Budget documents give incomplete picture of nation’s finances- IMF

Jan 27, 2018 News

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The International Monetary Fund (IMF) is of the view that existing budgetary documentation in Guyana gives an incomplete

picture of public finances. According to the Fund, it does not cover in necessary detail, the big segment of public finances relating to State Agencies (SAs).
The Fund stated that while the annual budgets of SAs are included in the budget documents, their medium-term estimates or strategic plans are not provided. Furthermore, the Fund stated that the central government or public sector budget estimates do not include SAs.
It stated that a substantial number of SAs (64 percent or 27 SAs) get more than 50 percent of their revenues as a transfer from the central government. Of these 20 SAs or 74 percent get above 90 percent of as transfers.
The Fund went on to state that 12 SAs or 30 percent, showed a deficit in the 2017 Budget Estimates. While there is no explicit obligation to help the SAs out, the Fund said that it is usually considered an implicit contingent liability and it is expected that government will step in.
“Therefore, it is important to supplement the information contained in the budget documents with identified specific fiscal risks (from SAs, PEs and others sources) as well as an assessment on their impact on the country’s future economic, social, and financial position.”
The International Monetary Fund said that disclosure of these factors will help to improve awareness about fiscal risks, encourage management of those risks and ultimately, strengthen fiscal stability.
STATISTICS ON STATE AGENCIES
Some of Guyana’s state owned enterprises include the Guyana Sugar Corporation (GuySuCo), MARDS Rice Complex Limited, the National Insurance Scheme (NIS), Guyana Power and Light (GPL), Guyana Oil Company (Guyoil), Guyana Rice Development Board (GRDB), Guyana National Newspapers Limited (GNNL), Guyana Post Office Corporation (GPOC), Guyana National Shipping Corporation (GNSC) and Guyana National Printers Limited (GNPL).
GUYSUCO
At the end of the first half of 2017, the Guyana Sugar Corporation continued to have an operating deficit, recorded at $6.3 billion. According to the Ministry of Finance, the $7 billion outlay to GuySuCo by Central Government by the end of the first half is a reflection of the Corporation’s continued inability to reform its cost structure and improve its competitiveness. The Ministry had said that the revised revenue forecast for 2017 is $27.1 billion, down from the budgeted $28.9 billion.
GuySuCo expects to realise increased revenue from land sales, but lower revenue from sugar sales. Expenditure is forecast to rise to $35.7 billion, putting the deficit at $8.6 billion. In 2017, Central Government’s financing to GuySuCo was budgeted at $9 billion.
The closure of Skeldon Energy Inc. during the first crop, weather, strike action, and factory maintenance downtime were some of the factors that contributed to the lowering of sugar production targets and revenues.
Furthermore, the industry continues to be plagued by many problems, including an increase in the prices of several inputs such as fertilisers, and these have had a negative impact on the company’s ability to realise sufficient cash to cover its operating costs. At the half year, GuySuCo’s employment cost was an alarming 111.5 percent of revenue.
GUYANA POWER AND LIGHT
The Guyana Power and Light (GPL) earned revenue of $17.0 billion in the first half of 2017, up from $14.7 billion for the same period in 2016 as a result of more timely payments. Similarly, expenditure increased from $9.3 billion in the first half of 2016 to $12.6 billion in the same period of 2017.
This increase is driven by higher cost of Heavy Fuel Oil (HFO) for which the weighted average cost rose to US$48.70 for the half year from US$30.50 as at June 30th 2016. In addition, GPL repaid the Government $500 million on the GCRG/GPL On-lending Loans for the 1st half of the year.
The Company’s outlook for the year has improved, with the budgeted deficit of $5.0 billion now expected to improve to a lower deficit of $771 million.
Notwithstanding the improved cash performance of GPL, the company’s technical performance remains plagued with inefficiencies. The Ministry of Finance said that the production of electricity increased marginally to 394,832 MWh in the first half of 2017 from 387,864 MWh for the first half of 2016. At the half year 2017, the twelve-month rolling average of total losses was 29.6 percent a slight increase from the half year for 2016 when the total losses was 29.3 percent.
THE GUYANA OIL COMPANY
The Guyana Oil Company (Guyoil) Limited earned revenues of $18.0 billion in the first half of 2017, up 11.8 percent from 2016. The increase in revenues is primarily due to additional receipts from debtors which rose by 23.1 percent to $9.2 billion. Expenditure also rose in the first half of 2017, and was 28.8 percent higher than the first half of 2016.
The Finance Ministry said that this is primarily due to increased payments to creditors. As a result, Guyoil recorded an overall deficit of $247.3 million, a 73.1 percent decline compared to 2016. Anticipated declines in local sales put the revised forecast for revenue at $37.6 billion, down from an original budget of $38.9 billion for 2017 while expenditure is projected to decline marginally.
Altogether, Guyoil is expected to post a deficit of $328.4 million from an originally projected surplus of $813.1 million.
GUYANA NATIONAL NEWSPAPERS LIMITED
For the first half year of 2017, the Guyana National Newspapers Limited recorded receipts of $264.1 million, a decline from the $287.5 million reported for the first half 2016. However, total payments declined from $249.3 million in 2016 to $218 million in 2017 resulting in a surplus of $46.2 million.
Despite this achievement, the Finance Ministry said that local sales were lower-than-projected, as readers make use of online news. Employment cost, the single largest expenditure item, was $84.8 million or 32 percent of total revenue.
GUYANA POST OFFICE CORPORATION
The Guyana Post Office Corporation reported revenues of $518 million, a decrease of $13.1 million over the 2016 half year. This was attributed to a reduction in export sales as well as a decline in the volume of money orders. In addition, mobile phone companies have reduced the commission fee received by third-party vendors, including the Corporation, relating to the provision airtime credit.
Further contributing to a worsening overall balance, expenditure increased by $37.7 million, moving from $500.6 million in the first half of 2016 to $538.3 million in the first half of 2017. This increase stemmed from higher transaction costs associated with the government increase in pension, and conveyance of value, as well as the cost of improving security presence.
Declining revenue and increasing expenditure resulted in a deficit of $20.2 million in the first half of 2017 compared with a primary surplus of $30.5 million in the first half of 2016. Updated revenue and expenditure forecasts move the Corporation from a minor surplus of $3.2 million to a similarly small deficit of $10.6 million for 2017. Going forward, GPOC expects to improve the marketing for its online shopping service coupled with active debt collection, with the intention of improving its bottom line.

The overall balance of the National Insurance Scheme (NIS) improved from a surplus of $174 million at the end of the first half of 2016 to $252.5 million for the same period in 2017. Revenues as at the end of the first half rose by $1.0 billion year to year from $9.3 billion.
This improvement is largely a reflection of increased compliance resulting from campaigns by the Scheme targeting informal sectors. While contributions from employers were the main driver in this increase, it is noted that contributions from self-employed individuals increased from $403.1 million during the first half of 2016 to $417.4 million in the corresponding period in 2017.
With regards to expenditure, the Scheme’s expenses have also risen from $9.4 billion to $10.0 billion, primarily attributed to an increase in benefit payments by $877.6 million resulting from a 4.0 percent increase in the NIS Old Age Pension.
To rebalance its financial position, the NIS will seek to increase overall contributions including through the establishment of partnerships with professional associations in order to increase compliance of their self-employed members.

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