–investment tops $114B; 6,000 new jobs next year

IN keeping with the mantra of good governance, Finance Minister Winston Jordan has affirmed that prudence in public financial management, in light of existing macro-economic and fiscal constraints will remain a priority.
Government this year in a bid to promote the efficient and effective delivery of services to the citizenry has trained 190 public servants, in key concepts of Monitoring and Evaluation 29 (M&E) and will train another 200, in 2017.

“Our signal improvement in the area of expenditure management is the early presentation of Budget 2017, with the advantage of beginning the new year with approved budgetary allocations and with the ability to implement, from January 1, rather than losing as many as four months of the fiscal year, as has been the practice for the last 40 years,” Jordan said in his third budget presentation on Monday.
The disadvantages of a budget presented during the fiscal year are numerous and demonstrated over the years – the late start-up of programmes, and the bottleneck effect in the third and fourth quarters that effectively chokes public sector processes and compromises private sector contractors’ capacities to respond.

According to the finance minister, it is alarming that Budget Agencies and managers have to attempt to spend over 40 per cent of their budgets in the last quarter alone – a most worrisome reality that raises concerns about transparency, accountability, and value for money.
“In 2017, we intend to increasingly align and strengthen systems, procedures, and implementation modalities to increase the absorptive capacity of the public sector.
“Several key strategies will include the development of procurement plans for key ministries and training; and the utilisation of creative performance-based contracts for project staff and permanent secretaries, in order to incentivise performance and delivery,” he said.

These initiatives will build on a platform that will identify indicators for determining inputs, outputs, outcomes, and objectives as well as set benchmarks and targets against which to measure progress; specify responsibilities and accountability; and identify constraints and risks.
Jordan pointed out that despite the Government’s success at maintaining debt at sustainable levels, losing access to concessional external financing could result in substantially higher debt service costs over the medium-term.

UPPER MIDDLE-INCOME COUNTRY
This year, the World Bank reclassified Guyana as an upper middle-income country, which will limit the availability of grants and “softer term” loans from traditional lenders.
To ensure that Government has continued access to financing at affordable rates, Jordan said it must be innovative in pursuing broader sources of funding, such as blending hard or non-concessional resources with grant resources to increase loan concessionality, and reaching out to non-traditional lenders.

“We must also mobilise domestic resources in support of our development goals. The Government is pursuing policies to encourage a deep and liquid domestic bond market, which will increase fiscal space and give Government more flexibility to respond to external shocks, while reducing our reliance on external borrowing.
“I am pleased to announce that Government will, in 2017, pursue the issuance of medium-term Government bonds, specifically dedicated to the financing of the fiscal deficit,” the minister said.
Like other Caribbean economies, Guyana faces a potentially damaging correspondent banking crisis. The local banks and financial institutions of small Caribbean economies rely heavily on correspondent banking relationships with global banks to connect with the international financial network.

These relationships allow local residents to receive remittances from abroad, tourists to access cash from their home accounts, and facilitate the transfer of funds needed to support trade and investment in the region.
Recently, concerns about meeting new, stricter rules related to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) have led correspondent banks to terminate their relationships with their local partners, a practice termed “derisking.”
While this trend has affected countries around the globe, the small economies of the Caribbean have been hit especially hard.

SEVERELY AFFECTED
Minister Jordan noted that while foreign-owned banks operating in Guyana have not been subject to derisking, locally-owned banks have been severely affected by, losing in the aggregate, approximately 37 per cent of correspondent relationships by the end of June, 2016.
He told the House that thus far, only one bank has been able to establish new correspondent relationships to cover about 75 per cent of those that were lost.

“If this trend continues, financial transaction services may become costlier and more limited, and legitimate transactions may go underground, encouraging the use of cash and increasing other forms of informality at a time when we are attempting to deepen financial inclusion.
“The end result is likely to undermine the efforts to supervise and regulate the financial sector and fight money laundering and combat the financing of terrorism,” Jordan said.
Guyana, in partnership with other Caribbean economies and international institutions such as the FSB, IMF, and World Bank, is working to address the threat posed by derisking, through both advocacy and addressing the perceived risks that lead international banks to sever correspondent banking relationships.

Guyana has enhanced compliance with the implementation of recommendations by FATF and the FSB.
“It is critical that international banks work with local banks to transfer practices that reduce risk, rather than severing relationships.
“In our on-going efforts to enhance our supervisory framework, the Bank of Guyana has conducted a thorough review of its Risk-Based Supervision framework, and drafted updates and a procedural manual,” the finance minister disclosed.

In the quest to deepen and expand access to financial services, he said credit unions play an important role as they have significant potential to reach the most vulnerable income groups.
However, their regulation has been a supervisory blind spot and various governance issues have surfaced in recent years.
In 2016, a policy decision was taken to bring the supervision and regulation of credit unions under the purview of the Bank of Guyana.
In 2017, Jordan said the Bank of Guyana will work towards increasing credit unions’ familiarity with International Financial Reporting Standards and improving internal control systems in a way that is appropriate for their complex governance procedures.

The Government, he said, also maintains that a strong and resilient private sector is one of the cornerstones of a healthy and robust economy and is committed to maintaining a thriving and fair business environment so that business owners and future entrepreneurs may prosper.
To reinforce and continue to promote such an economic structure, the Ministry of Business has launched its 2015-2020 Strategic Action Plan, which focuses on improving the ease of doing business, attracting increased foreign investment, supporting the development and export of value-added industries, increased economic opportunities for and capabilities of vulnerable groups, and increased capacity to develop and promote sustainable business-friendly policies.

BIG IMPROVEMENT
Jordan pointed out that between 2015 and 2016, Guyana has improved by 16 places on the ranking of the World Bank’s Doing Business Index.
“This has been the largest single improvement achieved in our history of being on the Index. To further improve our 39 position, the Government will examine the viability of the recently recommended reforms of the World Bank in the areas of starting a business, registering property, trading across borders, getting electricity, and obtaining construction permits, and we will develop an action plan for implementation,” he said.

Over the course of 2016, total investments, including Foreign Direct Investments (FDI), facilitated by Go-Invest totalled $114.8B, a significant improvement over the $89.3B inflow in 2015.
This year’s investments will yield over 6,000 jobs in various sectors, including 1,327 in agriculture, 1,366 in energy, 1,500 in ICT, and 1,483 in tourism and services.

In 2017, Go-Invest will target $139.8B in investment and the composition of the investment portfolio will be restructured to ensure greater diversification within the economy, with additional focus being placed on the tourism, agriculture, and light manufacturing sectors.
These ventures are estimated to create an additional 3,870 jobs, Jordan said. In addition, on-going institutional strengthening will result in a more data-driven, client-friendly, one-stop investment portal.
“To this end, our Government has allocated the sum of $213.2M for the continued strengthening of Go-Invest in the New Year.