- PNCR 2004
Winston Murray, C.C.H., M.P.
- National Library Auditorium
- Monday, April 05, 2004
budget of the public sector for any year should be seen and
placed within the context of an overarching, or underlying,
medium term strategy for the country as a whole.
It is difficult for me to honestly say that any clear
strategy over the medium term is discernible here or for that
matter, in any of the budgets presented by this administration.
have been some generalised references to the National
Development Strategy (NDS) in previous budget speeches but the
status of this document is at best dubious and for all practical
purposes, appears to have been shelved though, I believe, the
administration would like us to think it is still under
consideration somewhere. Let
us assume it is still relevant and of consequence to the
- The overview of the strategy states as
follows: “If all our strategies are followed, it is forecast that
the average annual growth of the country’s GDP, between 2001
and 2010, would be 9%. We
are convinced that, even if the strategies are not followed
optimally, at the very worst, barring a series of cataclysms the
average GDP growth would be of the order of 6 %”.
Against those benchmarks we are clearly in the wilderness
more recent vintage has been the Poverty Reduction Strategy
Paper (PRSP) which may be viewed as a sub strategy of the NDS,
although it seems in effect to have taken the place of the NDS,
- Having perused the budget the strongest
statement or indicative action I can find in the budget speech
on that strategy is at P22 where it is stated “….the
Government remains committed to implementing the broad policy
reforms that are outlined in the PRSP.
The focus of the PRSP is to raise the level of
development and generate sustainable growth so that all Guyanese
can enjoy prosperity and a higher quality of life”. This is followed by a paragraph of generalisations on the
- Perhaps we need to remind the Government of
two salient prerequisites under the PRSP which, it is my
understanding, would be necessary, if not sufficient, conditions
for the strategy to be successful.
- The first relates to GDP growth.
P38 of the PRSP states as follows:
“On balance the economy is projected to grow at an
average annual rate of 4% between 2000 – 2005….”.
Here are the facts.
In 2000 GDP contracted by 0.8%, in 2001 it grew by 1.9%,
in 2002 by 1.1% and in 2003 it contracted by 0.6%.
second prerequisite relates to the public sector deficit (after
grants) as a percentage of GDP.
At P35 of the PRSP it is stated that the Government will
“contain expenditures and raise revenues in order to bring the
public sector deficit down to about 1.3% of GDP in 2003 and
eliminate it in 2005”. The
fact is that in 2002 the deficit as a percentage of GDP was
5.7%, in 2003 9.1% and it is projected to rise to 10.1% in 2004.
external financing as is projected under the PRSP would have
been predicated upon the achievement of the above.
Already we know that financial resources from the United
Kingdom will be reduced and there is every reason to believe
that this is a likely scenario for other sources of financing.
combined effect of the above is that achievements under the PSRP
are way, way off target.
Minister of Finance owed it to this nation, I believe, to have
given a full and thorough report on why these divergences have
occurred, and even more important, given us a clear and firm
plan as to how the PRSP will be put back on course. For now we
can forget about the NDS not because it is unimportant but
because our goodly Government seems to have put it aside.
P3 of his budget speech, the Minister says “…. An exciting
period lies ahead. The successful implementation of this agenda will see our
country making a quantum leap into the second decade of the
excitement ahead in my view could only be with respect to the
almost insuperable challenges we face to put the economy right
and under the present dispensation the only quantum leap we seem
on the verge of making is one into a veritable abyss of
hopelessness and despair.
16th December, 2003, the President assented to the
Fiscal Management and Accountability Act 2003 which is, among
other things, intended to improve on the presentation, the
context and the execution of the budget.
Section 1 states that the Act shall come into operation
on such date as the Minister may, by Order, prescribe which,
according to the Minister, will be during this year, I believe.
