Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698077765198.pdf (Guyana)
GUYANA ·--· -·----·· SESSIONAL PAPER NO.

1 OF 2003 EIGHTH PARLIAMENT OF GUYANA UNDER THE CONSTITUTION OF GUY ANA SECOND SESSION 2002 --r,2003 BUDGET SPEECH Honourable Saisnarine M.P.
Kowlessar, Ministry of Finance ·March 28, 2003 Investment 5.Power 6.Urban Renewal G.Human Capital 1.Education 2.Health 3.Housing 4.Water & Sanitation 5.Poverty H.Improving I.Fostering and Social Programmes the Financial, Safety Nets Institutional sparency and Tran Greater Accountability and Regulatory 1.Public Sector Reform Financial 2.Integrated a.Budget and Treasury b.Review of Financial Oversight c.Improved Procurement Management Management Legislation of Public and Tendering 3.Public 4.Reform of the Tax System 5.Debt Management and Legislative Review Financial Management 30 31 32 32 33 34 34 35 Environment36 37 37 38 38 38 39 39 39 40 40 42 42 42 J.Job Creation K.Governance, 1.Governance 2.Crime and Justice Crime and Justice 5 Economic and Financial Targets in 2003 Projecti A.Real Sector ons 1.Agriculture 2.Industry 3.Services B.Inflation C. Balance of D.Fiscal Targets Payments and Monetary Policy 1.Central 2.Public 3.Non -Financial Public Sector Government ses Enterpri 6 Budget Measures A.Introduction B.Measures to Expand the Tax Base Tax on Local Telephone Calls 1.Consumption Tax 2.Increase 3.Introduction in Withholding of a Value Added Tax (VAT) C.Measures D.Measures to Improve Tax Administration to Increase Workers' to Public in Salaries in Income Tax Threshold Income Servants 1.Increase 2.Increase 11 44 44 44 44 45 45 45 46 46 47 47 48 48 48 48 48 48 49 50 50 50 7 Conclusion Appendices Socio -Economic Indicators Product l ..
Selected 2 ..

Gross Domestic 3.. Central 4 .. Urban Consumer 5 .. Balance of Payments 6 .. Actual Government and Projected Analytical External Debt Stock Summary at 1988 Prices Origin by Industrial Financial Operations Price Index (including Georgetown) 51 52 53 54 55 56 57 iii 1 Introduction 1.1 Mr Speaker, I rise to move the motion for the approval of the Estimates of the Public Sector and the Budget for the Financial Year 2003.
In so doing, I wish to indicate that in concurrence with Article 171, paragraph 2 of the Constitution, the Cabinet has recommended that the National Assembly proceed upon this motion.

1.2 Mr Speaker, when J last presented the budget, on March 15, 2002, I used the occasion to recall the tragic events that occurred in the United States of America, on September 11, 2001 and the likely impact they would have had Even on our economy.

in face of the uncertainties,.


I had expressed confidence in our policies and I counted on the known resilience of our people to keep Guyana on the move forward.

1.3 However, Mr Speaker, none of us could have predicted the unsavoury events that unfolded in Guyana in 2002.

The increase in criminal activities since February last year has claimed the lives of many persons, including twenty-three law enforcement officers, resulted in injuries to many others, and traumatised the citizenry.
This development exacerbated the already difficult political situation.

The physical and psychological damage that these events have inflicted on the psyche of the peace-loving people of this country would be felt long after normalcy has been restored.

I appeal to all those who cherish democracy, and the freedoms that flow from it, to lend an unequivocal voice against attempts to create instability, to make the country ungovernable, and to divide our people.
1.4 Mr Speaker, notwithstanding the many difficulties encountered at the local and international levels, we redoubled our efforts to deliver increased and social economic benefits to the population.
Growth continued sugar to be positive; production was the highest in 26 years; the exchange rate remained stable and internation al reserves exceeded the target; the physical and human infrastructure was expanded; more money was spent on health, education, pure water, and housing; and workers' incomes were increased.

