Peter R. Ramsaroop, MBA
Chairman, Vision Guyana
Yes, it is official again, VAT is a tiger and they will not let it go. Every one of us reading or listening to the budget speech realizes how much money the government has taken from us.
We would all be glad if our personal budget was unlimited. None of us I know would be able to sleep at night, if we knew we were stealing from others every single day.
President Jagdeo and the Minister both know of the miscalculation when the VAT rate was set and they have been reminded several times about their commitment to revenue neutrality.
They have continued to deceive the nation that revenue has been neutral with VAT, when the 2009 budget proved otherwise as the largest budget ever presented. That means they have collected ungodly sums of money from the ordinary citizens of Guyana.
What the budget should do is curb expenses and that will automatically allow taxes to be cut, but they have to finance the government, the party and their supporters via contracts. In addition to this expenditure, even high taxes are not enough so we borrow and incur borrowing costs. The President’s recklessness is out of control and is costing Guyanese billions.
WHAT WE DID NOT HEAR:
It is not accurate for the minister to say that the Real Gross Domestic Product was indeed 3.1 per cent and since inflation was 6.4 per cent that we have seen a nominal growth of approximately 9.5 per cent.
Rather, it would be more accurate to say that the real growth in GDP was approximately -3.3 per cent taking into account inflation. This is where I have my difficulties; I live in Guyana and cannot rationalize that in nominal terms the economy grew approximately 9.5 per cent.
We have been hearing from the President how we were going to prepare a firewall to possibly insulate an already provincial economy from the world’s troubles. Well now it seems as if the firewall was now being presented by his Finance Minister. I wonder whether these goodly gentlemen share the same space as the rest of us because we sense with growing concern that things are not as great as was presented in the Honourable House.
Indeed, with a sense of optimism I was expecting that there was a plan or at least some frame work ideas of how to keep Guyana and Guyanese above the water. And that this plan was in sync with Guyanese expectations that we would have been presented with at least a three-year rolling economic recovery package which would have included:
1. Adequate measures to keep workers in jobs and minimize the impacts of the current world economic slow down. But what have we seen? A very ambitious budget which is totally devoid of a conceptual understanding of the pressures we will face as an economy and a people.
2. There is no major areas where our money will be used to create the environment where jobs can come to the thousands unemployed or under employed in our nation.
3. Reduction in VAT.
The budget is an unashamed piece of PPP propaganda. It is an inarticulate mismatch of worn out platitudes without proof or expectations of achievement. I am a very optimistic person, I calculated risk and have made progress. This government is risk averse and myopic. Given the current economic climate, how in the world can Dr. Singh provide us with such nonsense in these difficult times?
Dr. Singh has provided us with a target of a positive growth in ‘real gross domestic product’ of 4.7 per cent for 2009. Dr. Singh seems to be akin to Mandrake. Dr. Singh is a most optimistic man.
I have argued previously that Guyana has a perpetual problem of achieving consistent and sustained growth in the economy and suggested that in addition to our ‘usual budget’ activities that an additional stimulus package be included.
That this package was not going to be like those of the developed and more progressive developing countries, such as Trinidad and Tobago, but rather in the form of a programmed approach to save the few jobs we have and to cushion the negative impact the global recession will have on all Guyanese.
I am arguing from a policy position. And I think that Dr. Singh’s “policy mix that will see the maintenance of macroeconomic stability in the medium term” is woefully inadequate. This mantra of ‘macroeconomic stability’ must not be allowed to go unchallenged; it’s a cliché, nothing else.
They have failed to identify the problems which Guyana will face and as such failed to define the problems and the adequate responses.
Am I wrong to advocate in my last piece on this 2009 budget expectations (Mr. President, are you and economist? KN Jan 25, 2009) a policy stance which would see an expansion of the fiscal deficit by reducing some key taxes which would impact directly the people and; increased government spending to help the vulnerable cushion the negative impacts and create and sustain jobs both in government/public and the private sectors?
Our debt strategy is the key for managing the overall deficit. The current account deficit needs to be larger and aimed at some of the things I suggested in order to realise a significant multiplier effect. Inflation can be harnessed by taking off liquidity; interest and non-interest charges will be spread over the current and capital accounts.
I strongly believe that the President has gone this way to hide the truth from the Guyanese people, that while he has been receiving debt relief on the external debt payments, he has also been borrowing like crazy from the domestic system, increasing the interest payments and charges to the budget.
One wonders where such high levels of inflation, 6.4 per cent, came from. How is it that we have such a wide spread between savings and lending rates, where is the excess liquidity coming from? Are we trading off inflation through the use of monetary policies? Well it’s not working.
This leads me to another question: how significant is the unofficial economy in all of this, money from outside of the official payment system?
Globalisation currents, markets and technology are driving economic development the world over. What new strategies have we adumbrated in this budget to help us? Skeldon factory, seed paddy plant in Berbice, Berbice Bridge, these are all good edifices but are they really the technology we require to consolidate economic development?
We need to be employing technologies which have the potential to raise our productive capacities beyond price inflation. When one talks of “real growth” one is talking about sustained economic development.
In other words, what we gain from productivity increases is greater than the cost.
So Dr. Singh are we in a position to say that over the next three to five years (yes, that is how long I think the world’s major economies will take to rebound) the technology which will be employed will provide real growth in GDP, that is, “creating jobs and generating incomes”.
I have deliberately stayed away from picking at the multitude of inaccuracies and half truths which have been offered in this budget speech. I have focused instead on what have been revealed in this budget as the government’s policy architecture upon which this budget has been based.
The government’s response to economic crisis is fundamentally wrong and lopsided and therefore lacks creative imagination. After all, the budget speech is the major policy paper of the government for that fiscal year. It is from this perspective, I opined that, the 2009 budget offers no optimism and will fail to impact positively on the lives of Guyanese.
I have left the analysis of the numbers to renowned financial expert, Christopher Ram whose analysis and review is second to none. Until next time “Roop”
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