That notwithstanding, having failed to provide a firm and
clear plan re the PRSP he should, at the minimum, have cast his
budget in the context of the requirements of the Fiscal
Management and Accountability Act. This Act at Section 15 requires that “The annual budget
proposal shall include –
tabulations and analyses of actual
and projected expenditures for the next ensuing fiscal year
and the next following three fiscal years, including a
discussion of any new or changed expenditure policy by the
estimates of all statutory
expenditures for the next following three fiscal years;
estimates of expenditures for
investment by each budget agency for the next following three
details of the fiscal relationship
between the Government and the regions, including proposed
general and special purpose transfers to the regions for the
next following three fiscal years”.
But alas even this was
too much to expect.
last half a decade or so of marginal growth, no growth or
negative growth stands in stark contrast the growth rates of
between 6 and 8.5% per annum during much of the 1990s.
- That growth was fuelled by the
Hoyte Economic Recovery Programme embarked upon in 1989 with the
assistance of the International Community.
In fact Mr. Hoyte entered into a Structural Adjustment
Programme with the IMF in that year. When he demitted office in 1992 after 3 years of structural
adjustment, Guyana had been firmly put on the road to economic
recovery and strong economic growth rates, with the clear
indication that once the momentum was maintained the need for a
formal Structural Adjustment Programme would be soon obviated.
over the 11 full years of PPPC management of the economy we have
never been able to shed the yolk of structural adjustment
programmes in whatever disguised forms they have come or by
whatever euphemisms they are known.
is only by a comparative analysis that we could truly discover
and appreciate the underlying root causes for the slippages (or
calamities) that have occurred over these last 11 years.
1989 and 1992 a virtual economic revolution was unleashed in
the Structural Adjustment Programme was addressing the economic
fundamentals it was always known and accepted that medium to
long term growth had to be a function of private capital
investment, both local and foreign, to develop the full economic
potential of Guyana.
the heart of the revolution was the jettisoning of socialist
economic theory and practice and the unapologetic embrace of the
forces of the free market with necessary safety net safeguards.
This involved not only the formal passage of laws but
also the evolution of a new ethos in the management of economic
constitution of the ruling party was drastically altered to make
it consistent with the new dispensation.
That was the framework and context
for success. The
changing of the guard, as it were, clearly signaled a shift, if not
in form, in substance; the body language of the new administrators
did not gel with their talk.
It is true that much evidence abounds in words
and even recently in legislation indicating that the economy was,
and is, to be private sector led with a big role for foreign private
capital. But the
evidence shows that the absolute minimum is done to comply with what
is required/ ‘suggested’ by the IFIs and the broader donor
community in a valiant, if not yet, futile effort to keep Guyana on
track for its rendezvous with prosperity.
The situation is that we have IFI and donor community driven
reforms with the Government doing the barest minimum necessary to
give them effect. Yet
the Government, at every opportunity, touts those reforms as
evidence of its commitment and achievements in such areas as
governance and private sector development.
Let us lay open the
full context of operations:
The ruling party has by its
‘democratic processes’ found repugnant proposals to amend
its constitution to excise the Marxist/Leninist principles
The principle of democratic
centralism is alive and well.
It was not so long ago invoked by a most eminent member
of the Government for overriding the decision of the Guyana
Forestry Commission set up as an autonomous agency with its own
governing board under a specific Act of Parliament.There
is an even more recent example of an attempt by a public officer
to collect monies inappropriately paid to a Regional Chairman
being overridden at the direction of the said eminent member;
business community, entrepreneurs in general and
especially large scale investments are viewed with deep
and it is only after, on an individual basis, a
particular investor or businessman has passed ‘ the test of
loyalty’ to the ruling party that the investment/investor is
cleared. Thus apparently general rules are applied, in
practice, by exception;
While formal agreements are being entered into
bilaterally and with IFIs their execution are often undermined
in content, spirit and practice.
excellent example of this is the agreement (put in legal form)
removing from the Minister of Finance the discretionary grant of
remissions of duty and making such grants applicable only under law.
One of the items affected is fuel.
There is information which suggests that whereas the
percentage and monetary amount of remission were previously shown on
the customs documentation this information is no longer included and
only the amount of duty paid is recorded.
