Govt. overspending has wiped out oil earnings

Dec 01, 2021 News

…financial hole now being filled with borrowings —Jordan

Kaieteur News – With more than US$600M currently sitting in the Guyana Government’s Natural Resources Fund, former Minister of Finance, Winston Jordan believes that these earnings over the two-year period since oil began production in December 2021, has already been eradicated by the cumulative budget deficits presented by the Peoples Progressive Party/Civic (PPP/C) Administration.

Former Finance Minister, Winston Jordan

A budget deficit occurs when expenses exceed revenues and indicate, generally speaking, the financial health of a country.
To this end, the former Minister of Finance, in the now ousted A Partnership for National Unity Alliance for Change (APNU+AFC), expounded during a recent public defense of his administration’s stewardship of the economy during its time in office.
Jordan was at the time responding to Head of State. President Irfaan Ali, who this past week, in defending the much criticized 7 percent salary increases, lamented that it was the predecessor coalition administration that had eradicated the spending power of the Guyanese population, through lost disposable income.
Calling the President’s assertions an attempt to hoodwink the populace, Jordan qualified his position by outlining that, as a result of the administration spending more than it is earning—spending done in large part through loans-it has – in fact, already decimated any earnings being held in the Natural Resources Fund.
According to Jordan, the PPP/C in its September 2020 budget did not really provide any measures for relief, but instead engaged in an attempt to mislead; such was the case in the instance of the Value Added Tax from electricity and water, something Jordan said was already done since earlier that year.
Expanding on his position further, Jordan said “what they had (in the 2020 Budget) was a multiplicity of measures that benefited the private sector.”
A trend, he said, that continued into the following year.
“So now when you come to 2021 and talking about payment of wages and salary increases to workers you don’t have the room.”
He elucidated saying, “you don’t have the room to pay a decent wage increase after two years to the workers, because you had already destroyed the tax base; you have already destroyed the tax base number one, forcing you to incur an extremely large deficit on the budget.”
Essentially, according to Jordan, government measures as announced by the administration in the past two years was tailored and suited for the private sector, which has led to a case where the country has spent more than it earned, so much so, that it currently outstrips the entire earnings had from oil since production began in December, 2019.
The former Finance Minister, during the online broadcast, alluded to the fact that in 2020, the Budget deficit stood at $90B “and that hole had to be filled by borrowing.”
He used the occasion to recall, too, that in 2021 at mid-year, “the projection for the deficit of the budget of 2021 was $100B.”
This, he observed “is half a billion US dollars.”
According to Jordan, “in the short space of a year and a half the accumulated deficit of the two budgets was $150B, almost US$1B.”
As such, he posited, Guyana’s overspending is already “two times what you have in the natural resources fund.”
For emphasis, he accused the administration of already wiping out “our natural resource fund two times over by giving away the concessions to the private sector and by breaking up the tax system.”
The former Finance Minister questioned rhetorically, “how a President in his conscience, how a President in his own conscience, who is entitled under the law to a tax-free salary and, therefore, will earn in excess of $150,000 per month tax-free as a result of the increase, how he can go to sleep every night knowing that he has this huge sum on an already humungous salary.”
This, he said, “while the ordinary sweeper-cleaner, the ordinary office assistant, the gardener, the people who on average may have three or four children, and a household of six, who are struggling to make ends meet.”
Moreover, Jordan again questioned “how you could justify taking a salary increase on top of your $2M plus tax-free dollars and taxing a mere pittance of $58,000, after two years for the salary earner at the minimum wage.”
He was adamant, this situation obtained because, “their [Govt.} revenue stream is weak. They have decimated the tax system and so they can’t afford now to give away this little taxes on this back pay; they looking forward to it to bridge a yawning gap that has been created in the budget,” namely the escalating overspending in the form of the deficit levels and borrowing in terms of debts to meet the shortfalls.