Mar 30, 2012 Editorial
There was a time when budgets in Guyana were most anxiously awaited. A skittish populace expected increases in taxes, licences and other measures that invariably impacted adversely on the cost of living. Budgets were not pleasant events in the life of the nation. Thankfully, over the last decade or more, as the economy recovered and began to climb slowly upwards, the volatility receded. Citizens began to expect budget presentations to be harbingers of less taxes and greater spending power.
This year, there is once again a feeling of expectancy in the air about the budget, which will be laid in parliament today. But the anticipation has to do more with politics than economics. But then it was with good reason that Marx proposed that the two cannot be disjunctured and we should talk about ‘political economy”. In modern politics, the economic initiatives are crafted as much with an eye on the voting populace as on its fundamental economic needs. With the unique (for us) circumstance delivered by the last elections – the legislature controlled by the opposition – there are widespread expectations that this budget debate will be the occasion for an intensification of ‘war by other means’.
So what are we to expect? Overall, the executive has insisted on taking responsibility for crafting the budget and even though the opposition had been invited to make recommendations, this did not come off due to scheduling clashes. The Minister of Finance has already telegraphed the thrust of his presentation: the government will be seeking to ensure that the economy continues on its upward growth trajectory. The sugar industry remains a troubled segment of the economy but the buoyancy of gold prices and production should more than compensate in maintaining the overall growth rate. But at the same time, it will be cautious that the overarching macroeconomic stability, of which it is justly proud, is not disturbed.
For this reason even though the opposition has been clamouring for the VAT to be reduced from the present 16% – the government will most likely point out that such an initiative will unleash inflationary pressures unless other taxes are imposed. The opposition has already announced that revenue decreases due to a reduction in VAT will be matched by savings gleaned from their tighter scrutiny of infrastructural spending. Since this approach is speculative, it is doubtful the government will go along.
The focus on direct governmental spending to boost the economy will however continue to be on infrastructural development. While the government’s initiatives in this area are commendable, even they concede that there needs to be a tightening of the process to ensure that value for money is obtained. The opposition has already promised to question the proposed allocations intensely and it will be interesting to see how far the government will be willing to go on releasing demanded information that is certain to go beyond what has been the norm up to now.
In the last few years, the government has begun to experiment with public-private investment facilities to fund some infrastructure – the Berbice Bridge comes to mind. Whether due to its novelty in this part of the world or not, this innovation has not been accepted with open arms by the opposition. The government’s announcement that it intends to go that route in pushing for a Marriot Hotel to be constructed has already precipitated a firestorm of protests and it is hoped that during this budget debate the opposition will clarify whether it is opposed ideologically to the new investment vehicle or to its execution.
The budget is also utilized to reallocate resources to members of the society that are in need of help. One measure that has become popular is to raise the income tax threshold: right now it stands at $40,000 and one is not taxed if one’s monthly income falls below this amount. The government might most likely raise this threshold to $45,000. The government will definitely continue with its traditional high level of spending in the social sector.
Let the debate be vigorous but civil.
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