Latest update April 28th, 2026 12:30 AM
Blasé Budget
Well it’s a good thing we didn’t hold our breath for what the President promised in the Budget: “several growth poles that …will catapult Guyana to a new era of prosperity never seen before in this country.” The Minister of Finance was much more prosaic in his $161.4 billion budget presentation and promised a growth rate from the 3.6% of last year to 4.6% – still below par to many of our peers in UNASUR. Based on the record, we have to take even this projection with a grain of salt.
The other unkept promise was from the Minister himself: not to make the budget into an election year gimmick. Let’s look at the innovations. Firstly, the lowering of the withholding threshold from $35,000 to $40,000. The government can now with a straight face tell those voters that make $40,000 or less monthly that they won’t pay any income tax. Next were the pensioners – all 40,000 of them: they now have a raise. And the business class were not overlooked – the tax on their income was now lowered.
What the Minister did not say was how little these tinkerings mean at the bottom line. As we predicted, the 16% VAT was left untouched even though it raked in record-breaking revenues – as it has done every year since its introduction. The Minister projected another VAT increase in total collections for this year; and why shouldn’t he? The measly increase in the take home pay of those earning between $35,000-$40,000 will go inevitably into purchases for their livelihood – and they will have to shell out the 16% that flows from VAT into the government coffers.
Then, of course, there’s the boast about inflation – one of the famous indices of “macroeconomic stability” – it will “only be 4.4% this year (as opposed to 4.4% last year). This is predicated on the government being able to quarantine us from the predicted global rise in food prices.
Contrary to what most believe, we are far from achieving food self sufficiency, even though we export agricultural products.
A huge chunk of our food basket is filled from “foreign” and we believe that inflation will be higher than the 4.4%. But even if that figure were accurate, it singlehandedly wipes out any benefit of the lowered tax rate.
We can see where the term of trade is heading when the Minister concedes that the fall in the balance of payment surplus from last year’s US$90.1M to a projected paltry US$24.4M is “due to higher import commodity prices outweighing the projected higher export earnings.”
The inflation rate also makes a mockery of the government’s now infamous maximum 5% wage increase that it mandates for workers. At the very best it means that the ordinary Guyanese is merely standing still as far as wages go. Let us put matters in its proper perspective: $40,000 is just US$200 and we know that all our prices at the market and supermarket are actually denominated in US dollars.
Even though the Minister said that he was being frank on GuySuCo, we still believe that the production projections for this year are way off target.
What has actually changed that will deliver the projected increase – modest as it is? Are the workers, the key ingredient in any recipe for sugar’s recovery, any better motivated? The exodus from the industry will continue and the production at best will be stagnant.
The Minister urged that gains by businesses from their reduction in corporate taxes should be reinvested. We hope that this will be the case since this will add to our growth rate.
It would have been better, however, if a menu of measures had been announced to attract agro-investment to take advantage of the global food security crisis.
For the favoured contractor class (and their sponsors) as we predicted, the good times keep rolling on. This year, capital expenditure is projected to increase by 33 percent to $62.1B. The goodly Minister explained: “The growth in capital expenditure is mainly due to heightened activity in ongoing projects and new projects commencing execution.”
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