The Budget and Economic Growth

Feb 12, 2010 Editorial

Under the tutelage of the IMF/World Bank over the past two decades, we have moved away from explicit planning by the government to achieve targets for the growth of the economy. Starting from the abysmal base we found ourselves by the end of the eighties, the policy makers were not unaware that it would take double-digit annual growth rates (a la China) to make a real impact on our GDP. They continued to make annual predictions on growth in their budget speeches. However, under the new dispensation of liberalisation, the government was supposed to create the “environment” that would unleash private sector investment to generate the anticipated growth.
That, at least, was what the theory predicted. We know to our cost however, that sustained growth of our economy has proven to be quite elusive, to say the least. Yet some recommend that we blithely continue with the same model and expect by some magic that the results will somehow be different. The government, to its credit, has become somewhat more proactive in recently promulgating a Low Carbon Development Strategy (LCDS) in conjunction with a National Competitiveness Strategy (NCS) that it promises will deliver more robust growth figures.
While a budget is not an explicit economic plan but a synopsis of the government’s projected spending for the coming year, that spending should offer clues as to what further changes in the facilitating environment for business the government envisages will generate growth – especially vis-à-vis the LCDS and NCS.
The theme for this year’s budget is “Consolidate, Transform, Sustain” and declares that the government intends “to pursue the catalytic changes that would enable realisation of rapid transformation into the truly modern and prosperous Guyana which is aspired”. It is therefore not unreasonable to expect some “transformative” developmental initiatives identified within the budget’s ambit.
In this year’s budget, the US$30 million instalment in the overall $250 million promised by Norway for the government’s REDD program has been included, but specific projects that it will fund have not been identified. This is disappointing. As we editorialised earlier in the week, we fear that much of this sum might be directed in complying with the conditionalities of the donor. We suggest that the funds be clearly and unambiguously identified for projects fostering development.
The government has long identified the lack of a reliable and cheap source of electricity as crucial constraint in its drive to transform the economy through diversification into manufacturing and other high value-added activities.
This is one of the reasons the manufacturing sector was moribund last year. The privatisation of GEC and its transformation into GPL unfortunately did not transform its abysmal performance and now, once again in government’s hands, it still has a long way to go before it can engender any confidence in the business community.
The President has placed his personal credibility on the line for several years now in guaranteeing that the Amaila Falls hydroelectric project will become a reality. This year’s budget has allocated $4 billion for building a road to access the site and we do hope that the funding details will finally be consummated and that the project will finally kick off. It is as Low Carbon as one can get and it can be definitely transformative.
The landing of the new cable by GT&T that will open up the bandwidth spectrum in our country to approach international standards is encouraging. We note that the government has allocated $847 million on top of an earlier $350 billion for its own cable and IT utilisation. It is our hope that the government will be entering into public-private partnerships to implement its projects since this could push local companies far enough along the learning curve to compete in the global market.
Last, and certainly not least, we have to remind our policy makers that they cannot ignore our small businesses: these are invariably the vehicles for the transformation of economies. It is vital that incentives – tax and otherwise – be provided to them to enter the new opportunities that will be opened up as the LCDS unfolds.

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