Many positives in budget but questions remain

Having listened to the budget presentation presented by the Ministry of Finance, CRG sees many positives and several opportunities for improvement in the budget. Dr. Singh did an excellent job with the help of his team to ensure that the increases provided to Guyanese were above the forecasted inflation rate for 2024. Thus providing a real increase in disposable income. The reaction by the opposition to the increases was surprising, especially when considering the lower level of disposable income that the government inherited upon taking office in 2020. The current plan to provide an additional $7B to reduce the impact of price increases does bring into question whether the forecasted inflationary level and the most recently recorded inflation rate are accurate. The expansion in money supply was significant and the lower interest rates on T-Bills when compared to inflation does incentivise increased demand for imported and domestic goods. The prior being under significant price pressure due to increasing freight costs and higher global inflation. A relook at the inflation rates and the basket of goods used to calculate the Consumer Price Index (CPI) may be necessary.

Although the budget has quickly surpassed the Trillion dollar mark, it was unclear what the estimated number of jobs created would be. The mentioned gap of approximately 30% of University graduates not being employed upon graduation does raise concerns. A balance must be achieved between the educational investment and the number of jobs created at the differing educational levels. Some initiatives are very good such as the loan forgiveness programme that the government is planning to undertake during the year, but a gap exists in that it does not consider offering this option to those who are unemployed and underemployed after graduation. The news of call centres expanding across the country was a bright spot in the budget and will also allow for us to make productive use of the refugees from Venezuela. These centres will become more competitive when a Spanish speaking option is incorporated in order to capture business in the USA.

The plan to support pensioners, and others who benefit from NIS should be applauded and as mentioned, the increase does go above inflation projections. Efforts to make the NIS fully sustainable over the long term need to be elaborated upon with a clear and achievable timeline that encompasses growth in the number of recipients and increases in forecasted inflation. Linking of ongoing government expenses such as this to NRF targets should begin as soon as possible. NRF performance and forecasted performance was not clearly disclosed, but double digit growth should be its primary objective.

Balancing expenditure and revenue continues to be a challenge in this year’s budget, with an increase in the debt ceiling being sought once again. Many projects are being rushed and the level of completed performance continues to raise questions on capability and capacity for the level of spending being pursued. Shifting some of the funds from the Infrastructure budget to sea defence would be money well spent and will help reduce some of the constraints currently faced. CRG recommends at least a $20 Billion shift. Having sea defence at 10% of the overall budget would ensure that preventive action is being taken to prevent future flooding due to forecasted sea level increases.

In the health sector many good initiatives are being rolled out such as the initiative on eye care and cervical cancer. Having funds also assigned for treatment of those diagnosed with the cancer would help close a current gap in the proposed budget. Similarly, health insurance provisions for temporary employees are not being considered in this year’s budget. Thus making the services provided by government hospitals and clinics more critical as an area for investment to meet affordable treatment needs. The Ministry should clearly outline how this section of the budget will be addressed.

Although there is a substantial investment being made in the Guyana Fire Service via VAT reduction on critical fire safety items and direct investment, there is an opportunity to align the needs of the fire service with the investments in the water supply. The recent fires have made it clear that pressurized water lines are now needed in the villages, communities and towns across the country to aid in fire fighting.

In the energy sector, which has been plagued by blackouts, the use of Solar Energy continues to be more attractive and more competitive when compared to other options such as Hydropower. This does make the plan to continue to pursue and invest in the Amaila Falls Hydro project more questionable. Funds would be better spent in continued expansion of solar energy use and the exploration of wave energy options along the coast.

The oil sector continues to provide the lion’s share of the revenue and growth in the economy, and recent legislation has improved Guyana’s position in the sector. However, the continued lack of adequate insurance coverage should result in budgetary provisions being made for an oil spill. This potential liability should be linked to an increase in our financial reserves, which can then be reduced once adequate insurance coverage in the sector has been provided.

Overall, the budget delivered many positive initiatives for the population and the PPP/C continues to place the wellbeing of our citizens at the forefront of most of their policy choices. Self sufficiency, which is a carryover from our earlier stages of development, continues to be a factor that is resulting in over investment and exposure to environmental, health and safety concerns. Using our allies to leverage excess capacity in oil refining, fertilizer production, and spice production (e.g. nutmeg) will help bolster trade and improve market access for other sectors of the economy. The pursuit of white sugar exports will aid in job creation and increasing the level of investment in the ecotourism offering are opportunities we can better leverage by maintaining our status as a good regional and global partner for trade.

The Tourism sector appears to have been sidelined in this year’s budget and opportunities to expand our unique offering have been missed. An example would be the new National Toshaos’ Council Secretariat, which is impressive, but there would have been added benefit to creating a structure that complemented both the Umana Yana and our ecotourism industry. We must also continue to consider the health risks associated with developing manganese mining, which is a low margin industry.

It is important that this year’s budget proponents allow for constructive dialogue that provides beneficial input into how we can work together to improve the effective use of our limited resources.

Congratulations to the Ministry and the Government on making a positive contribution towards the development of our Small Nation.

Best regards,

Mr. Jamil Changlee

Chairman

The Cooperative Republicans of Guyana