Nov 16, 2021 News
Kaieteur News – Former Finance Minister, Winston Jordan has lambasted the administration over what he intimates to be a misleading Mid-Year financial report saying, despite its lofty account of a 14.5 percent growth in the country’s Gross Domestic Product (GDP), the actual growth is closer to less than zero percent.
Additionally, the reported 14.5 percent growth rate is not only misleading but means nothing to the average person, since the figures in themselves are misleading. He made the assertions over the weekend while being a guest on Christopher Ram’s ‘Plain Talk’ Programme aired on Channel 7, where the two local financial experts discussed the most recent report released by the government.
Ram, an eminent Chartered Accountant and Attorney-at-Law, in grilling his guest, had pointed to the fact that the document reflects a 14.5 percent GDP growth rate and that the non-oil economy grew—which is already absorbed into the overall figure—by only 4.8 percent and was asked to give his views on, “what does it mean for the country and the average person.” To this end, the former Finance Minister responded bluntly, “not much.”
He qualified his position by pointing to the fact that “the growth is being driven by the oil, oil as you well know from the old socialist days it’s an enclave sector; it’s a sector that is out there contributing very little to the economy.”
A position also observed by Ram, who reflected that in neighbouring Trinidad and Tobago (T&T) the sector accounts for only three percent of its national earnings despite its numerous onshore facilities such as refineries. “If oil grows by 14 percent it means nothing much to us, if agriculture grows by 14 percent it means a lot to us,” he asserted. The former Finance Minister under the ousted coalition A Partnership for National Unity, Alliance for Change (APNU+AFC) administration, explained that this obtains, since growth in the agricultural industry, redounds to growth in the earnings of thousands of Guyanese. This, he said contrasts with the petroleum sector, which while it is heavily capital intensive, employs very little persons—however better paid.
Compounding the situation, the former Finance Minister in exposing the deception being employed in the report, sought to put the numbers in context, pointing out that the 14.5 percent growth recorded, is compared to a 2020 base. He used the occasion to recall that in 2020, “you had a lot of problems,” referencing the economic slowdown that impacted the global economy as a result of the pandemic.
Elucidating his position, the former Finance Minister further pointed to the fact, “if you notice carefully the non-oil GDP of 4.8 at half year, is same as the non-oil GDP in 2019.”
As such, “you haven’t really grown.”
According to Jordan, at present, “…for the average person, they (are) worse off, they haven’t seen a salary increase in two years.”
Compounding the situation, he pointed to the fact that the inflation rate is higher this year, in the face of no real growth in economy. In addition to the thousands of lost jobs since 2019, Jordan noted that the price for virtually everything has gone well above the inflation rate.
This, he explained, impacts in the poor even more since they do not have a savings to “fill that gap.”
Challenged by Ram that “you used to play up GDP growth” during his tenure as a Finance Minister, Jordan was quick to point out the context of the inquiry, and pointed to the fact that the growth rate of less than zero percentage, is being had in a situation where the inflation rate is above five percent. He qualified his position further by referencing the fact that without oil in 2019—production commencing in December 2019—Guyana still recorded at the time about 4.7 percent growth rate, in the context of very low inflation. He said too, that at the time there was GDP growth above the inflation rate with a $70,000 minimum wage.
Two years later, Jordan said that non-oil growth is 4.8 percent, coming from a lower base in 2020 and even though overall growth is 14.5 percent, this is highly influenced by oil which in itself, presents a problem for Guyana’s accounting and the misleading figures being presented to the nation lauding growth.
Ram in his line of questioning had pointed to the fact that the Mid-Year Report for this year recorded an overall balance of payment shortfall of US$67.4M, compared to US$2.8M the previous year. As such Ram questioned, “…if we are earning all this money from oil, why are we witnessing a deficit?”
To this end, the former Finance Minister lamented, that this was one area of the country’s accounting structure that “I have problems with, balance of payments.”
He told Ram, this was an issue raised with the Governor of the Bank of Guyana recently.
The former Finance Minister in explaining the predicament, pointed as example to the Floating Production Storage and Offloading (FPSO) vessels that are being built in Singapore but it is not being accounted for financially in that country. The government of Guyana, he said, will have to pay for the FPSO, one way or another, but it is not reflected in the statutory financial reports and operates more like “it’s an offshore online account story.”
He was adamant, that for ExxonMobil Guyana to extract money in the order of 75 percent of crude extracted for repayments, “you have to have in prior years, the investment they claim that they put in, reflected on the balance of payment, because you can’t extract something that you didn’t inject in the first place.”
According to Jordan, he was unaware as to what date is handed to the administration by ExxonMobil, “to reflect the investment, the imports and so on.”
He used the occasion to remind that ExxonMobil does not resell its 75 percent cost oil, the same place Guyana sells its entitlements, and as such, the country export earnings on the 75 percent recovery is not reflected in the balance of payment when it is however reflected as part of the GDP growth.
This, he said, ends up with a huge imbalance in the country’s recorded balance of payments.
Jordan further explained, saying this will obtain since, “you’re counting all the petroleum that has been extracted in a single year—and all of that petroleum for the purpose of the balance of payment you assume is sold—so how is the Bank of Guyana taking account of all the petroleum and not just the piece that Guyana is getting and selling on balance of payment.”
Jordan was adamant all of these transactions have to be taken into account across the board.
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