The source of our problems

Aug 05, 2021 Features / Columnists, Peeping Tom

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Kaieteur News – The truth has been staring our financial gurus in the face. They have been looking at it but whether they have seen it is another matter.
Guyana’s Budget is and has been imbalanced for a long, long time. The financial gurus have been faced with this imbalance and have not done anything to correct it because to do so requires courageous and controversial action.
The Budget has two sets of expenditure – capital and current expenditure. Capital expenditure is the monies which are used to build and upgrade physical assets such as roads, schools, bridges and airports, hospitals, police stations, power plants, vehicles, machinery, etc. It is comparable to the money a person would spend on a car or a house. Your current expenditure, on the other hand, is you day-to-day operating expenses. It refers to the monies you have to spend on this such as wages, rentals, supplies fuel and as water, electricity security and janitorial services. It would equate for a household for the monies you would spend on food, electricity, water bill, gasoline for the vehicles and paying your domestic help.
The ratio between your current and capital expenditure is a good idea of how well you are managing your finances. If you are building a house and the labour cost is equal to the material costs, then something is wrong. It makes no sense building that house because you are overpaying for labour.
And it is the same with the country’s Budget. If your current expenditure – which amounts to the cost of running the government – is higher than your capital expenses, it means that you do not have the resources to invest on long-term and long lasting infrastructure which will allow you to expand the economy.
Professor, Tarron Khemraj, did an analysis of this ratio in the country’s Budgets over the period 2008 to 2020. What he found was disturbing. Guyana was spending 66 percent on current expenditure and 34 percent on capital expenditure. What this means is that the country is carrying an over-bloated bureaucracy which is absorbing monies which should be used for increasing the physical assets of the country so as to grow the economy even more and to make it more efficient.
In comparison, Khemraj found that over the same period 2008-2020, Jamaica spent on average 34 percent on current expenditure, Barbados 23 percent and Trinidad and Tobago 17 percent. Guyana spends on average 66 percent, leaving only 34 percent for capital works. And guess what? A great deal of the expenditure on major infrastructural works is borrowed adding to the country’s public debt.
The country is saddled with an unwieldy bureaucracy with the result that there are limited resources for long-term and long-lasting capital investments. This imbalance is unsustainable; the country will go nowhere so long as it exists.
One of the main contributors to this problem is the size of government. Instead, however, of trimming government, the financial gurus have been expanding it.
The expansion of government has been costly to the economy. Professor, Tarron Khemraj, did an analysis of the government’s overdraft. He found that the PPP/C government inherited in August 2020 an overdraft at the Bank of Guyana of G$92.8B as opposed to G$9.3B in 2014 just prior to demitting office.
In his analysis he sought to examine the link between this overdraft and employment levels in central government. What he found was that when the PPP/C left office there were 14,905 workers in central government. But within a mere three years of the APNU+AFC taking office, this had ballooned to 26,354 or an increase of 76.8 percent, while non-central government employment such as at GuySuCo declined by more than 40 percent.
The inference was that increased central government employment costs added to the pressures on the overdraft. No one has attempted to dispute this analysis. And it does not appear as if there is any attempt at all at ensuring a leaner public sector.
The financial gurus are not trimming the bureaucracy because they are afraid of the fallout resulting from the loss of jobs. But if the private sector is supposed to be the driver of growth, then the private sector should be absorbing any loss of jobs from the public sector. But this is not happening because public sector wages are now higher than the private sector. The government is now crowding out the private media by luring away staff with fat salaries paid with taxpayers’ dollars.
The public service is overstaffed and has to be trimmed. Otherwise the Budget will remain imbalanced and development stymied.
Cutting staff is always controversial but there are other options which could be looked at. One is to cut wastage, reduce rentals and slash overheads by moving towards renewable energy for powering government buildings. The government does not need so many buildings and does not need to be providing office space for so many workers. If the pandemic has proven anything worldwide it is that working at home and cutting the workweek has proven more efficient and less costly.
The financial gurus of Guyana should have solved this problem between the ratio of current and capital expenditure. They should fix it now. The country cannot develop when so much money is being spent on current expenditures.
Guyana needs a plan to make the government more efficient. Otherwise the bureaucracy will gobble up the limited oil revenues earned.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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