Shrewd management that of the economy ensured all of this was accomplished despite the diversion of resources to fight crime.
1.5 Mr Speaker, all of us should ponder on the following: if so much can be accomplished under such extreme circumstances, how much more could be achieved if the Government did not have to engage constantly in costly and avoidable distractions.

Should we not see this as a clarion call for us to· put our collective shoulders to the proverbial wheel in the fight against poverty and underdevelopment?
I believe that we owe it to this and future generations to redirect and, in the words of our National Pledge, "dedicate our energies towards the happiness and prosperity of Guyana."

1.6 Mr Speaker, we are cautiously optimistic that despite its inauspicious beginning, Year 2003 will see a further advancement in the welfare of our people.
As President Bharrat Jagdeo intimated in his New Year's Message, the task of the Government will be to continue to forge a Guyana in which opportunities for all of our people abound; a place where citizens are free, proud and can pursue their way of life in dignity.

We have already developed the plans and programmes to make this vision a reality.
They find expression and elaboration in the PPP/C's campaign manifesto for the 2001 Elections, the Poverty Reduction Strategy the Paper (PRSP), National Development Strategy (NDS), and various public statements and pronouncements that have been made periodically.

1.

7 It is within that framework that I bring to this Honourable House a packed agenda for 2003.
Among the priorities are job creation through growth, promotion and attraction of investment, and increased support for the private sector; greater access to potable water, housing and other social services; reform of the Judiciary; more accountable Government; and an intensified crime fight.

The seriousness with which we intend to pursue the execution and implementation of our plans, policies and programmes will ensure that we make further progress this year.
1.8 Mr Speaker, we are not unmindful of the enormity of the effort needed to put Guyana on a high and sustainable growth path.

The road to development is not paved with gold; neither is it shorn of missteps.

Many obstacles abound -· some foreseen, others unforeseen or beyond our control.
As 1 develop the agenda for 2003, shortly, it evident will become increasingly that our intent, our purpose, indeed our goal is not to give up but to consolidate and expand our hard won gains, fortified in the knowledge 2 2 Review of the Global Economy 2.1 Mr Speaker, in the aftermath of the September 11, 2001 debacle, which shattered investor and consumer confidence and hastened the slide of the world economy into a full blown recession, the prospects of an early return to robust growth were slim.
While the world economy lurched to a 2.6 percent growth in real terms, there were several common features, which characterised most of the countries.

Among them were sluggish growth of output, benign inflation (and deflation in some cases), stagnant employment, worsening fiscal balances, low and uneven growth in international trade, reduced international capital flows, and lower prices for many non-fuel commodities.
2.2 Mr Speaker, the news was particularly grim for countries in Latin America and the Caribbean.

With very few exceptions, especially and those that produce export oil, countries on this side of the world fought a losing battle to maintain output, income and employment at their 2001 levels.

Output for the Latin American Region contracted by 0.6 percent, with most of the decline coming as a result of the crisis in Argentina and the spillover effects on neighbouring countries.
Outright recessions were experienced in Argentina, Paraguay, Venezuela and Uruguay, where the economy contracted by more than 10 percent.

Inflation, which moderated in 2001, rose by 8.6 percent in 2002.

Of the 26 countries that were monitored, as many as 12 experience d a decline in per capita GDP.

Only one had per capita GDP growth above 3 percent.
2.3 A similar situation was observed for Caribbean economies, where, with the notable exception of Guyana, Belize and Trinidad and Tobago, weak economic performances were returned.

Critical foreign exchange-earning sectors, especially tourism, failed to provide the stimulus that was needed to generate expansion in output and income.

Even normally healthy economies, such as those of Barbados and the Bahamas, were not spared; both of them contracted.
In the extreme case of Dominica, whose economy contracted by 3.1 percent, the Caricom Heads of Governments were moved to adopt an imaginative approach, in the form of a Regional Stabilisation Fund, to rescue that sister nation.

