By Joel Bhagwandin, financial analysist

SUMMARY

THE government has already delivered 73 per cent of the Guyana Teachers’ Union’s (GTU) requests for the teachers during the period 2021-2023. In respect of salary increases, during the period 2021-2023, the government had corrected teachers’ salaries for anomalies across all categories, which resulted in significant upward adjustments equating to a cumulative increase of 42 per cent over that period.

Prudentially, recurrent expenditure should be financed from the non-oil revenue as opposed to having a significant portion of the recurrent expenditure financed from the NRF withdrawals, which is a volatile source of income. Notwithstanding, within the current fiscal framework, 30 per cent of recurrent expenditure will be financed from the NRF withdrawals, which amounts to $240 billion in budget 2024. The government has tangibly demonstrated its commitment towards improving the working conditions, including wages and salaries, not only for the teachers, but all categories of public sector employees, albeit, within a sustainable framework and in a manner that is fair and equitable.

While the GTU claimed that financial matters were not part of the negotiations that were had, there is no indication whatsoever that financial matters were prohibited from being included onto the agenda. It is expected, henceforth, that good sense will prevail, inter alia, the mediation process.

INTRODUCTION

It has been almost a month since the GTU orchestrated a strike, demanding higher wages and salaries, among other things. At the outset, the government claimed that the staged strike is illegal. This is because negotiations between the GTU and the government were ongoing in addition to the granting of more than 60 per cent of the GTU’s request over the years since 2020-2023. On the one hand, the GTU contends that the strike was not illegal and that it was not politically motivated. On the other hand, the government contends that the strike was largely politically motivated and driven. The GTU claimed that the ongoing negotiation with the Ministry of Education (MoE) was on policy issues and not finances. Yet, the GTU never indicated whether those negotiations were prohibited. It would appear that that was not the case on the government’s part, as implied by the GTU’s public statement. Thus, if it was not prohibited, then indeed, the strike might have been unnecessary, let alone illegal.

DISSCUSSION AND ANALYSIS

In a GTU correspondence dated September 11, 2023, addressed to the Ministry of Education, the GTU submitted a list of forty-one (41) items that they were requesting / demanding. Of the 41 items, the government already granted thirty (30) items on the list, which represent 73 per cent of the GTU’s total list of requests. The GTU’s demand for salary increases, however, is unsustainable, apart from having other implications that would also not be sustainable. In this regard, the GTU proposed a 20 per cent increase in salary dating back to 2019, and 25 per cent for each year thereafter up to 2023 (2020-2023).

FINANCIAL ISSUES

By the end of 2023, the government had corrected teachers’ salaries for anomalies across all categories, which resulted in significant upward adjustments. These adjustments together with the across the board increases for the period 2021-2023 amounted to a cumulative increase of 42 per cent over that period.

Resultantly, teachers’ wages and salaries increased from a position of $26 billion in 2019 to $37 billion in 2024, reflecting an increase of $11 billion from where it was in 2019. Of the total public sector wages bill, teachers’ salaries alone account for 30.3 per cent. The total public sector wages bill increased from $72 billion in 2019 to $123 billion in 2024, reflecting an increase of 71 per cent or $52 billion from where it was in 2019. The total public sector employment cost accounts for 31 per cent of non-oil revenue and 25 per cent of current expenditure. Bear in mind that current expenditure represents 118 per cent of non-oil revenue. This means that $72 billion or 15 per cent of total current expenditure will be financed from the oil revenue (Natural Resources Fund (NRF) withdrawals).

For the sake of demonstrating, if the government was to grant the percentage increases in teachers’ salaries proposed by the GTU, this would have amounted to an increase of $51 billion from the 2019 position, to reach $77 billion in 2023-24 instead of $37 billion, reflecting a cumulative increase of 196 per cent over that period.

Moreover, this would not have been without implications, such that the government cannot grant such exorbitant increases to only a singular segment of public sector employees. As such, the government would have had to apply similar rates of increases across the entire public sector.

Consequently, the total public sector employment cost would have increased to $231.3 billion, up from $72 billion instead of $123 billion (Budget 2024). This amount represents 57 per cent of non-oil revenue, and 96 per cent of the NRF withdrawal (Budget 2024); recurrent expenditure would have increased from $480 billion to $589 billion, accounting for 82 per cent of total revenue (Budget 2024), up from 67 per cent. This, in turn, would mean that 44 per cent of the recurrent expenditure out of the total budget would have had to be financed from the NRF. The concomitant impact of the proposed level of increases thereof borders undesirable fiscal sustainability risks.

Prudentially, recurrent expenditure should be financed from the non-oil revenue as opposed to having a significant portion of the recurrent expenditure financed from the NRF withdrawals, which is a volatile source of income.

Notwithstanding, within the current fiscal framework, 30 per cent of recurrent expenditure is financed from the NRF withdrawals. Of note, the NRF withdrawal to finance budget 2024 amounts to $240 billion.

Hence, to further increase the recurrent expenditure to the extent where more than 40 per cent would be financed from a more volatile source revenue, would engender undesirable fiscal sustainability risks. For example, currently the average crude oil price is between US$70-$80. If, in the medium-term crude oil prices fall to US$40-50 or below this range, this would pose serious fiscal problems, such that, the government would have to borrow to finance recurrent expenditure (including public sector wages and salaries). This is a situation that the country experienced historically in the late 1980s and 1990s when the economy was bankrupt.

More importantly, the proposed steep increases by GTU, aside from the aforementioned implications, would come at the expense of depriving the present and future generations of opportunities in the future as well. This would mean that the resources available to invest in building out the economy to create future income streams, job creation etc., will be significantly constrained. Thus, it is imperative that the government administers the financial resources of the country in a responsible manner―that is, within a framework that balances the immediate needs of the people as well as the requisite investment for the future generations (noting that Guyana has a relatively young population).

Towards this end, the government has a responsibility to spend on many other crucial areas of the economy such as: national security, investing in the country’s defence capabilities; climate adaptation and resilient infrastructure, physical and social infrastructure; the social services sector, for example, health education, housing; the economic sectors (for e.g., agriculture, natural resources, tourism, energy), economic diversification, and expansion into new industries; and regional [administrative regions) development.

LEGAL ISSUES

It was subsequently revealed that the GTU has several compliance issues. Chiefly, according to the Auditor General’s Office, the GTU has not submitted its accounts to be audited since 1989―more than three-decades; and according to the Deeds Registry, the GTU has not filed its annual returns in 20 years. These could prove to bear adverse legal repercussions on the part of GTU, which the government, if it so wishes can invoke by applying the full extent of the law. However, the government, for all good reasons and intent, appears to be disinterested in such pursuit. This is indicative of the government’s unreserved commitment to ensuring reasonableness and an amicable solution aimed at resolving the dispute.

Worthy of note, through the Court, the matter has been subjected to mediation and it is hoped that good sense would prevail in the best interest of all stakeholders involved.

CONCLUSION

The political motivation for the GTU staged strike action is debatable. As demonstrated herein, the government has tangibly demonstrated its commitment towards improving the working conditions, including wages and salaries, not only for the teachers but all categories of public sector employees, albeit within a sustainable framework and in a manner that is fair and equitable.

In so doing, more than 70 per cent of the requests put forward by the GTU were granted by the government during the period 2021-2023. Notably, negotiations were ongoing up to the point the GTU abandoned that process in January 2024. While the GTU claimed that financial matters were not part of the negotiations that were had, there is no indication whatsoever that financial matters were prohibited from being included in the agenda. It is therefore expected that good sense will prevail, inter alia, the mediation process.