Nov 29, 2016 News
By Kiana Wilburg
Within the timeframe of 3 hours and 15 minutes, Finance Minister Winston Jordan yesterday
informed the National Assembly, and sections of the nation through live broadcast, of how his Government intends to spend some $250B for the year 2017, so as to achieve “the good life” for all Guyanese.
The budget, which is presented on an annual basis, is one of the most important economic instruments of the government. It seeks to ensure that the state has the resources it needs to execute the works planned for the fiscal year, create conditions which stimulate economic growth and clearly indicate the priorities of the government.
This is the third budget of the Coalition Government in just over a year and half in office.
The Finance Minister noted that the theme for the 2017 budget is; “Building a Diversified, Green Economy: Delivering the Good Life to All Guyanese.” Jordan said that Budget 2017 is designed to consolidate the gains the Government made since its accession to office, improve economic performance, and define a sustainable pathway to the happiness and prosperity of Guyana.
Delving into the goodies of the budget, Jordan sought to provide a portrait of the economic state of affairs of the global economy.
Among his disclosures in this regard, the Finance Minister said that the price of crude oil, a key import for Guyana, is expected to average US$55 per barrel in 2017, up from an average of US$43 so far in 2016. He said that the magnitude of the increase could be less if the Organisation of Petroleum Exporting Countries (OPEC) is unable to reach agreement to limit output.
Additionally, the Finance Minister said that the threat of gold prices declining in 2017, combined with rising oil prices and global issues such as de-risking and climate change, will pose a major risk to Guyana’s economy that will demand enlightened management.
He noted that the nation’s relatively undiversified economy leaves it particularly vulnerable to these external shocks, as well as internal financial distress in its major industries. In response to this fiscal forecast, the Finance Minister said that the Government will continue, therefore, to implement policies designed to maximize opportunities and minimize the damage that emanate from such risks. It is against that he provided a review of the performance of the economy in 2016
The traditional sectors did not perform well this year. Despite an encouraging recovery in 2015, Jordan said that sugar is projected to decline by 18.7 percent, to reach 188,000 metric tonnes in 2016.
Due to continued uncertainty in the rice industry, he said that output is expected to reach 600,000 metric tonnes in 2016, representing a decline of 12.8 percent from the levels achieved in 2015.
As for the livestock sub-sector, Jordan said that it is expected to contract by 5.1 percent in 2016. With regard to the forestry sub-sector, the Finance Minister said that it is expected to contract significantly by 33.3 percent, principally as a result of Barama halting the production of logs and the UK’s restriction on greenheart logs originating from Guyana.
In relation to the manufacturing sector, this industry is projected to contract by 7.1 percent, as a result of the dismal performances in sugar and rice, as well as a small decline in other manufacturing.
Jordan noted too that construction declined from a budgeted 10.5 percent to a projected 3.2 percent in 2016. This performance is related to a decline in activity in the housing sector.
On the bright side, Guyana’s mining and quarrying sector is projected to grow by 35.7 percent in 2016, the highest in over a decade.
Turning his attention to the area of income for public servants, Jordan said that Government upheld its promise to allow the collective bargaining process to function in setting the wage and salary increases. Following extensive negotiations with the Union, in which no agreement was reached and mindful of the early Budget and the workers’ need to be compensated given the lateness of the year, Jordan announced that the Government granted wage increases as follows:
(i) 10 percent increase to public servants earning less than $100,000 per month;
(ii) 6 percent to those earning between $100,000 to below $300,000;
(iii) 5 percent to those earning between $300,000 to below $500,000;
(iv) 4 percent to those earning between $500,000 to below $800,000;
(v) 2 percent to those earning between $800,000 to below $1,000,000; and
(vi) 1 percent to those earning $1,000,000 and above.
In addition, the minimum basic salary for each public servant was raised to $55,000 per month, representing an almost 40 percent increase in the minimum wage in less than eight months since the Government acceded to office, while the threshold was raised by 10 percent to $660,000 per annum.
The Finance Minister also disclosed how Central Government will be raising funds this year.
Jordan noted in this regard that several one-off payments of arrears from delinquent companies, coupled with increased company income tax collections, are expected to contribute to an improved tax revenue performance, while non-tax collection will benefit from increased royalties from the mining sector.
He asserted that the projected total revenue collection for 2016 is $174.8 billion, which is 0.9 percent more than budgeted and 7.4 percent better than in 2015.
As for tax revenue, Jordan said that this is projected to rise to $149.3 billion, representing an increase of 4.5 percent, driven primarily by an 8.2 percent, or $2.5 billion increase in the collection of company income taxes and an 8 percent, or $1.6 billion increase in personal income taxes.
The economist revealed that international and trade transactions are expected to rise to $16.3 billion, or 16.3 percent.
Meanwhile, Value-Added Tax collections are projected to increase by 1.7 percent to $36.0 billion. Excise tax collections will decrease by 10.4 percent to $29.9 billion. Rent and royalties will soar to $4.4 billion, from a meagre $8.8 million in 2015, and will be driven by the expansion in gold production. Further, transfers from statutory bodies will reach $8.5 billion, up from the $7.9 billion transferred in 2015, while dividends from public enterprises will rise to $2.2 billion, from $1 billion in 2015. Additionally, the Finance Minister announced that transfers from the Lotto account will amount to $600 million.
Notwithstanding, the increased revenue in 2016, Jordan noted that the Guyana Revenue Authority (GRA) is expected to remit $42.6 billion. While this figure is $4.5 billion or 9.6 percent lower than the tax remissions in 2015, Jordan said that arduous effort will be exerted to monitor concessions granted in 2017.
With regard to allocations for key sectors, the Finance Minister said that $29.1B was allocated to restore confidence in the security sector, $31.2B was set aside towards the continued transformation of the health sector and $20.6B was budgeted for the agriculture sector with $9B going towards the Guyana Sugar Corporation. Additionally, $43.1B was allocated to the education sector.
An examination of the expenditure shares of key sectors reveals that education has moved from 16.6 percent in 2015, to a proposed 17.2 percent in 2017; health has moved from 11.5 percent in 2015, to a proposed 12.5 percent in 2017; infrastructure has moved from 7.6 percent in 2015, to a proposed 14.9 percent in 2017; and public security has moved from 11 percent in 2015, to a proposed 11.6 percent in 2017.
The shifting composition of the expenditure in 2017 reflects a closer alignment of resource allocation with national priorities.
In this regard, Jordan commented that the Government is acutely aware that the capacity of its human capital and institutional systems to spend, combined with the poor quality of public expenditure, will continue to delimit its ability to effectively allocate resources.
In the 2017 budget, the Finance Minister also announced a number of measures. Some of these include; the lowering of the excise tax on hybrid and electric vehicles; the granting of tax exemptions to set up electric vehicle charging stations; the Zero-rating of the excise tax on biofuel and specially designed refuse trucks; the restriction of used tyres; and a reduction of taxes on new tyres.
Additional measures for budget 2017 include 14 percent VAT increase on water and electricity bills, as well as an increase in Old Age pension to $19,000.
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