Latest update October 6th, 2024 12:59 AM
Jul 16, 2018 Editorial
Guyana’s economy grew by 2.1 percent in 2017, down from the 3.4 percent as forecast by the Minister of Finance, yet the International Monetary Fund (IMF) has predicted that the economy will grow by as much as 3.4 percent in 2018. The IMF prediction is contrary to the beliefs of several business groups and economists who have projected a modest increase for the economy in 2018. They believe that the problems, which plagued the economy in 2017 will continue if diversification projects and other measures are not fast tracked. Their assessment is based on more than three years of economic stagnation, due to lower production in the agriculture and mining sectors, which has resulted in higher imports and lower exports.
The economy is improving slowly and this is noticeable within the business community, which has experienced a slight increase in retail sales during the first six months of 2018. However, the slight increase in retail sales has slowed down the expansion of business and has stifled wages. In Guyana’s mixed economic model, the private sector is considered the engine of economic growth. It therefore stands to reason that if sales are slow, then it will take a while for business to invest in new projects, which could negatively impact the economy and employment.
It is important for business to flourish so that the economy could gain momentum and improve at a quicker pace. But for this to happen, the government has to engage the private sector and the wider public in more meaningful discussion, so that everyone understands that an improved economy is beneficial to all. Since taking office three years ago, all the predictions by the Minister of Finance on the economic growth rate have not materialized. However, the government should embark on a development strategy to diversify the economy and to encourage all stakeholders in both the private and public sectors to be part of the process. Neither the government nor the private sector can do it alone.
While some changes have been made to the tax system by government to encourage businesses to invest in the country, it is not enough. The bureaucracy must be reformed to make it friendlier to business and more government incentives are needed to encourage companies to invest in the country. But, like everything else, due to the lack of public funds, a balance must be struck. The challenge facing the government is to find a balance where its financial needs for projects such as infrastructure, health care and education are satisfactorily met without excessive borrowing, which will increase the national debt and stifle economic growth, and increase unemployment.
In order to have a robust economic growth rate, the government must move with haste to increase production in the agriculture and mining industries, privatize some state corporations, which rely on huge government subsidies to keep them afloat. The state-owned National Communication Network and the Chronicle Newspaper, which are subsidized by the government and have become a burden on the taxpayers should be privatized. Also, GUYSUCO which is bankrupt and depends heavily on government subsidies to maintain its operations should be a public/private venture with the government retaining a majority stake to ensure that the interest of the country is preserved. But the mere mention of privatization automatically triggers considerable opposition from those in the government because they see privatization as losing their control of the government’s assets.
However, it would be in the interest of the government to lower the national debt because if the debt continues to increase, the government would have to commit a higher percentage of its revenue to service it. This means that it would have to cut back on the resources needed to improve health care, education, other social services and public infrastructure. Privatization and reducing the national debt would provide the fiscal space the government needs to improve the economy and social services, thus providing a better life for all.
October 1st turn off your lights to bring about a change!
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