PSC highlights challenges to economy in wake of budget cuts

Apr 26, 2013 News

A significant slash to the $208.8 billion national budget will in no way help to cushion the imminent economic threats the local economy currently faces.
At least this has been the deduction of the Private Sector Commission (PSC) which sought yesterday to highlight the various challenges that have surfaced that could challenge the growth of the economy.
The PSC’s disclosure comes in wake of the $31.35 billion slashed from the budget, compliments of the parliamentary opposition.
At a press conference yesterday at the Camp Street, Georgetown Club, Chairman of the PSC, Ronald Webster, underscored that the Private Sector in any open-economy such as Guyana is known to drive the economy, create jobs and by extension create wealth for that economy.

From left: PSC’s Kit Nascimento, Ronald Webster, Ramesh Dookhoo and Ramesh Persaud.

He was at the time sharing the spotlight with other executives of the PSC, including Ramesh Dookhoo, Chair of the Trade and Investment Sub-Committee; Ramesh Persaud, Finance Director; and Kit Nascimento, Chair of the Communications and Environmental Sub-Committee.
Webster in his deliberation noted that a very important role for the Government is to facilitate or put in place infrastructure, that is, the facilities, communication and otherwise to make the work of the private sector a reality and thereby help to create wealth. As such he noted that the private sector, the Government and the country’s Parliament have to work closely together to achieve these objectives.
Webster sought to emphasise that economies are likely to collapse, “if everyone is going in a different direction. The whole story of a house divided falls apart…”
It was against this background and ahead of the budget cuts, Webster said, that the PSC had engaged lengthy discussions with President Donald Ramotar and the leaders of the parliamentary opposition parties.
“In every instance those discussions provided new information, provided new concepts and insights that we can work with.”
Webster said that the PSC was engaged in a lengthy meeting with a number of parliamentarians with a view of getting a better understanding of the reasons for the decisions taken over the past week. He said the results were very interesting and enlightening, given the fact that there was roughly a 15 per cent adjustment to the national budget that was originally presented by Finance Minister, Dr Ashni Singh.
“One of our very serious concerns is Guyana’s over-dependence on the export of commodity priced items such as gold, bauxite, sugar and rice and in the future possibly manganese if everything goes right,” Webster said.
Dropping commodity prices
Moreover, Webster said, the PSC through a trade/commerce perspective cannot but highlight the position as it relates to the decline in the prices of the named commodities over the last three months.
He pointed to the fact that aluminium on the world market has suffered a “fairly steep drop”, moving from US$2,050 per ton to under US$1,900 as at yesterday morning. This development, he said, has the potential to indirectly affect “our bauxite industry…and as you are aware bauxite is under very many feet of overburden. We have a clearing cost or an overburden removing cost before we hit the ore, which is something that is not faced by West African countries or mines.”
Turning his attention to sugar, Webster said that prices on the world market have seen a drop per pound from the October 2012 level of just under 20.5 cents down to 18 cents, even as he noted that production has declined steeply. Also he said that commodity prices for magnesium have dropped by nearly 50 per cent over the last 10 or 12 months.
Another indicator, which has been gaining immense attention, is that of gold, the value of which has recently significantly plummeted, according to the PSC Chairman. It wasn’t too long ago he noted that gold was attracting what he described as “phenomenally high” prices even over US$1,800 an ounce, but a few days ago it dropped to under US$1,380 per ounce.
“There are so many companies that are in the process of making investment or about to make investments and when you see a price drop like this, the ability to get equity and injection from foreign investors is not good…”
However, Webster insisted that the aim is not to paint a picture of doom and gloom as it relates to the commodity price market, since there is a possibility that the state of affairs that obtains could merely be a short-term drop as had happened in the past.
He noted that the global situation is one which sees Europe in a mess, with the United States and the United Kingdom both seemingly approaching a triple type of depression. “The US is gradually pulling out of it, but other countries are also getting hit. Their rate of development is slowed somewhat and there are instances where countries are having to take deliberate steps to avoid their economies running out of control,” Webster said.
As such, he pointed out that “we are in an interesting period of time, to say the least. Our economic situation is fragile at this point and we need, of critical importance, for our parliamentarians to work together to ensure that we can get through this economic trough without creating a worsening situation and without driving away investors.”
Webster yesterday sought to advocate for every step possible be taken to ensure that needful investments are realised so that the economic base can be broadened, and ensure that the country is not overly dependent on commodity price goods.
Webster expressed optimism that within the next two months the private sector would be able to sponsor an economic summit targeting all stakeholders so that ideas can be solicited for national development. This, he said, must be done without removing in any way the responsibility for Government to manage the economy and ensure that there is accountability.
“We need to build bridges. We need to build a solid knowledge base to get everybody involved in this move forward,” Webster said.