As stated in a previous letter published on 13th November, I wish to further examine the promises of the APNU/AFC Government against their actual performance. The following two promises were made:-
1. Create a new economy that will stimulate rapid development through Guyana’s transformation from a raw material producer to a Manufacturer of Value Added Goods
According to the latest data by the UN, within the first year in office, 2015-16, value added within the agriculture, forestry and fishing sector declined by more than US$67M. In fact, within the manufacturing sector, value added declined by more than US$18M, with wholesale, retail and trade, by another US$5M.
At the local level, in 2017, lending to the manufacturing sector contracted by more than $4.2 billion or 14.6%, when compared to 2015.
According to the latest available data, in mid-2018 the manufacturing sector contracted by another 5.7% to $26.0 billion. Specifically, credit to the beverages, food and tobacco industry and for other construction and engineering decreased by $2.6 billion (39%) and $1.8 billion (15 %), respectively.
The decline, however, is of grave economic concern given Guyana’s future role as an oil-producing country. According to economic pundits, manufacturing has been proven to be the quintessential escalator for developing countries, given its unmatched capacity to absorb low-skilled workers.
In a developing country like Guyana, the development of our manufacturing sector is crucial for us to avoid any negative exogenous shock that accompanies oil prices volatility.
2. Macroeconomic Stability
There is no doubt that our economy is quickly receding. Public enterprises, commercial banks, even the Bank of Guyana, are showing signs of great financial difficulties.
Overall, according to the 2017 Bank of Guyana annual report, non-performing loans (NPL) from 2014-17 increased from 7% to 13.2%. Specifically, NPL in the business enterprise and household sector increased by more than 58% or $7.1 billion and 65% or $3.1 billion respectively. In the commercial banking sector, return on equity for the six major commercial banks fell from an average of 22.3% in 2014 to 2.9% in 2017. Moreover, in 2018, the debt to GDP ratio is expected to reach 54.2%, the highest in four years.
At the central government level, fiscal deficit increased from $9.3B in 2015 to $34B or 277% in 2017 and is expected to further increase by $9B by the end of 2018, to a total of $43 billion. Moreover, public enterprises moved from producing a surplus of $8B in 2015, to a deficit of $12.8B in of 2017. In 2018, it is anticipated to further increase by another $10 billion, to 22.8 billion.
To fund this deficit, central government has become increasingly reliant on domestic credit, thus, in the process outstripping credit to the private sector. From 2013 to 2017, domestic borrowing to help fund budget deficit increased from $11.3 billion to $23 billion, an increase of 110%. Notably, in 2018, this sum is expected to increase by another $11 billion, to $34 billion.
As it relates to International Reserves, the Bank of Guyana recorded a decline of US$130 million to US$454 million, the lowest in 10 years. The ramification of such could be detrimental to our economy and even raises scepticism surrounding our 2018 projected import bill of US$1.6 billion.
In the coming weeks, I will continue the examination of all the broken manifesto promises. The readers can determine whether the promises were kept and where the Government is with their manifesto.
Mohamed Irfaan Ali
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