The Coalition government finds itself in a bind as it is unable to implement to a significant degree, large pet
projects that it may have on its agenda. According to Finance Minister Winston Jordan, it is mainly due to the fact that there are massive loan-funded projects by the PPP which have rolled over into the plan of the current government.
One might say that the government could simply drop the projects of the PPP so that it can have the space to execute its own. But this is easier said than done. Jordan explained that because of the huge size of the loans for some of these projects, simply dumping all of them would be unwise, as they have attached to them, penalties for not seeing it through.
It is a dilemma that may see the Coalition administration being accused by the Opposition, perhaps for the next five years, of having a “recycled budget” or a “budget that fails to bring anything new to the table.”
The Finance Minister first noted this comment by Opposition Leader Bharrat Jagdeo after his maiden budget presentation in 2015.
While Jagdeo and his members hurled the same accusations for the 2016 budget, which was passed in the wee hours of Tuesday last, Jordan said that he was not surprised. He said however that the Opposition Leader used the opportunities in and out of Parliament to distort the truth of the matter.
The Finance Minister said that when it comes to these projects and their implementation, there is something which must be taken into consideration—Fiscal Space.
According to Peter S. Heller of the International Monetary Fund (IMF) , “In its broadest sense, fiscal space can be defined as the availability of budgetary room that allows a government to provide resources for a desired purpose without any prejudice to the sustainability of a government’s financial position.”
With this in mind, Jordan noted that the Coalition administration inherited from the previous government, a set of projects in various stages of commitment and implementation. As a consequence, he expressed that the room for his government to insert its core projects into the Public Sector Investment Programme (PSIP) has been “severely restricted” given its stated objective of a sustainable deficit position.
The Finance Minister in an interview with this newspaper said, “The fiscal space is narrow at the moment because of the projects we inherited and we could have abandoned them, but they have attached to them, loans that are massive and there are penalties on those loans …Take the Cheddi Jagan Airport Expansion Project, for example. That is a whopping US$130M Project and more than half of the money was given upfront to the contractors …If we had abandoned that project then about US$70M would have been going down the drain.”
Jordan continued, “So it’s a case where you either abandon the projects while paying the consequence or you go ahead with it…but if you want to have a sustainable deficit then the capacity to bring in new and larger projects is severely constrained by the fact that you inherited all these large projects from the previous government.”
The Finance Minister said that the Opposition Leader is aware of the predicament facing the Government where the fiscal space is narrow, until they get rid of some of the projects inherited.
“So it’s a double whammy for this government and he (Jagdeo) could talk about all the repackaging from now till year five of this government, but we have to get rid of some of these projects and that is the reality,” Jordan lamented.
The Finance Minister also spoke to the matter of fiscal consolidation. He explained that this centres on the maintenance of a fiscal deficit and a debt profile that does not impair the capacity of the private sector to fulfill its role as the engine of growth and the generator of employment in the economy.
The Parliamentarian said that already at 4.7 percent of the Gross Domestic Product (GDP), the projected fiscal balance for 2016 is below any recorded by the past PPP administrations in the last five years. Jordan said that much of the rhetoric and theatrical activity of the opposition benches need to be called out for what it is.
He said that the political gamesmanship and acrimony stem from some perceived right or misguided notion to govern at all cost. He said that the notion must be rejected strenuously as a stumbling block to Guyana’s development.
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