By Joel Bhagwandin
BUDGET 2023 is 41.4 per cent larger than budget 2022, amounting to $781.9 billion, fully financed with no new taxes. Prior to the government tapping into the Natural Resource Fund (NRF), central government revenue typically composed of 96 per cent tax revenue and four per cent non-tax revenue.

In Financial Year (FY) 2022, organic tax revenue accounted for 68 per cent of total revenue, non-tax revenue accounted for two per cent, and the NRF withdrawal accounted for 29 per cent of total revenue. In FY 2023, organic tax revenue is estimated to account for 55 per cent, organic non-tax revenue is estimated to account for three per cent of total revenue, NRF withdrawal is estimated to account for 36 per cent of total revenue, GRIF inflows estimated to account for one per cent of total revenue, and carbon credit inflows is estimated to account for five per cent of total revenue.

The budget is premised on a national development framework which began three decades ago under the incumbent government, viz-á-viz, the National Development Strategy (NDS) (1996). The NDS is a seven-volume document with over 3,000 pages. If one were to peruse this document, one would recognise that all of the infrastructure and physical development program, in particular, the tourism development strategy among other things that the government is advancing, were all identified in that NDS framework.

The need to revisit the feasibility of reintroducing railway networks with respect to the development of the transportation sector– aimed at reducing the logistical cost in transporting goods in bulk across the country and of course connecting the country through rail networks once again to enable cost effective and efficient movement of goods and people, is also articulated in the NDS. It is worth noting at this point that in respect of reintroducing railways, beyond connecting the country through rail networks, Guyana is now in a position where over the long term, policymakers may need to consider integrating Guyana in South America through rail networks which will open up new opportunities and access to a larger market within the South American continent. The NDS, over the years was subsequently complemented by the National Competitiveness Strategy (NCS), the Low Carbon Development Strategy (LCDS) which has been recently updated and expanded to include the blue economy, and the manifesto commitments of the Government upon which it was elected.

The budget contains several measures to combat the cost-of-living issue which is largely impacted by external factors within the global economy. To this end, the inflationary pressure is driven by two forces: (1) Imported inflation attributable to the fact that Guyana imports more than 80 per cent of consumption goods, intermediate and capital goods. This aspect of inflation is impacted by events in the global economy such as supply chain disruptions leading to cost push inflation and demand-pull inflation. (2) Secondly, the inflationary impact within the domestic economy is also driven by strong domestic demand across all sectors as demonstrated by the vibrant double-digit growth in the overall economy and in the non-oil sectors.

The total estimated cost of the COL measures implemented by the government in terms of direct cost to the treasury and foregone revenue to the treasury–is approximately $89 billion. This represents 11.3 per cent of the total budget, 28 per cent of current revenue, and 43 per cent of the NRF withdrawal to finance budget 2023. The budgetary allocations in the social services sector, which include allocations towards employment cost for public sector employees, health, education, social welfare programmes, housing and water, culture and youth amounts to $226.2 billion, reflecting a 42 per cent increase over the previous year and accounting for 29 per cent of budget 2023, and 71 per cent of current revenues.

In view of this, these are substantial budgetary allocations towards the social services sector–while noting that the approximate sum of $226.2 billion is exclusive of allocations towards public safety and security. Indeed, the government is pursuing an expansionary fiscal and monetary policy framework to facilitate the accelerated development trajectory of the economy. In theory, it is true that expansionary policies are inflationary.

From all indications, however, the government is mindful of this and has managed to contain inflation while preventing the economy from overheating. It is precisely for this reason why the government has been careful to not increase significantly the current expenditure side of the budget. In this regard, the current expenditure of the budget since the government assumed office in 2020 only increased cumulatively by 51 per cent or an average Y-o-Y increase of 12.76 per cent. In theory, substantial increases in the current expenditure side of the budget would drive inflationary pressures on consumption, and which would be difficult to scale back because this would include, for example, larger increases, as the Opposition is advocating for, in wages and salaries and social welfare programmes.

Conversely, to accelerate the development trajectory, there have been substantial increases in the capital expenditure by over 400 per cent cumulatively since FY 2020 with an average Y-o-Y increase of 102 per cent. Notwithstanding, capital expenditure and capital projects can easily be scaled back to contain any inflationary impact or overheating of the economy. So far there are no indications of the economy overheating and this can be explained by another inherent constraint, that is a default mechanism anchoring the overheating risk of the economy.

To this end, one of the major challenges that the government has to confront is absorptive capacity, wherein, this speaks to the rate of implementation of projects coupled with the bureaucracy in the system. While this is a constraint to the fast-paced development, it is also naturally working as an anchor by staving off any strong inflationary impact that would lead to overheating. With respect to the argument that the budget is not a balanced budget and not people centric, the proponents of this view failed to state and justify what are the determinants of a balanced budget and how is it that the budget is not people focused?

In order to so do, SphereX Analytics examined the composition of the population age groups using the 2012 population census data (which is 11 years ago), whereby for the purpose of this analysis, the age groups were adjusted upwards by 11 years, since the study was done 11 years ago. In examining the age groups of the population from the above illustration, 71 per cent of the population are in the age group of 11 – 40, 17 per cent of the population are in the age group 41 – 65, seven per cent of the population are in the age group 66 – 75, and the remaining five per cent of the population are 76 and over.

Putting this into context, investing for the future and creating prosperity for the tomorrow essentially means investing in the economy that will create sustainable prosperity for the 71 per cent of the population comprising of the present and future generation, who in turn have their entire working life ahead of them–and in the process building and developing the economy. Another 24 per cent of the population in the age group which is made of 17 per cent in the age group of 41-65 and seven per cent in the age group of 66–75, these age groups are also in the working population all of whom ought to have the framework for improved standard of living and quality of life today and securing their future as well.

Aligning this with the configuration of the budget whereby 29 per cent of the budgetary allocations are towards the social services sector and the remaining 71 per cent allocated towards investing in the infrastructure to enable the future growth trajectory and prosperity, this ratio configuration mirrors the composition of the population in terms of age group where the future is for the 71 per cent of the population (11-40 years old). While this segment of the population needs social services as well, more importantly, they also need the opportunity to build profitable enterprises for those who have entrepreneurial ambitions, and job opportunities which can only be created through investing in the economy and creating a conducive business and investment climate to so facilitate.

It is within these contexts, therefore, that it can be safely concluded that the budget is people focused. It is a balanced budget catering adequately for the future generation of professionals and entrepreneurs while improving the present-day conditions upon which their livelihoods hinged. The budget also sufficiently caters for the elderly who account for five per cent of the population within the limitations of the financial resources available.