Transforming the Guyanese Economy Starting with this Budget

Jan 29, 2023 Letters

Dear Editor,

Government of Guyana (GoG) is poised to hit a 26 percent Gross Domestic Product (GDP) growth rate in 2023 resulting from a diversified economy and moving the economy to different levels. The economy is in a constant state of change and this economic transformation is not only stable but yielding progressive growth of GDP.

Economic transformation comes about as a result of major and thoughtful investments to reduce poverty, educating the younger generation and creating lucrative jobs for them, building the economic, financial, judicial and political systems to support growth and continuously improve on the infrastructure in healthcare, transportation and social services to support a growing economy as well as those most in need. It is also building a strong private sector to continue innovation and invest in the economy in Guyana as well as our regional Caribbean nations, especially those countries facing development challenges.

As the nation goes through the 2023 budget process, it is a fitting to reflect on how this budget is supporting long-term economic transformation while at the same time addressing those immediate short-term imperatives that impact Guyanese daily lives. Prior to the development of carbon fuel, Guyana’s economy was largely agarin based economy in which a third of the population relied on subsistence agriculture. This is about to change, now with the discovery of oil and gas.

The economy is moving into an export-led economy with the carbon commodity. Export-led growth occurs when an economy uses exports as an economic growth strategy to achieve economic development. In the past many small developing economies relied on import-substitution development strategy to boost economic development, this economic paradigm has largely failed and proved ineffective. The export-led economic model, in the case of Guyana is carbon. This will yield much needed resources to use for capital investment spending in key sectors.

Given this stark economic reality and looking where spending is going, the GoG is focusing on long-term economic transformation with revenues from exports. The GoG can now make major investments in healthcare which will lead to long-term economic outcomes. Additionally, the GoG has an opportunity to begin this transformative process now with the 2023 budget. Let’s highlight some of the areas that the government has targeted to speed the transformation of the economy while addressing current domestic challenges:

Quality Healthcare. GoG has committed GYD $84.9 billion to the health sector with the aim of improving service and facilities across Guyana. As part of the budget, over $500M for the training of healthcare professionals and $900 million to address non-communicable diseases and mental health. There is a striking link between a healthy workforce to continue transforming the economy in addition to responding to pandemics and other health concerns.

Education. There is a strong and direct correlation with education and transformation of an economy and in the case of Guyana to support short-term and long-term initiatives. Investments in education improve people skills and knowledge, which is needed to support a transforming economy. Recognizing this direct relationship, the GoG has allocated the largest planned investment in education ever with a record GYD$ 94.4B allocation.

Income Relief to those in Need. To transform the economy, individuals need to have access to food, water, medicine, etc. but more importantly, they need to have accesses to income to make these possible. In what would be considered a commitment to those most in need, the GoG has created mechanism to remove approximately 12,000 households from taxation so they can keep more of their income for necessity consumption. In addition, some GYD$ 100M has been allocated for the construction of day and night care centers allowing parents to put their children in safe environments, while they work to improve their livelihood.

Housing. Government has increased the allocation to support low-income housing to GYD$20 million. Besides the obvious living standard impacts, shelter, this policy would have on Guyanese, there is now the opportunity to acquire, store, and transfer economic wealth from generation to generation.

Food Safety, Supply Regionally. Guyanese have and through this budget with investments in the agriculture sector will continue to feed the Caribbean. The budget envisions major investments, in rice, sugar, coconut, fruits and vegetables, cocoa and coffee, corn and soya, poultry, beef, small ruminants and aquaculture. Transforming means reducing the reliance on imports and produce sufficient for domestic consumption while supplying the Caribbean. This principle is based on economic abundance of resources, land and water.

Infrastructure. The GoG through the budget has planned massive improvements in roads and bridges, deep water harbor and port development, sea and river defense, feasibility study for railway, industrial rail network, 3D technology for provision of low-cost housing and Port Management Information System. These investments will transform how goods, people, information, and resources moves within the economy in a cost-effective manner. For example, slow ports cost entrepreneurs and business time and money in the movement of goods. Access to information to make informed decisions, will greatly improve decision making and efficiency. Planned investments in water is estimated to be GYD$17.7B to improve access to potable water in the hinterland and coastal communities. While an estimated $43.4 billion is allocated to construct the Wales Gas-to-Energy project, which would reduce energy costs and replace the outdated power generation systems.

In terms of leadership and collaboration on the domestic, regional and international levels, we see that President Irfaan Ali and his cabinet is directly involved with representations at every possible venue to build partnerships, open communication and answer questions on the readiness of political and economic systems in Guyana for transformation and growth. The GoG has also recognized the value of transparency in the workings of the government to support those partners, which is necessary for the transformation of the economy. President Irfaan Ali through his speeches both domestically and internationally encourages the private sector to be partners in the transformation of the economy and has committed GoG to ensuring that the economic and physical infrastructure are in place.

Clearly, there are an exhaustive listing of both macroeconomic and microeconomic variables that would provide how effective fiscal policies are focusing on economic transformation. This essay was not intended to provide that exhaustive listing but highlight those fiscal policies of the Government of Guyana that needs to be addressed. The discussion shows that the GoG is in fact focusing on the long-term transformation of the economy given its new found resources. This is in essence how a budget is used to transform an economy.

Dr. Tilokie Arnold Depoo

Economist