Budget: Bigger is not better

Feb 10, 2010 Editorial

As predicted, the Finance Minister announced an even “bigger” budget than last year’s $128.9 billion – a whopping $142.8 billion dollars. We are not so sure if that claim holds up after all the additional billions requested in “supplementals” during last year are factored in. But since we can safely assume that the trend in increased supplementals will continue, the Minister might know of what he speaks. And this does not necessarily bode well for us.
As we have been at pains to point out every year, governmental spending as outlined in the budget is coming out basically from your pockets in one way or another. This is especially true when the major corporations still remaining in government’s hands – GuySuCo, GPL, GWI etc. – instead of contributing funds into the Treasury, have to be subsidised to the tune of billions. The Guyana Revenue Authority (GRA) through its VAT, personal and corporate tax receipts and customs and excise charges (all that will ultimately be funded by the ordinary taxpayer) is projected to rake in $94.1B of $98.2B in current revenue.
To boast, as the Minister once more did, that taxes will not be raised to fund the increased spending is a cruel hoax. All it means is that the current levels of taxation are so high that it can absorb continuous increases in governmental spending. Ever since its introduction, there have been trenchant criticisms that the 16% rate of VAT is too high. The subsequent levels of collection – this year targeted to increase by 5.6% to $47.2B – have done nothing to refute those arguments.
The major critique is that since the VAT is regressive – it affects the poor that can least afford it proportionately more than the rich. However, any reduction of its rate will not only give relief to the poor but will spur an increase in economic activity since the poor would most likely spend its windfall. The government would recoup much (if not all or more) of its reduced income from VAT through increased receipts from the higher economic activity.
So if the government is going to collect only $98.2 billion but plan to spend $142.8 billion, we might want to know where it will get the rest of the funds – some $44.6 billion. We can pretty much write off the US$30 million that will be donated from Norway to the REDD+ Fund. Contrary to what the Minister stated, most of that will likely end up in the pockets of the foreign “experts” and “consultants” that will be needed to satisfy the conditionalities of the MOU. After all the measuring, monitoring and reporting are done with, we might have to shell out some funds from our own treasury. So the answer boils down to “borrow”, “borrow”, “borrow”. And we know (or should know) that this means “interest payments”, “interest payments”, “interest payments”.
Both Guyana’s external and internal debts have increased over the last year, with the former fast approaching that magical US$1 billion mark. We have long heard that the present government inherited a US$2.1 billion debt from the previous administration. But we should note that more than half of that was due to interest payment that had accrued because we had stopped paying the debt. In actual funds coming into the country, the present administration has now borrowed more than the previous government. Since we will have to repay that debt with interest, citizens should be concerned whether our debt burden is not once again getting unsustainable.
As for the ever increasing billions of internal debt, most of that goes towards the Bank of Guyana “sterilising” funds from the commercial banks that they refuse to lend to the private sector. We have long pointed out the Catch -22 nature of that arrangement. The banks do not perform the task they are mandated to do; become awash in funds which have to be held in the BOG and are then rewarded with interest to the tune of billions from our tax dollars. In the trade-off between growth (which the loans to businesses would generate) and inflation (which the increased spending might trigger) the government rejects growth. Go figure.

Latest News

Budget: Bigger is not better

Related

Similar Articles

The Glenn Lall Show | December, 2nd, 2024

Follow on Tik Tok @Glennlall

THE BLUNT OF THE DAY

Sports

CWI’s Shallow, Bascombe circumspect amid two-tier Test system

Guyana to play Suriname, Grenada in “Nations...

Guyana Football Federation announces opening of...

West Indies unveil powerful 17-man squad for O50s...

Seven Regional Champions to vie for direct...

Kennard Memorial Turf Club expresses sincere...

Features/Columnists

The unconscionable terms of the PSA establish a case for renegotiation

Forget Begging Rich Nations: Caribbean Countries Should Act to Save Themselves

Renegotiation – the latest Guyanese curse

Publisher’s Note

Weekend Cartoon

Bridge Watch

Demerara Harbour Bridge

> Berbice Bridge […]

Budget: Bigger is not better

Share this:

Related

Similar Articles

The Glenn Lall Show | December, 2nd, 2024

Follow on Tik Tok @Glennlall

THE BLUNT OF THE DAY

Sports

Features/Columnists

Publisher’s Note

Weekend Cartoon

Bridge Watch

Demerara Harbour Bridge

> Berbice Bridge […]