The Piper: A conservative Budget

Budget 2016 was presented on Friday amid a great deal of expectations after the APNU+AFC inaugural but truncated one that covered the latter half of 2015 and in which they were accused of “blundering”.
As has become traditional, the total budgeted expenditure of $230B was an increase over the $221B of the previous year, but being spread over a complete year, some observers are already questioning whether the stimulus that both government and opposition accept the economy needs at this time, will be sufficient to initiate the turnaround that is needed.
It was refreshing to hear Finance Minister Winston Jordan echo President Granger’s earlier admission that most of the traditional sectors of the Guyanese economy were “anemic”.
Problems can never be even addressed if they are not acknowledged. The solutions, of course, depend on a host of other contingent factors. While $9B were allocated to the sugar industry for “diversification” and consolidation, in the short term, at the very best that can be hoped for is to staunch the haemorrhaging rather than during the “anemia”. It is expected that the “diversification” plans refer to plans for the land at Wales Estate that will become available with the closure this year end.
On the other hand, while gold prices have not rebounded to their historic highs, increased production from large scale miners helped to boost revenues to buttress the lethargic performances in rice and timber and keep the deficit within reason. The outlook on rice is now even bleaker since the cancellation of the lucrative Venezuelan market has now been followed by drought-like conditions created by El Niño. While the government has made some interventions to assist the beleaguered farmers, the refusal of the Speaker to entertain the Opposition’s request to discuss the industry’s travails in Parliament was not politically adept. While it is accepted that rice is a private industry, its importance to the economy, cannot be dismissed so cavalierly.
While they had criticised the PPP government for focusing on infrastructural spending to give the economy a jolt when in opposition, with not many other arrows in their quiver, the government followed suit. As in the past, the ability of our local contractors will be tested to execute these major civil engineering works mainly on building roads and highways.
Moving on to the redistributive function of the budget, the government continued to pay attention to pensioners with an second round of increases and to the “working poor” by raising the level of tax exempted salaries. Heeding the criticism of the TUC, the government deferred intervention in Public Servants’ salaries pending formal negotiations later this year.
In terms of the macroeconomic fundamentals affected by macroeconomic monetary policy, the government appears to be playing it safe and placing more emphasis on dampening the inflation rate rather than making a more robust effort to increase money supply and thus interest rates and investments. In the developed economies this policy led to deflation, but also a moribund economy in which businesses retained profits rather than investing.
The latter circumstance is augmented also by an unwillingness to directly encourage private sector expansionary measures such as further lowering the corporate tax rate, or reducing taxes on firms that export goods to bring in foreign currency.
Overall, the government played it safe, and gave the Opposition much room for criticising them. We hope for a robust debate down the road.