2021 Budget Measures
In this section we summarise and comment on the 2021 Budget measures in the Budget speech. Measures 6 and 7 listed below are measures announced in the September “Emergency” Budget and are already in effect. The proposed changes are subject to statutory amendments and certainly in relation to Item 1, no action can be taken until the relevant Order is published.
Readers are advised to follow announcements in the Press or by the Guyana Revenue Authority.
VAT and Duty Measures.
Review 2020 Economic Performance
The Minister reported that Global output in 2020 is estimated to have contracted by 3.5 percent and in the Latin America and the Caribbean region, economic output is estimated to have contracted by 7.4 percent in 2020. By contrast, reflecting Guyana’s first year as an oil producing country, the Minister reported a growth in the economy of 43.5 percent. However, the performance of the non-oil sector of the Guyana economy was similar to that of our regional neighbours, recording a deficit of 7.3 percent.
We summarise here under the sectors discussed by the Minister in his budget presentation.
Sectoral gains and losses announced by the Minister were as follows:
Ram & McRae’s Comments:
This is the worst economic performance since 1989 and reflects the twin plague of the pandemic and the political tensions from the no-confidence in December 2018 to the declaration of the elections results in August 2020.
Inflation
Based on an Urban Consumer Price Index, the inflation rate for 2020 was 0.9%, marginally above the range of the negative 0.23% and 0.7%, projected in the September 2020 budget. According to the Minister, higher food prices largely driven by higher prices of meat, fish and eggs, and vegetables and vegetables products were off-set mainly by low energy prices.
Ram & McRae’s Comment:
Inflation figures are always contested by individuals often based on personal experiences and anecdotal evidence. For the average person whose main mode of transportation is the minibus, such lower energy prices did not translate to lower transportation cost.
This first full-year budget of the PPP/C since resuming office, is themed “A Path to Recovery, Economic Dynamism and Resilience”. The Policy Issues and Targets are set out in Chapter 4 of the Budget Speech with the sub-title the Agenda for 2021 and Beyond. Budget Focus highlights some of the principal issues identified by the Minister and offers some of our own comments.
In summary, the Administration’s plan for the near-term is “to keep people safe and continue to nurture the economy.” For the medium term, their plan is to make Guyana an economic powerhouse in which national prosperity is a reality. The Minister offered that the achievement of these plans requires a broad-based resilient productive sector, creating meaningful and rewarding employment and the emergence of a dynamic entrepreneurial and small business sector.
A. Macroeconomic Outlook
Anticipating high rates of real economic growth, the Minister recognises the danger of the Dutch Disease - a characteristic of economies experiencing rapid growth - and proposes an agenda for the country designed to make it competitive while addressing both stability and sustainability. The Minister expects that this will be achieved by prudent contracting of new financing, careful targeting, management of government expenditure and strengthened revenue administration. Specifically, the Plan hopes to achieve adequate levels of external reserves, and ensure exchange and interest rate stability and low levels of inflation.
B. The Low Carbon Development Strategy (LCDS)
The Minister reaffirmed the Administration’s commitment to restore the Low Carbon Development Strategy (LCDS), a centerpiece of which was the forest partnership Agreement with the Government of Norway allowing Guyana to earn US$250 million over a five-year period. Key to this Strategy was a significant hydroelectricity project at the Amaila Falls on the Kuribrong River, the failure for which was attributed squarely but incorrectly on the political opposition.
The key actions proposed under this Strategy are:
1. The unblocking of more than US$135 million receivable under the Agreement Norway funds and its investment in renewable energy projects.
2. Assessing the emerging market for forest climate services.
3. Updating and expanding the LCDS into a comprehensive development strategy.
C. A Diversified, Resilient and Competitive Productive Sector
The Minister announced extensive plans for Oil and Gas; the Mining Sector which he estimates employs over 27,000 persons; Forestry; Agriculture and Food Security including Sugar, Rice and Other Crops, Agro-processing, Livestock, Fisheries and Aquaculture; Intermediate Savannah Development Initiative, Drainage and Irrigation;
Sustainable Tourism; Information Technology; Industrial Development and Manufacturing; and Small Business Support.
In Oil and Gas, the Minister announced plans to create an enabling and regulatory environment for the oil and gas sector including amending legislation, the development of a model Petroleum Sharing Agreement, exploring a revised petroleum fiscal regime, advancing the draft local content policy and associated legislation and the Petroleum Commission Bill.
Expressing plans to work with stakeholders to ensure the viability of sugar, the Minister reserved his strongest language for what he describes as “hundreds of years of sugar cultivation being slaughtered at the altar of political expediency”. In relation to the three sugar estates which were closed by the previous Administration, the Minister announced that the Board of the Corporation was assessing the damage suffered and the cost to rehabilitate those estates.
The Administration has announced that Agriculture will be one of the major anchors of the country’s non-oil economy with a view to providing food security, improve incomes, create jobs and generate foreign exchange income.
Acknowledging that Wales Sugar Estate cannot be re-opened, the Minister announced plans for the establishment of a Wales Development Authority (WDA) which he estimates will employ 3,000 directly and a similar number indirectly. Among the new frontier crops to be promoted across the country are coconut, corn and soya bean.
In Livestock, the Government proposes engagement in partnerships to realise improvements in the volume and quality of meats and meat products for both domestic consumption and exports. The Minister announced a modular abattoir at Garden of Eden and a modern abattoir in Region 5.
In tourism the Minister announced that at least six privately financed major hotel brands will commence construction in 2021, adding 1,000 hotel rooms with another 2,000 to 3,000 being added in the medium term.
In information and communication technology, the Minister drew attention to the liberalisation of the telecommunication sector and expects a minimum of $360 million being contributed by operators to a University Fund to facilitate access by poor and vulnerable communities.
D. Transformational Infrastructure
The Minister announced as three areas he considers of transformational value, viz Energy, Transport Infrastructure and Sea and River Defence.
1. Energy
The several projects designed to expand the country’s energy capacity include the Amaila Falls Hydro Project and the gas to shore power project to be the trailblazer to advance Guyana’s path to domestic energy security in the next three years. In this regard, the Minister announced geophysical, geotechnical, engineering and environmental impact assessment studies to be undertaken. He also announced plans to install 10 mini-grids and four off-grid systems in 2021, four solar farms and three hydro-projects across various communities in the country.
2. Transport Infrastructure
Among the major roads and bridges projects announced are:
The the rehabilitation of the Linden – Soesdyke Highway; a road link between Diamond to Mocha; the four-lane highway from Eccles to Mandela Avenue; a four-lane superhighway between Schoonord to Parika; developing the Parika to Goshen route; and the Timehri to Bartica link.
Minister also announced plans for the construction of a high-span bridge across the Demerara River and the Corentyne River Bridge Crossing, a joint project of the Governments of Guyana and Suriname.
Six stellings are identified for rehabilitation: Bartica, Supenaam, Parika, Kumaka, Wakenaam and Fort Island.
The troubled CJIA project will be addressed to add two passenger boarding bridges, the rehabilitation of the airline and administration offices and outfitting the commercial complex.