A CONTENTIOUS DEBATE LOOMS

Dec 01, 2016 Editorial, Features / Columnists

From all appearances, a contentious battle is looming between the government and opposition over the recent $250 billion budget. The taxes imposed on the people, including those on the consumption of water and electricity above a certain level, many have caused the opposition to believe that the writing is on the wall for the administration. The lack of a viable plan to transform and diversify the economy away from its traditional products has given little hope.
The reduction of VAT by two percent and imposition of a 14 percent tax on the consumption of water and electricity above a certain level has been described as a sleight of hand operation. The majority of Guyanese pay more than $10,000 for electricity and $1,500 for water monthly, which means that their bills will automatically be increased by 14% which may be more than their salary increases and the two percent reduction in VAT combined.
While the government boasts of increasing the old age pension once again, it should be noted that it was only by $800 per month. For it to be said that the budget has elevated the people to respect, shows how far removed some in authority are from reality. The proposed Value Added Tax on the consumption of electricity and water should be withdrawn.
Despite several provisions in this and the two previous budgets to improve production in all sectors and resuscitate the economy, the government has continued its misguided strategies that have dug a deeper hole in the economy instead of resuscitating it. It seems incapable of turning around the economy which grew at a dismal 2.6 growth rate. This has resulted in high unemployment and the general malaise of the population.
After a year and a half in office, the government still does not have a pragmatic policy to improve the economy and create jobs. It continues to fully invest in inappropriate infrastructural projects such as the airport expansion – to accommodate only three or four international flights daily. It is a bad idea. It would not increase revenues significantly and would contribute nothing much to the transformation of the economy to a sustainable level. Worse yet, borrowing to finance such projects merely balloons the national debt and the cost to service it.
The last administration made several investments that had no impact on revenues, local or foreign exchange earnings, and has left the nation with a debt that has driven it into an inescapable trap. While these investments have created jobs in the short term, they should be considered last resort investment projects.
The 2017 budget was hailed as a tremendous success by government officials, but its scale of over taxation means that a lot more money would be raised but it will be short lived because of the huge cost to service the debt which stands at a little over US$1.5 billion and recurring expenses due to poor investments.
Unfortunately, this government seems to be continuing the strategies of the last administration, which will only hasten the decline of the economy and increase the country’s debt. It just does not make sense.
This government campaigned on change, but it is actually doing the same things. Clearly, it is heading in the wrong direction, and if it does not change course it will run out of assets to sell and run out of savings to draw on when needed. Further, it continues to pin all its hopes on the discovery of oil with the expectations that it will save the economy and end all the nation’s problems. That is wishful thinking. It is like building castles in the air.

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