The Budget Debate

Mar 31, 2013 Editorial

Starting Tuesday, and continuing for the rest of the week, the Opposition will be offering their critique of the Budget, which was presented by the Minister of Finance a week ago. The process will culminate, we hope, with the response of the Minister to the points raised by the Opposition, and not, we hope recourse to the courts.
We believe that the Budget process goes to the heart of democratic practice and good governance in a country and consequently, that citizens ought to be aware of what is involved so that they may make informed interventions to their representatives. We repeat the perspective, pointed out several times over the last decade, from which we feel citizens should evaluate the Budget Debate.
The Budget gives a detailed account of what the government will spend during the coming year in fulfilment of their task to better the lives of all the citizens of the country. The first thing that we ought to be aware of is the total amount the Government will be spending and from which sources will it obtain the funds to be spent.
In this year the total Government expenditure was announced at some $208.8 billion while current revenue raked in (primarily from duties, VAT, income and corporate taxes) only amounted to $162.8 billion. After capital revenue and grants of $12.3 billion, there will be an overall deficit of $33.7 billion.
This would have to come from loans – that is, borrowing.
Citizens would have to consider whether spending over $33billion more than the Government collects is a wise policy or not. Loans, after all, will have to be repaid some day: the days of debt write-offs are long gone now that we are not a “Highly Indebted Poor Country”. There are the conditionalities that bankers attach to loans. But it should be noted that our economy is much larger and more vibrant than before and we can sustain a larger quantum of debt,
The other areas of scrutiny ought to centre on the areas the Government spends the money which we just concluded, ultimately all comes from the pockets of the citizenry. In a mixed economy such as ours, traditionally Government spending attempts to achieve three goals: attempting to stabilise the macroeconomy; assist resources to flow most efficiently to sectors that will deliver the greatest growth rate to the economy and lastly to ensure that there is some equity in the distribution of the national income so that the least fortunate of our society do not get left irretrievably behind.
For the macroeconomic fundamentals, one has to be concerned, for instance, with the rate of inflation since this, in essence, devalues the money one earns, to the extent of the rate. The Minister announced that the rate of inflation last year was 3.5 percent which means that the 5% increase in wages that most workers received last year did leave them with a real increase.
In terms of policies to encourage growth of the economy, these can include tax and fiscal measures to encourage investment. Since the Government of Guyana is itself the biggest source of spending, the decisions of Government on the projects it selects for development ought to be scrutinized. The bottom-line question is, will there be growth in the economy? It is accepted that the economy will have to grow at a rate of around ten percent per annum if we are to make any significant dent in our poverty rates in the next decade.
Finally, we must ask whether measures were taken to assist the poor in the redistributive function. For instance the cut in the tax rate of 33.3% will definitely help, but it will help the higher income workers more. The increase in benefits to Old-Age Pensioners and the subsidy to their electricity bills are definitely progressive. Last year’s reduction of the corporate tax rate should be analysed to discern whether it produced increased investment – and jobs.
We hope that citizens will become more involved in a process that involves them where it counts most – their pocketbooks.

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