government must take a stand on this matter and not be swayed or bullied by the private sector spokespersons. If as the President stated in defence of the oil companies, workers are also entitled to a fair return on their labour.