Budget Focus 1999 - Intro

This publication of Ram & McRae seeks to review and comment on the major issues raised in the 1999 Budget Speech by Hon. Minister of Finance Bharrat Jagdeo. Its content is not intended to take the place of the text of the speech or a professional advisor.

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As Minister of Finance, Bharrat Jagdeo, rose in Parliament today to present the final Budget of the 1900’s few would have envied him the enormity of the challenge which confronts anyone with the responsibility to present an acceptable Budget in these troubled political and economic times.

It could not have been easy for him to have presided over such a dramatic decline in an economy that had been coasting so smoothly and averaging growth rates of over seven percent.

The policies, bureaucratic structures and slow decision making procedures of the PPP/Civic Government have done little to encourage investments as a result of which the flows of foreign direct investment into the economy had begun to slow. This has been exacerbated by a sustained and troubled political relationship between the PPP/Civic Government and the opposition People’s National Congress.

The Minister still seems more pre-occupied with debt relief than with managing the economy and whatever his technical strengths he has not adequately displayed a capacity for managing his Ministry in an organised and efficient manner.

Writing a budget speech at the ‘twelfth’ hour is clearly unacceptable and explains why the Speech could have contained (or not contained as was the case) as glaring an omission as the inflation rate in the economy last year.

The Speech is long on words and short on details and substance. It fails to address the difficulties facing the economy as well as society. It is hard to understand how the Minister could ignore the efforts of so many of our citizens who are working pro bono publico in resurrecting the National Development Strategy.

The Speech also fails to address critical issues such as the recent dramatic deterioration in the exchange rate of the Guyana dollar, teachers’ salaries, crime, rising unemployment, capital flight and the dearth of investments so necessary to keep the economy in a growth mode. On the social side the Minister failed to acknowledge youth, women’s and poverty issues.

There is nothing in the Speech that suggests that the Minister is aware of the magnitude of the difficulties which confront him as he takes the economy into the next millennium.

Despite past experiences with unjustified optimism the Minister continues to project positions that seem not to be rooted in reality. In our view several of the financial and economic targets for 1999 will not be achieved postponing some of the tougher and imaginative decisions required to take us out of economic doldrums.

Many patriotic and knowledgeable Guyanese both in and out of Guyana through various media have offered advice and healthy criticisms on the management of the economy. Regrettably, the Minister often shows irritation at and contempt for what he incorrectly perceives as personal criticisms.

The Minister needs to rid himself of the tendency to regard critics as mischief-makers and to recognise that Guyana’s success will require the bringing together of the ideas, initiatives and energies of all Guyanese regardless of political or ideological persuasions.

As a matter of urgency the Minister must address the serious institutional and managerial deficiencies which are so patently obvious in not only the Ministry of Finance but the Government as a whole.

The issues which we consider critical for the Budget include: the rapid privatisation of State entities, controlling the exchange rate and therefore inflation, the public sector wage issue, unemployment, the flight of human capital and foreign investment.

Hopefully, the country will work with the Minister in addressing these issues.

• Major wave of Privatisation
• US$11 million part financing of Berbice River Bridge
• $US25 million Urban Development Programme to commence this year.
• Amendment to the Income Tax (Depreciation Rates) Regulations from 20 percent to 50 percent on all electrical equipment.
• Amendment of Property Tax Act requiring filing of returns by individuals with net assets in excess of $1.5 million.
• Increase in the exemption threshold from $5 million to $7.5 million in the case of individuals and $0.5 million to $1.5 million for companies.
• Reduction in stamp duty.
• Reduction of maximum external tariff from 25 percent to 20 percent.
• Sectoral review of incentive regimes.
• Establishment of a Tourism Board with a subvention of $15 million during 1999.
• $119 million for Poverty Alleviation Programme.
• $250 million to aid Neighbourhood Democratic Councils and Municipalities in the implementation of their programmes.
• $70 million to pay certain categories of officers whose posts are deemed vital to the civil service.

• Current revenues of G$34.9Bn or 5.5% over the actual for 1998.
• Current and interest expenditures of G$ 22Bn and G$ 10.3Bn respectively, resulting in a current balance of G$2.4Bn down 20% over 1998.
• Capital revenues* of G$3.01Bn or over six times the revenue for 1998. Capital expenditure on the other hand is expected to be G$12.78Bn or 2% less than 1998.
• External Debt repayments of G$ 3.968Bn and nil on domestic debt repayment.
• Overall deficit balance of $11.3Bn or 25.9% down from 1998 financed by G$15.4Bn from external sources and a local repayment of G$4. Bn.

 * Excludes Project Grants, which are included in the External Financing item.