4 We, therefore, call for a speedy conclusion of the war and for the fullest use to be made of these tested and proven means of conflict resolution.
2.8 Mr Speaker, we will continue to formulate and implement policies to allow us to exist and compete effectively within the Caribbean Single Market and Economy; the Free Trade Area of the Americas, which is scheduled to come into effect in January 2005; the World Trade Organisation Post Doha negotiations, in especially agriculture and services; and the new Economic Partnership Agreement with Europe that comes into force in 2007.
While Guyana may be considered to be a small player in world affairs, we, in concert with our partners, can play an important role in influencing and shaping the course and outcome of these negotiations.

This is a challenge that we have accepted and have been boldly pursuing.

this It is against context international that Budget 2003 has been constructed.

6 Review of the Domestic .Economy 3 A.


Real Growth of Output 3 .1 Mr Speaker, skilful management of the economy, in the face of the difficulties encountered at the national and international leve::ls, ensured that the economy expanded once again in 2002.

The Gross Domestic Product (GDP) grew by 1.1 percent in real terms, compared to the target of 2 percent, and the 1.9 percent that was achieved in 2001.

B.
B.

Sectoral Performance 3.2 Mr Speaker, prominent among the performers in the agricultural was sector sugar, whose production increased by 16.4 percent to 331,057 tonnes, the highest since nationalisation.

result This outstanding is a reflection of the correctness of the decision to undertake a massive restructuring and modernisation of the industry as embodied in the Agriculture Improvement Plan.
Favourable weather conditions, timely which facilitated land preparation, and improved yields were also responsible for this success.

On the other hand, on account of poor weather early in the year that affected planting and continued financial difficulties faced by farmers, rice production declined by 10.

7 percent to 287, 755 tonnes.

3 .3 The performance of the other sub-sectors sector of the agriculture was mixed.
Livestock increased by 5 percent, largely as a result of new investment, expanded capacity and increased protection of the local market.

However, meat while poultry increased by 33.6 percent to 16.7 million kilograms, egg production declined by 32.3 percent to 17.4 million units.

Other agriculture grew by 1.5 percent.

Fishing declined by 4 percent to 23.7 million kilograms.

Forestry contracted by 8 percent.


3.4 Mr Speaker, although the output of the mining and quarrying sector declined by 6.9 percent, there were some encouraging perfonnances in gold and diamonds.

Buoyed by a recovery in world market prices, declared raw gold production of small miners rose by 15.1 percent to 117,240 ounces -somewhat of a record for these small operators.

Ev1�n though Omai Gold Mines Limited performed better than budgeted, 7 the output of 339,798 ounces was 8.8 percent less than in 2001.
After record levels in 2001, diamond production rose by 34.8 percent to 248,436 carats, higher reflecting prices, the impact of new technology and foreign direct investment in the industry.

3.5 For the second successive year, bauxite production contracted sharply to reach 1,630,244 tonnes.

This 18.9 percent reduction is symptomatic the of the woes facing industry, including depressed prices, high production costs, and lack of financing.
It is hoped that the actions that were taken during 2002 will result in a turnaround of the industry's production and profitability in the near future.

3.6 The manufacturing sector grew by 2 percent, continuing the trend observed in 2001.

Generally, there were good performances.


in the following broad areas: industrial_gQgd� (neutral alcohol, 78.3 percent; stockfeed, 20.2 percent; paints, 6.2 percent); beverag� (stout, 37 percent; malta,, 11.6 percent; rum, 10.2 percent); edibl� items (snack foods, 96 percent).

3.7 The services sector performed indiffe rently, with only two sub-sectors recording positive growth.

Transport and communication increased by 4.5 percent, largely due to the phenomenal growth in cellular phone subscrib ers.
On the other hand, engineering partly and construction declined by 4 percent, due to the general inactivity of the private sector.

Distribution fell by 1 percent, in part, reflecting, declines in visible imports and overall local production.

Financial services declined by 1 percent, an indication of the effect of the unstable political climate and the cautious approach to lending that was adopted by the commercial banks.

Government's contribution to the GDP fell by 1 percent.