Thus whether there has been a remission of any duty is no
longer detectable from the documents and an arbitrary or
discretionary remission may thus be concealed.
is an impressive list of legislation passed which has either built in advantages for administrative
manipulation or which
only remain in form. The
list includes, but is not limited to, the following:
The Insurance Act 1998 – Although passed in the National
Assembly in 1998 it did not come into effect until December 2002,
and although the Insurance Arbitration Board was set up in 2003 the
Insurance Board of Review required under the Act has not yet been
The Money Laundering (Prevention) Act 2000 – As of now in
2004 the Supervisory Authority required under the Act has yet to be
set up. The Act is
therefore not operational four years after its passage in the
The Public Procurement Act 2003 – Act was passed in haste
in June 2003 without any consideration of serious flaws drawn to
attention by the opposition PNCR.
Under this Act the Minister retains wide ranging powers of
appointment of the persons to administer procurement at all Board
levels and even directs appointment of staff of the Public
Procurement Administration. This put institutions under the Act under the effective
control of the Minister;
Tourism Authority Act 2002 – This vests in the Minister the
powers to appoint all members of the Authority’s Board and he must
give sanction to appointment and termination of staff at the highest
unfortunately makes the Authority a creature of the Minister;
Commission Act 1997 – This Act is seen to have no impact even in
the face of mounting corruption all around us.
the heading ‘Stimulating Private Sector Investment’ in his
budget speech, the Minister said “During 2004, we will continue to
take initiatives to provide a more business-friendly
environment….” and in that context he mentions two brand new
They are respectively Act No. 1 of 2004 (Investment Act) and
Act No. 2 of 2004 (Small Business Act 2004).
me to spend some time on these Acts since they provide the most up
to date evidence of the game the Government is playing in giving the
appearance of promoting private sector development or providing a
more business-friendly environment when, in effect, the Government
wants to retain a veto and a paramountcy over private sector
Under this Act an Investment Promotion Council is established with
the function of, inter alia, reviewing and recommending to
the Government alterations to Priority lists (these contain the
investment priority categories for benefiting from concessions.
It also has the function to recommend to the Government
alterations to the regime of fiscal incentives established for
Deal with composition at P10 of the Act
Time within which to establish IPC
of Small Business Council.
Functions on P7 of the Act.
See composition on P5 of the Act.
review of the 2004 Budget by Ram and Mc Rae in the
News of Wednesday March 2004, sums up this situation accurately when
of Guyana is quite willing to enact legislation despite the absence
of commitment, conviction or capacity.
The consequence is that the objectives are seldom met even
when the legislation is brought into effect.”
I can only add that this amounts to an unforgivable deception
of the Guyanese people and an attempt to mislead the International
Community whose intention is to make a positive impact on the lives
and circumstances of the Guyanese people.
seems that in exchange for financial assistance, the
to return to our economic condition.
It is absolutely clear that whereas the Hoyte
administration understood that a structural adjustment framework
only bought time and opportunity for the necessary focused
policies and measures to be put in place and assiduously pursued,
the PPPC administration is clinging to structural adjustment
process and the attendant resources it brings as the Alpha and
Omega of its economic policies and this is my greatest worry about
the future of our country.
the most positive utterances by Government Ministers, the fact is
that at best, then is but a trickle of private investment to and
in Guyana, compared with the vastness of our resource base and our
immense potential for economic growth.
Within the Caribbean we are constantly lagging behind in
economic development and at the wider international level serious
and large investors are not looking in the direction of Guyana.
us look at some of the measures that have formed part of the
armoury of the PPPC administration.
part of the liberalisation process of the Hoyte administration the
Corporate Tax Rate on commercial companies was reduced by 20% from
55% to 35% and the rate on non commercial companies was reduced
from 45% to 35%.
its first Budget in 1993, the PPPC increased the corporate tax on
commercial companies from 35% to 45% with effect from year of
Accommodation Tax of 10% was imposed with effect from March 1993.
the 1994 Budget the Tax Holiday as an incentive for investment was
abolished although it was reintroduced in the 1998 budget and a
new turnover tax based on gross receipts was introduced.
This was limited to commercial companies in January 1997.
