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THE PROBLEM IS THE SIZE OF THE BUDGET

Aug 01, 2017 Features / Columnists, Peeping Tom

The Minister of Finance is of the flawed belief that there is a problem with the implementation of the Public Sector Improvement Programme. The Minister should carefully consider this assessment. The problem may not be with the implementation of his capital budget; it may be with the size of that Budget.
We are told that more than 50% of the PSIP has been approved as of mid year but slightly over 30% has been spent. This is not a bad record at all. We are past half year and half of the PSIP has been approved. As the year, proceeds, approvals are going to be accelerated and spending is also going to be accelerated.
It is clear from the numbers provided by the Minister, himself, that project approval is proceeding at a decent rate with more than 50% of the PSIP approved. A lower rate of spending may have nothing to do with implementation capacity and everything to do with absorptive capacity i.e. the ability of the economy to absorb certain levels of spending at the same time.
We have a lot of so-called ‘big’ contractors in this country. But they are limited. Very few of them can implement two or three major contracts at the same time. They cannot mobilize the capital or the labour to do two of three massive projects at the same time.
The Minister should concentrate less on finding out the problems with implementation and concentrate more on his highly ambitious PSIP given the constraints of absorptive capacity of the economy.
In 2014, the PPP/C spent $51B in capital expenditure. The Minister of Finance should examine, if he has not done so already, what were some of the big numbers which allowed the PPP/C to spend that sum. One year later, amidst tremendous pressures from the APNU and the AFC in parliament, only $39.04 B was spent because of the decline in most sectors of the economy.
Despite this the APNU+AFC Budgeted $52.2 B in 2016, hoping to match the PPP/C’s 2014 spending, but without any major projects in the pipeline. The APNU+AFC could never have been serious that it was going to spend that amount in capital expenditures.
The analysis therefore suggests that the problem is two-fold. The APNU+AFC aimed too high. The problem is with the numbers in the Budget. They are too ambitious. The APNU+AFC, given the downturn in most sectors of the economy, was never going to be able to spend $50B as part of its capital programme. The PPP/C spent $51B in 2014. But even if it had won in 2015, it would not have been able to spend more than the $39B spent on capital works in 2015 because of the decline in most of the sectors of the economy.
Secondly, the APNU does not have the projects to spend this type of money. It should be spending, ideally, on the productive sectors rather than on sectors which will not generate growth.
This is not to downplay the problems of implementation capacity within the government. But the government cannot absolve itself from blame for that. It shook up the personnel in almost all of the Ministries, except the Natural Resources Ministry. And it has paid a huge price for this because quite honestly the newcomers have in the main not been able to do much better than those whom they replaced.
In fact, they have done worse. Important skills have been denuded from Ministries. Institutional knowledge has been lost. Persons who have been away from Guyana for eons have been catapulted to positions of prominence.
There are persons who are at sea when it comes to their jobs. They are better suited to sailing rather than running an economy. The human resources talent is limited and when critical personnel are removed then there is bound to be an effect in terms of the operations of government agencies.
The bottom line, though, is that the Budgets of the APNU+AFC are too ambitious. As such the PSIP will always have a poor implementation ratio until the numbers are shaved.

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