C. Balance of Payments 3.


8 Mr Speaker, the performance of the current and capital accounts of the balance of payments was mixed.

The current account deficit improved by 17 percent to US$ I 06.7 million, reflecting the narrowing of the merchandise trade account which more than offaet the net services and net transfer accounts.

8 Broad money, comprising currency in circulation and private sector deposits, grew by 5.5 percent to $98.1 billion.
3.13 Total deposits of residents rose by 9.5 percent In particular, to $8.8 billion.

compared to a 6.4 percent increase in public sector deposits grew by 34.5 percent private sector deposits and a 15.1 percent increase in the deposits of non-financial institutions.

3.14 Net domestic credit of the banking system increased by 5.5 percent to $28.7 billion.
Credit to the private sector remained flat, reflecting the excess liquidity in the system, the overly cautious lending policy adopted by the commercial banks, political instability and the heightened crime wave.

In fact, with the exception of rice milling, personal use and 'other' purposes, all of the economic sectors registered net repayments to the banking system.

The public sector continued to be a net depositor of funds to the banking system.
However, Central Government's deposits, net of loans, advances and Treasury Bills contracted by 16.2 percent or $3 billion while other public sector net deposits expanded by 16 percent.

E. Prices and Incomes a.

Inflation rate 3.15 Mr Speaker, the inflation rate for 2002 was 6.1 percent, slightly above the target of 5 percent.

pressures This was due to several reasons.

First, inflationary resulted from substantial increases in the tariffs of electricity, water and telecommunications.
Second, along the the steep rise in the crime rate, especially East-West corridor of the country, temporarily disrupted food supplies during August and September and this created artificial shortages that led to increases in the index for the food sub-group.

Third, the price of diesel fuel rose sharply towards the latter part of the year, forcing the government to intervene through of the the lowering consumption tax.
Finally, the very openness of our economy suggests that the inflation rate would be influenced by price adjustments in our major trading partners.

This was our experience in 2002.

10 3.20 Current revenue (net of reimbursable Rice Levy) was $44.6 billion, 1.8 percent more than budgeted.

The Guyana Revenue Authority accounted for 91.6 percent of the revenue, or $40.8 billion.
The Internal surpassed Revenue Department its target of $20.7 billion by $1.5 billion or 6.6 percent, an achievement that reflects the success of our efforts to strengthen tax administr ation and collection.

This was mainly responsible fer the 11.1 percent growth in income tax.

On the other hand, even though tax collection of $18.7 billion by the Customs and Trade Administration was 3.3 percent more than in 2001, it was substantially below the target of $20.2 billion.
Other current revenue contribu ted $3.8 billion, the bulk of which was garnered from royalties ($952 million); dividends from equity holdings and public enterprises ($810 million); and Bank of Guyana profits ($479 million).

3.21 Total expenditure (net of principal repayments and reimbursable Rice Levy) amounted to $64 billion, 7.2 percent less than budgeted.
Current expendit ure reached $48.2 billion, of which: personal emoluments rose by 7.4 percent to $15.8 billion; other goods and services grew by 7.1 percent to $9.7 billion; and transfers (including those to Linmine and Bermine) increased by 3 percent to $11.9 billion.

Scheduled interest payments declined by 8 .4 percent to $10.

7 billion, as a result of further interim debt relief and lower domestic interest rates.

Capital expenditure (net of transfers and loans to public enterprises) was $15.
7 billion.

3.22 The current deficit of the Government was $3.6 billion, an improvement of 36.2 percent relative to 2001.

The overall deficit after grants or 5.7 was $8 billion percent better of GDP, substantially than the 8.4 percent in the of GDP recorded previous year.

The deficit net external was financed through borrowing of $3.8 billion and a drawdown of government deposits with the banking system of $4.2 billion.

2.
2.

Public Enterprises 3.23 Mr Speaker, total receipts of the public enterprises increased by 9.8 percent to $50.6 billion, largely as a result of Guysuco, whose revenue was positively affected by increased exports and a favourable euro/US dollar exchange rate.

