Withdrawal of $$$ from commercial banks…Transfer to Consolidated Fund will help reduce deficits

Aug 07, 2015 News

– Finance Minister
Concerns continue to mount, especially among members of the Banking Association and the Private Sector Commission (PSC), given government’s decision to no longer allow its monies to be held in commercial banks.
This was indicated to the media on Wednesday via a statement by the Commission. The entity did not however, indicate what reasons government might have provided to them for taking this decision.
However, Finance Minister, Winston Jordan sought to bring some clarity to the issue yesterday.
Jordan said that during a meeting with the Banking Association, he explained that government would be moving to have the funds held by agencies such as the Guyana Geology and Mines Commission (GGMC) and the Guyana Forestry Commission (GFC) placed into the Consolidated Fund. These agencies, among others, have been collecting monies on behalf of the state and have held them in accounts in some commercial banks.
The Finance Minister emphasized that he made it clear to the association that these monies would not be moved until the forensic audits into these agencies have concluded.

Finance Minister Winston Jordan

Jordan said that this sentiment was also communicated to the Chairman of the Guyana Manufacturing and Services Association (GMSA) Norman McLean. He said, however, that McLean expressed some reservations about the decision, and opined that should the administration go forward with such a decision, then it would lead to some problems for the commercial banks.
“I told him that it is government’s money and it makes no sense having it in the commercial banks when it really belongs in the Consolidated Fund. The Fund is in overdraft and putting the monies where they belong will help to reduce some of these deficits,” Jordan said.
The Finance Minister said that at no time did he specify that $60B in total was being removed from commercial banks. He added, “I don’t know where they got this figure from. It is inaccurate. I never said that.”
As for businesses complaining recently that their profits are being affected by the decline in economic activities, Jordan said, “They know that they are operating in an environment where they make a profit one day and can end up one day making a loss the next day.”
The Finance Minister stressed that he explained to the business community that a combination of activities led to the current situation.
He said that it was explained to the Private Sector Commission that sugar and rice, two of the country’s biggest revenue earners are in dire straits while the gold sector is now crying about a decline in production and is calling for concessions.
Jordan added, “How do we expect the economy to be as per normal with these situations before us? The issues affecting sugar and rice are not solved and may loom even larger next year. We have a plan in place, however, that will, as I said earlier, address the current situation.”
The recent decline in economic activities prompted a meeting between the Commission and some businesses where they shared their concerns and discussed the impending and immediate effects of the situation.
The Commission had said that already, some businesses have been forced to trim their staff size, while foreign and local business partners have been left with no other choice but to put some of their investments on hold.
The discussion between the two dealt with matters ranging from employee retrenchment to the sudden increase in crime, as well as spending on Government projects, and matters related to how the clearing of goods and the processing of investment agreements are affecting them.
The Commission had said that business representatives mentioned that they have noticed a decline in consumer spending and expectations, and noted that projects are being delayed and/or suspended due to the cessation of payments.
The entity had said that the business community is also concerned about the persistent “bottlenecks” when doing business with the Guyana Revenue Authority (GRA).
“It is the view of the business community that GRA needs to expand its taxpayers’ bracket and focus on those individuals who have been evading taxes for too long. To this end, Minister Jordan was written to, and meetings were held with the top brass of the GRA and the PSC,” the Commission had added via its missive to the media on Wednesday.
The body also noted that it is concerned that the current situation can lead to a high level of non-performing loans. The PSC also expressed concern about the intended removal of Government funds that are deposited at the Commercial Banks. It said, too, that there is an increased level of defaulting loans being recorded in some sectors of the economy.
The PSC is of the opinion that once there is a decline in consumer expectations and spending, it can create drops in sales and profits. This development it said, would force businesses to put a hold on hiring and inevitably the retrenchment of employees.
The PSC had said that while it commends the actions taken by the Government and the Guyana Police Force in the solving of recent crimes, it believes that more should be done to prevent and detect crimes and restore the confidence in law enforcement.
It had said that there has been a call for stronger police presence in and around the city as businesses are concerned about their employees and customers being robbed in the streets and at their homes.
The Commission had indicated that it has also recognized that the economy has taken a downturn since 2014, but the present administration has an opportunity to restore this confidence, by releasing a budget that would stimulate spending. Additionally, it opined that the Government needs to ensure the efficiency of GRA and to restart spending through issuance of contracts, etc.
The Commission had said that it urged the Finance Minister during a meeting on the 2015 budget, to consider a stimulus to boost the economy, since there has been a slowdown in business. The Minister had given his commitment to consider this proposal. He also committed to ensuring stability of the currency through appropriate monetary policies.
The discussions between the two also focused on a number of areas, such as the urgent need for liberalization of the telecommunications sector.