In 1994 we were promised a Tax Court to be operational in
Jan. 1, 1995 - never done
the 1995 Budget 10% Consumption Tax on Overseas Telephone Bills
1997 a progressive system of Personal Income Tax was reintroduced
with a 20% rate and a 33 1/3% rate in place of the flat rate under
the PNC administration.
2003 Consumption Tax of 10% on Local Telephone Calls was imposed
along with an increase in withholding tax on savings etc. from 15%
measures could hardly be said to portray vigorous support for the
private sector or for the encouragement of private initiative.
year in the lead up to the budget the ritual of
‘consultations’ takes place with stakeholders, including the
private sector organisations and this is usually trumpeted as an
act of achievement even though from all accounts precious few, if
any, of the suggestions are incorporated within the budget.
failure to convince private capital (both local and foreign) that
it is truly welcome on a level playing field is the major
bottleneck in both broadening the base of the economy as well as
in bringing about the needed strategic alliances for backward and
forward industrial linkages. There is a crisis of confidence in
our Government which frightens away private capital.
The Government must give up its insatiable appetite for
control and leverage. It
must also remove the red tape and bureaucracy that stifles the
effort to bring an investment on stream.
Many foreign nationals of Guyanese extraction recall the
horrors of trying to bring investment to fruition. In the Stabroek
News of March5, 2003 there was a report on President Jagdeo’s
participation at two public forums where he addressed large
gatherings of Guyanese. The report said in part (quote).
abysmal failure to pursue serious and focused policies with
commitment to attract private sector investment denies Guyana an
exit strategy from Structural Adjustment Programmes.
should come as no surprise, therefore, that in 2003, net
domestic credit of the banking system fell by 8.1% to $25.9
billion, that credit to the private sector decreased by 17.2% or
$10.1 billion, that loans and advances to the manufacturing
sector declined by 14.5%, to the agriculture sector by 48.4% and
to the rice milling sub sector by 42.6%.
Total liquid assets to the commercial banks amounted to
$40 billion or 7.2% more than in the previous year.
The budget speech tells at P9 “The banks showed a
marked preference for short term treasury bills”.
at what has happened in the bauxite industry.
Fifteen hundred persons have been laid off at LINMINE
with but a very small number being re-employed.
We are told at P25 of the budget speech that “efforts
to restructure the ailing bauxite industry will continue this
year”. But the
picture at best is very murky.
The one thing that is clear is that “following the
cessation of mining at Aroaima, the workforce will be reduced by
about 150 workers by September, 2004”.
regards sugar we continue to be very skeptical about the Skeldon
expansion but obviously wish it well.
I believe it to be wrong however to try to create an
overly optimistic picture.
It was only two years ago in the 2002 budget, at P25,
that it was said that “the Skeldon expansion should result in
…. reduced cost
of production to US 11 cents per pound of sugar over the next 5
years”. But at
P23 of the 2004 budget there is talk about lowering the costs of
production from the current average of US 17 cents per pound to
US 9 cents per pound by 2007.
At least we should be told a believable story.
it is my understanding, and I have heard the President himself
say this, that GUYSUCO is, and will be, pursuing a profit
maximisation strategy for the industry.
In such a situation it will be misleading to give any
assurance (as the Minister appears to have done in the budget),
that the operations of the Demerara estates will continue.
for rice, the position remains very insecure.
We have seen that loans and advances to the sub sector
fell in 2003 and we have heard in previous budgets about finding
new markets in Brazil, Venezuela and Haiti.
None of this is likely to happen in 2004.
is disheartening is that the Government attempts to conceal its
failure by touting our current condition as sound.
It is fad in Government circles to speak of the soundness
of our macro economic fundamentals such as inflation, monetary
aggregates, reserves and exchange rate but the Government needs
to be reminded that in a stagnant or contracting economy that is
of little relevance. The situation can be likened to a citizen earning $5,000 per
month who does not spend beyond his means, borrows from no-one
and ensures his income equals his expenditure.
What good is that to him if he is malnourished, homeless
and cannot acquire his basic needs to make him healthy.
