Govt. vows to maintain prudent fiscal policies against external shocks

Apr 18, 2017 News

Government, through Minister of Finance Winston Jordan, has committed itself to the maintenance of prudent fiscal policies which would protect Guyana’s economy against external shocks.

Finance Minister Winston Jordan

This commitment was stated in the Ministry of Finance’s end of year report for 2016 which was presented to the National Assembly last Thursday in keeping with government’s promise to provide updated information to parliament on actual outcomes which were projected in the 2017 budget presentation.
According to Jordan’s report, since the 2017 budget was prepared, the risk of external shocks has increased. He said that the International Monetary Fund’s projections for growth in the Latin American and Caribbean region have been revised downward and foreign currency liquidity shortages in the region appear to have worsened.
He added that the risks which were discussed in the 2017 budget, including uncertainty surrounding Brexit and the policies of the new United States Administration still remain.
“To address these risks, the Government will maintain prudent fiscal policies and sound macroeconomic policies including maintaining clear policies regarding the regulation of foreign exchange, to provide certainty to workers, businesses, investors and financial markets.”
According to the Minister, government plans to continue improving its operations to ensure that the measures outlined in the 2017 budget are executed on schedule, so that programmes that support welfare and economic development can be delivered to citizens.
“In parallel, our Government will continue to engage with our private sector, our Caribbean neighbours and development partners, to address economic instability and build a more robust economy both in Guyana and throughout the region.”
The Minister explained that the overall, economic and fiscal performance in 2016 was similar to, or slightly better than, the projections developed at the time the 2017 budget was prepared. He said that central government expenditure was close to projections, although some categories of expenditure fell short.
“Although real GDP growth came in above projections, the economy remained dependent on gold production to fuel growth, and Guyana remains highly vulnerable to shocks due to the absence of a diversified economy. Since the 2017 Budget was prepared, the risk of external shocks has increased.”
In Jordan’s 2017 budget speech, he had mentioned that government had moved a step forward in prioritising attention to the nation’s macro-fiscal forecasting capacity, with the establishment of the inter-agency macro-fiscal forecasting committee.
He said that Government recognises the critical linkages between the different spheres of the economy: the real sector – what is produced; the fiscal sector – what Government earns, spends, and achieves; the external sector – what is traded with other economies; and the monetary sector – how industries access borrowing to finance growth.
According to him, understanding the macroeconomic relationships and economic trends in each of these spheres is essential to planning forward-looking government budgets and policies.
Further, the Minister highlighted that government will pursue policies which will encourage a deep and liquid domestic bond market, which will increase fiscal space and give the government more flexibility to respond to external shocks, simultaneously reducing Guyana’s reliance on external borrowing.