Listen up Mr. President – Are you an Economist?

Jan 25, 2009 Peeping Tom

Peter R. Ramsaroop, MBA
Chairman, Vision Guyana

OVERVIEW:

At his first official press conference of the year, one would have thought that the President being a so called economist and a former Minister of Finance would have used the opportunity to provide Guyanese with a sense of optimism that things are going to be difficult for the country and that he has a plan or at least some framework ideas of how to keep Guyana and Guyanese above the water.

We have been reading and hearing so much about the difficulties the world is expected to face over the coming years. President Barack Obama informed Americans of the difficult times they would face, he told them that they will come out of the economic crisis a stronger nation and provided them with not only hope from his inspirational speech but also his economic recovery plan a few days earlier.

Rightly, issues relating to the EPA and Guyana in terms of liberalization will not hurt our revenue position that much, since we have been down the liberalization road for sometime now. However, export earnings from the EU will seriously affect our total revenue. Lower levels of private remittances will also impact on government revenue. We will have less top spend.

Interestingly, Christopher Ram’s analysis of the most recent external debt accounts drew a response from the President. He explained that the 20% rise in the external debt stock was due to non payments of interest. Can the President explain further what impact his debt repayment strategy has on the current account deficit especially, and then the overall deficit? One can only hope that the Ministry of Finance has employed a suitable expenditure policy.

We seem to be taking in so much revenue from taxation, benefited so much from debt relief, so now one is left to wonder as to the reason for the non payment of interest on the external debt. The domestic debt is the Achilles heel of the Jagdeo government’s debt management and overall economic financing strategy.
GLOBAL ISSUES:
I have been reading and listening to so many experts on the issue of the downturn of the world’s economy and what is needed for revival. Most experts forget how intertwined the major countries have become as a result of globalization and have failed to realize that the application of uncoordinated stimulus interventions will only make matters worse.

Timing and coordinated action is needed, especially from the G7 countries, to result in any magnitude of impact. Some argue that confidence will return with the actions of the US but the US is no longer the world.

I think China, especially, has a huge role to play, greater that America’s other G7 partners. Someone has to buy the American debt and China has the American dollar reserves to hold the debts. To do otherwise, like use their dollars to expand domestic expansion would be fatal to them and the world. Who will buy the Chinese goods from the expansion; we see here a case of mutual addiction.

BARTICA – A Case Study:
I visited Bartica this week and as always the residents were extremely welcoming. I was appalled that the NDC only received $3M for the entire year for drainage, garbage and street lights among other programs. The RDC for example puts in a budget for the paving of four major roads but get funding for ½ mile of road.

This makes the residents very upset at the RDC/NDC, but little do the residents know that the taxes they pay (VAT, Income Taxes, etc.) are not sent back to their community. For example, only the Minister of Agriculture can approve the fencing of a pasture in Bartica for stray animals. This request has been on his desk for over two years. A fire station was built but with no fire truck.

Bartica is an area that we need to develop as a major hub for both mining and agriculture. It was once known for its peanuts, but lack of infrastructure has destroyed the markets.

We must all lobby that a large portion of our taxes be put back into our own communities. When government takes Bartica resident taxes and puts it into the $1.7B wasted on the drainage contract from Georgetown to Berbice with no results, then the residents of Bartica are made to suffer.

EXCESSIVE SPENDING:
In my own conversations with citizens, many argued that the government needed to spend taxpayers’ money and lower interest rates to get us out of any deep impending problems. I agree with the expenditure part but not the interest rate part. The trouble is that the banks are non-responsive to interest rates shifts downwards due to lack of competition and poor regulatory policies.

Sometimes the ideas of the public coincide with those of their leaders but I am yet to hear from the Guyanese officials, namely, the Minister of Finance, the BOG Governor and the President of their plans. Look, I am very wary that the ideas expressed in these columns are not noticed by the administration. Quite foolishly, they like to think that they have the monopoly on ideas and pay no heed to ideas and suggestions from others who are not trusted loyalists.

President Jagdeo has made passing statements of which little can be gleaned. He says that his government is on top of things; they are creating a firewall to insulate our economy, that our economy is provincial.

What all of this means to the ordinary people who are looking for a way out of financial and economic hardships is your guess as it is mine. He needs to tell the people that his government needs to invest in stimulus programs quickly and efficiently while avoiding wastage and leakages from the usual corruption associated with his government.

He should be investing in construction and maintenance programs and in areas for creating new jobs. He should also be investing in education and health care infrastructure, after all, most recently built infrastructure are already run down and need major overhaul.

CONCLUSION:
The President should be telling us the citizens that the economic plans are going to be presented in the budget due in a few weeks’ time. He should talk about financial support and incentives for businesses to refrain from sending home staff, his Labour Ministry should be talking about providing workers with employment relief payments.

Importantly, he has to find creative ways of financing a stimulus package. How much further in deficit spending is he prepared to take the economy is a good a guess as mine. For me, growth with inflation and bulging debt situation is not the issue.

The issue is the survival of the Guyanese people during tough economic times the world over. We have been in a perpetual economic crisis situation since the latter half of 1994 and “fiddled while Rome burned”. Guyanese cannot sink their heads further Mr. President; they will drown, literally. Until next time “Roop”.

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