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Sugar industry, national security issues pose risk to economy for 2017 – Finance Ministry

Aug 13, 2017 News

In reviewing the performance of the economy at the end of mid-year, the Finance Ministry has identified a number of risks which can undermine the business climate and the overall economy for 2017, if left unchecked.
Among the risks identified were the state of the sugar industry, the underwhelming performance of the public sector investment programme and national security issues.

SUGAR
The Finance Ministry said that one untenable risk is that of management of the production of sugar which continues to be plagued by inefficient cost structures, weather and labour relations.
The Ministry said that the cost structure of the industry continues to be misaligned and the discussions on restructuring and diversification are yet to yield benefits to the corporation’s bottom line.
Once again, the $9 billion allocation to the Guyana Sugar Corporation (GuySuCo) has continued to crowd out needed expenditure in other sectors. The Finance Ministry said that the related shortfalls in production will continue to hamper growth, constrain export earnings, and impact the fiscal deficit.
GuySuCo has signaled that during the second half of the year, funds will be secured from sales of molasses and sugar and sale of land. In recognition of the need to arrest the unsustainable position of the company, a decision to privatize the Skeldon plant and estate was taken.
Since then, Government has proposed, with Parliament approving $130 million, for the creation of a Special Purposes Unit to deal with the valuation and sale of related assets.
In addition, the diversification of less productive estates is intended to provide alternative employment opportunities for workers in the industry.

INVESTMENT PROGRAMME
Another hurdle on the domestic front, as identified by the Finance Ministry, has been the underwhelming pace of implementation of the Public Sector Investment Programme (PSIP).
According to officials within the Ministry, this was underpinned by poor management of the public sector investment programme across almost all sectors, a limited pool of qualified contractors, dearth of procurement planning, and a lack of accountability of supervising consultants, among other factors.
The slow pace of implementation was reviewed at the level of Cabinet at the half year and it is anticipated that this level of engagement with Heads of Budget Agencies will occur at least quarterly, in light of the chronic institutional weaknesses that prevail.
According to the Ministry, many Heads of Budget Agencies continue to be weak in demonstrated capacities and the reviews at Cabinet level will determine how to fill existing capacity gaps.
Additionally, developing public sector capacity to spend effectively has been placed at the forefront of reform agenda for public financial management and by the end of 2017, the Department of Public Service is expected to establish planning units in all key sector ministries.
Further, in September, Government will undertake a Public Investment Management Assessment that will evaluate the design and effectiveness of institutions that shape investment planning, allocating investment to the most productive sectors and implementing investment.
The results of this assessment will help to drive additional reforms going forward.

SECURITY ISSUES
According to the Finance Ministry, public security priorities have arisen as a result of the recent repeat instances of prison escapees. The Ministry said that this has placed the population in a state of deferred activity.
With this in mind, the need to address security issues definitively is now placed on the front burner to avoid the undermining of the business climate, the level of economic activity, and personal safety.
As it relates to national sovereignty, the Finance Ministry said that concerns in light of the border situation with Venezuela under the Good Officers Process has seen the United Nations Secretary General extend it until the end of 2017.
The success of that process is important to resolving the controversy and ensuring no deterioration in the relations between Guyana and Venezuela given the potential to impact negatively on our economic development objectives.

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