While his economic fundamentals are excellent he is
probably facing imminent death. Sound economic fundamentals must
be a launching pad for economic growth and development. They are
tools towards achieving objectives and not an end in themselves.
two of the last four years the economy contracted and over the
four-year period grew an average at 0.4% per annum.
Specifically last year the economy contracted by 0.6%.
This occurred when, in 2003, world output expanded by
2.5% and world trade increased by 4.7%. I submit that a projection of 2.5% real growth in GDP in 2004
is most unrealistic.
assessing performance in 2003 the Minister of Finance took us on
an excursion into social sector and infrastructure spending,
that is, spending in Housing, Education, Health and Water and
Roads and Draining and Irrigation, and highlighted for us the
percentage of GDP being spent on Health and Education.
While such expenditure is welcome it should be clearly
understood that under HIPC arrangements there are specific
identified percentage targets for expenditure in Health and
Education so in at least one sense the level of expenditure
springs from a conditionality for resource access.
The other point of note is that most of the expenditure
in the social sectors is based on borrowings from the IFIs which
creates debt to be serviced by the citizens of Guyana.
The Government has already borrowed more than US$900
million or approximately G$180,000 million or G$180 billion.
Thus each citizen’s burden for this debt is more than
$250,000. This has
occurred in the face of unprecedented levels of grant funds
being made available to Guyana.
to this is the fact that instances abound where many projects
were, and are being, executed with substandard specifications,
substandard materials and in some cases, with no materials at
Yet the full sums for the projects are disbursed.
The classic case is that of the stone scam in which the
sum of approximately US$250,000 was paid to suppliers overseas
for stone which was never shipped to Guyana.
This would have added a debt of some G$50 million which
the taxpayers of this country will have to bear. The most
amazing fact is that no one was brought before the courts even
though the auditor general pointed in obvious directions. Almost
every project being executed has some element of corruption.
At one time it was estimated that approximately 10% of
the capital expenditure leaked out of the system meaning that
instead of being spent on capital projects the funds found
themselves in unauthorised pockets.
At a rate of leakage of 10% with a capital expenditure of
over $20 billion in 2003 the sum of $2 billion, ie $2,000
million, would have gone into unauthorised pockets in 2003.
But that is a debt that has to be paid by the people of
In such a situation I suggest that it borders on
effrontery to tell the Guyanese people that 95% of the PSIP was
implemented when what this in effect means is that 95% of the
money was spent though with highly questionable results in many
in the budget speech for 2004 the word corruption was not once
mentioned even though it is obvious to everyone that this is a
major concern in Guyana.
must also not escape notice that the Minister of Finance
projects that there will be an overall deficit on the Central
Government accounts of $25.9 billion in 2004 which means that
the Government would be spending $25,900 million dollars more
that it expects to receive in revenues in 2004.
Of this amount, it is projecting to receive grants
amounting to $10.3 billion leaving a gap of $15.6 billion to be
This deficit represents the equivalent of 10.1% of GDP
compared with 9.1% of GDP in 2003.
One of the macro fundamentals needs careful monitoring.
The deficit will be financed by net external borrowing of
$11.7 billion and net domestic borrowing of $4 billion (the bulk
of this information is set out at P53 of the Budget Speech).
one looks at the picture overall one sees a country with no or
very low economic growth, borrowing heavily to sustain some
level of programmed activity, largely in the infrastructure and
social areas while very little is being demonstrated by way of
vision based policies to put the economy back on a sustained
path of strong economic growth. A policy of beg, borrow, tax and
spend is untenable in the medium term.
I am here to tell you today that all is not lost for our dear
country. The PNCR has the vision and an accompanying Agenda for
Development (of which I have a copy here) to make Guyana a truly
prosperous country. We are in the process of updating this
we are willing to engage all stakeholders in dialogue on
this Agenda and to take their suggestions on board.
The objective would be to fashion an updated broad based
action plan ready to rescue Guyana from its sad and sorry state.
We of the PNCR stand ready to execute that plan and we await
your bidding to do so.