At the same time, operating expenses rose by 15.7 percent to $48.3 billion, reflecting strong 12 growth in wages and salaries and other goods and services.
Most of this growth was attributed to Guysuco in the process of achieving its record-b reaking performance in production.

Taxes paid to Central Government were $1.2 billion, three times the amount paid in 2001, while dividends were $312 million.

Current savings deteriorated markedly to $2.2 billion, from $4.3 billion in 2001, and this contributed to the decline in the overall balance from $2.5 billion to $452 million.

3.
3.

Non-Financial Public Sector 3.24 Mr Speaker, the developments in the Central Government and the Public Enterprises resulted in an overall deficit public after grants of the non-financial sector of $7.4 billion, or 5 .3 percent of GDP.

This compares favourably with $8.

7 billion or 6.5 percent of GDP in 2001.

G. Public Sector Investment Programme 3.25 Mr Speaker, the Government budgeted to spend $20 billion on the Public Sector Investment Programme some $4.1 (PSIP) in 2002.
This amount assumed billion in new resources from meeting the completion point for the EHIPC and disbursement of public sector loans for onlending to Guysuco for the sugar modernisation project.

However, neither event occurred and the Government had to revise the PSIP downwards.

It was able to achieve 99 percent I of the revised target.

will now review developments in each sector.

1.


Physical Infrastructure Sector 3.26 Mr Speaker, over the past several years, we have embarked on a programme to rehabilitate our highways and main, communi(Y and farm-to-market roads countrywide.

During 2002, we commenced the process to hire a contractor and consultant for the reconstruction of the Mahaica to Rosignol road link and to start pre-­ feasibility studies for an alternative route to the Airport.
Also, we engaged consultants to study and design the construction of a four-lane Highway from Demerara Harbour Bridge to the Ruimveldt Police Station and to rehabilitate the West Demerara arterial road from the Demerara Harbour With respect Bridge to the Best Hospital Complex.

13 to the minor roads, we completed reconstruction and/or rehabili tation works on roads in areas such as Vergenoegen, Anna Catherina, No.
47 Village, Cane Grove, Golden Fleece, Dartmouth, Sarah Lodge, Glasgow, Agatash, Karasabai, Ituni, Kwakwani, .Jonestown, Bare Root, Plaisance, Rose Hall, Bush Lot, Black ·Bush Polder and Bartica.

3.27 We successfully completed negotiations with the preferred contractor for the reconstruction of 59 bridges and culverts stretching from Timehri to Rosignol, including the key Mahaica and Mahaicony River Bridges.
In addition, we completed several other structures and bridges at Dartmouth, Dunkeld, Walton Hall, Greenfield, Cullen, Riverstown, Kumaka, Golden Grove, Victoria, Sophia, Tain, Moleson Creek, Kato and Sand Hills, among others.

In the case of the Demerara Harbour Bridge, two large pontoons were replaced and 100 new buoys were fabricated and installed.
Finally, we concluded negotiations and secured a contractor to resurface the runway of the Cheddi Jagan International Airport, Timehri ,md we started the process for the study and design of a new aJTival terminal and upgrade of the sewerage system at the airp ort.
3.28 Mr Speaker, our rel,entless fight to stem the encroachment of the mighty Atlantic continued in 2002 ,vith over $1.5 billion being expended to rehabilitate and reconstruct sea defence structures at locations such as Bel Air, Mon Choisie, Buxton, Nos.

41 and 88 Villages, Bush Lot, Waterloo/Bath, Sara North, Maria's Pleasure, Wakenaam and Leguan.
3.29 In terms of work done to improve drainage and irrigation facilities in the country, we: )i> completed the rehabilitation of the East Demerara Water Conservancy; )i> completed the El Nino Project, which included of several the rehabilitation drainage and irrigation structures; )i> expended over $570 million to refurbish and rehabilitate numerous drainage and irrigation structures throughout the coastal belt;. )"
completed revetment of outfall channels at La Union, Eversham, Borlam, Seawell and Joppa: 14