GUYANA: Budget 2023 – Editorial January 23, 2023

 EDITORIAL – By January 23, 2023

Of note, is the roughly US$1b in oil revenue which has been allocated to the 2023 budget.

This is the fourth budget produced by this PPP/C government and the 2021 and 2022 editions also contained substantial outlays for infrastructure and improvements in key sectors. The upshot of all of this is that major development work is in the pipeline and how it turns out will provide valuable insight into whether the country is on the right trajectory.       

Roughly US$1b in oil revenue which has been allocated to the 2023 budget – this is around 26% of the budget and is expected to grow substantially with each new oil platform. Oil money has now been established as the engine of the economy. The US$1b also serves as another useful comparator. For years this country was saddled with an external debt of US$2.1b that it could hardly service and needed several rounds of debt write-offs for. The oil revenue from 2022 alone would have wiped off half of that.

The GDP growth figures are also stratospheric. While the 2022 growth figure was projected at 47.5%, the actual outturn was 62.3% with the non-oil sector contributing 11.5% up from the projected 7.7%. The GDP this year is expected to grow by 25.1% and could be even higher depending on the arrival of a third oil platform offshore.

With the bountiful good news there will inevitably be cautionary tales about the way forward. The oil bonanza continues to show early features of both the Dutch Disease and the Resource Curse. Both banks of the Demerara River are now exclusively at the service of the oil and gas industry to the extent that an island is now being created to provide a shore base. Meanwhile, though there have been extensive discussions on this, there is no sign of substantial reorientation of the economy away from its traditional bases save for trials in the savannahs for soybeans and other crops.

MARKET FORCES – Cost of Living

The man and woman in the street continue to be at the mercy of the market forces that have pumped up the cost of living particularly since oil production began. Increased demand in the food sector associated with the oil and gas industry has driven up prices for basic items and nothing that the government has done since its terms began has had a lasting effect on easing this burden. In the 10th instalment of the SN cost of living series in today’s edition of the newspaper, ordinary folk have set out in excruciating detail how difficult it has become to make ends meet. More than 100 persons in all parts of the country have been canvassed for this series.

Finance Minister Dr Ashni Singh in his budget presentation adverted to the inflationary conditions. “…at home prices also continued to grow with the 12-month inflation rate estimated at 7.2 percent in December 2022, above the 5.7 percent recorded in 2021, primarily based on account of higher food prices, which contributed 6.4 percentage points to the inflation rate.

“To soften the impact of imported inflation, Government implemented a suite of fiscal measures throughout 2022 including: lowering the excise tax rate for petroleum imports to zero in March; extending the application of the freight cost adjustment to pre-pandemic levels for the calculation of import taxes to December 2022; and distributing subsidised fertiliser to farmers to encourage replanting and reduce the impact of imported fertiliser price spikes”.

The impact of the rising cost of living on those who can least afford it must be evaluated, understood and acted upon. It is intolerable that with US$1b earned from oil in 2022 that there are deep pockets of poverty with some households struggling to afford food. The budget has set aside a sum of $5b to ameliorate the cost of living crunch and it is left to be seen how this will be deployed. Also to be assessed is the rising cost of housing and rentals which has also zoomed upwards.

INFRASTRUCTURAL PROJECTS

Where the challenge will arise for the government is in the designing, supervision and successful execution of these projects. Already, the public has seen failures of several road projects which were awarded to contractors who appeared not to have the requisite credentials for the job. In the last week alone, two contracts were cancelled by different ministers as one builder never showed up after eight months even though he collected a mobilisation advance while another just did shoddy work on a koker. The ending of the contracts will result in a loss to the country and call into question the entire process from bidding to supervision to execution.

Major four-lane highways and other roads will proceed in earnest this year. These include the Linden to Mabura Hill Road for which $11.9b has been budgeted and construction of a four-lane highway from Meer-Zorgen to Schoonord (Phase 1) and Schoonord to Crane (Phase 2). Then there is the biggest one of them all – the new bridge over the Demerara River which is being mobilised for and for which significant debt has already been incurred. How these projects proceed this year will help to define whether this budget presages transformation or whether the country’s limited absorptive capacity will have the final say. This is all the more acute as the education, health and security sectors will also see major construction.

Significantly, $43.3 billion is being allocated to advance construction of the controversial gas to energy project which the government vows will reduce the cost of electricity by a half. There is good cause for concern over this project as the government’s ability to organise undertakings of this scale has been properly called into question. The assumptions underpinning this project are not as straightforward as they have been made out to be.

In every area of government endeavour and expenditure there must be audits to ensure that sensible decisions are being made and value for money is being obtained. Has the administration begun to evaluate how GOAL scholarships are preparing recipients to take up jobs that will predominate in the new economy or to engage in self-employment?

In his conclusion, Minister Singh said that the budget delivered on the government’s commitment to “improve the lives of every single Guyanese family and individual and to improve the opportunities they enjoy for the future”. This will be an enduring topic for discussion during the year with particular attention to the levels of serious poverty in the country.

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