Budget 2004 At A Glance
Infrastructure |
Sea Defence | Education
| Health | Housing &
Water | Investment | Job
Creation | Agriculture | Bauxite
| Tourism | Crime Fighting
& Security | Amerindian Development
| Public Sector Management | Local
Government | Poverty Reduction | Targets
for 2004 | 2003 Indicators
The National Budget 2004, presented under the
theme, “Investing for Sustained Growth and Enhanced Social
Development,” amounts to $75.6 billion, an increase of 5.3
percent from last year’s Budget. Minister of Finance, Saisnarine
Kowlessar presented the Budget to the National Assembly on March
29, 2004.
Consistent with its theme, this year’s Budget focuses on
sustained economic growth and development and enhancing social
development.
This year’s Budget addresses critical development problems:
identifying and removing bottlenecks and sources of vulnerabilities;
as well as tackling longer term and structural issues; reinforcing
macroeconomic fundamentals; retooling the economy to enhance competitiveness;
supporting private investment initiatives; venturing into new
growth activities; improving the social and economic infrastructure;
enhancing human resources development to meet the demands of the
expanding economy and job creation.
In the face of slowdown in the global economy, which was caused
mainly by the war in Iraq and the Severe Acute Respiratory Syndrome
(SARS) virus, in spite of challenges faced by global and domestic
difficulties, the economy contracted by only 0.6 percent. The
fiscal deficit remained within prudent limits, despite increases
in public expenditure that were occasioned, in part, by higher
spending in the social sectors and by the fight to repel the growing
crime wave. Improved access to and better delivery of education
and health care services were also attained in 2003.
Government remains committed to implementing the broad policy
reforms outlined in the Poverty Reduction Strategy Paper (PRSP)
and is recording significant progress in this regard in implementing
the PRSP as documented in the progress report of 2004.
The economy is expected to grow by 2.5 percent in 2004 with increased
spending in major sectors.
Infrastructure
This year, work will be completed on the rehabilitation
of the Mahaica/Rosignol road; the construction of the four-lane
highway; rehabilitation and expansion of the West Demerara main
road and the designs for the rehabilitation of the New Amsterdam/Molson
Creek Highway and the southern entrance to Georgetown. Almost
$700 million has been allocated to refurbish community roads countrywide.
This year $3.4 billion will be spent to increase and improve the
network of highways, roads and bridges. Almost $700 has been allocated
to refurbish community roads countrywide. Discussions are continuing
on the most feasible options for constructing the Berbice River
Bridge.
TOP
Sea Defense
$955 million will be spent to improve sea and
river defense , including rehabilitation of structures at Johanna
Cecelia, Lower Pomeroon, Maria’s Pleasure, Blenheim, La
Grange, Hyde Park, Grove, Turkeyen, Buxton/vigilance, Belladrum
and Cornelia Ida.
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Education
Government has increased spending in this sector
from 8.4 percent of GDP or 12.1 billion in 2003 to 9.4 percent
of GDP or 14.5 billion in 2004. Priority spending will be in the
areas of curricular and pedagogical reforms, teacher’s training,
recruitment, reducing overcrowding, improving facilities and their
management, functional illiteracy among out of school youths and
institutional strengthening.
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Health
Spending in the health budget has been increased
to $6.7 billion. Additionally, the Basic Nutrition Programme,
intended to reduce malnutrition among women and young children
in poor communities, will commence this year. HIV/STDs prevention
and control programmes will continue this year. Government is
currently negotiating to finance a new five-year, US$15.6 million
Health Sector Programme. Construction works will continue at the
New Amsterdam Hospital.
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Housing and Water
Almost $1.4 billion has been budgeted to accelerate
the housing programme, and $1.5 billion has been budgeted to improve
and upgrade the water systems.
Government will continue its programme to improve land titling
and allocation. Priority actions in 2004 will center on the implementation
of land tenure regularization in the riverain areas of Essequibo,
Berbice and Demerara, completion of systems development in land
administration; and improving revenue management within the Guyana
Lands and Survey Commission.
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Investment
Given the annual CARICOM food import bill of US$3 billion , Government
will seek to increase it exports and with Guyana’s comparative
advantage in agricultural production, seek to encourage and promote
investment. Government’s investment strategy will continue
to focus on attracting and supporting existing and potential local
and overseas investors to invest in manufacturing and the creation
of value added products and services for export.
Additionally, legislative reform, such as the Investment Act,
Small Business Act and hosting an investment conference will be
undertaken this year.
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Job Creation
In the wood sector, over $300 million will be
invested in two projects for sale to the Caribbean. It is anticipated
that new jobs will be created with a cocopeat project coming on
stream this year on the Essequibo Coast. Two other projects in
the Intermediate Savannahs are expected to create more jobs, while
new jobs will be created in the Linden area through the Linden
Economic Advancement Programme (LEAP). Other private investment
projects, which will produce hundreds of jobs, are slated for
this year.
In addition to other financial assistance, Government will also
focus on the rice industry and will push for an early and rapid
disbursement of $11.7 million Euros, which has been granted by
the European Union to enhance competitiveness of the industry.
In addition to restructuring the traditional sectors, Government
is pursuing new growth areas and opportunities for expanding the
economic base. The focus is steadily moving towards services,
tourism, non-traditional agriculture and petroleum exploration.
Government will facilitate projects in the information and communications
technology sector to the tune of $800 million for the establishment
of a call centre at Linden, creating several jobs for Lindeners.
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Agriculture
The Guyana Sugar Corporation’s strategic
plan will continue to be implemented in 2004. This plan envisages
increasing production to about 450,000 tones of sugar and lowering
costs. Additionally, Government secured a soft loan of US$25.2
million to restructure three estates in Berbice.
Drainage and Irrigation systems will continue to receive attention,
including rehabilitation of the Dawa pump, replacement of sluices
at Golden Fleece and West Burary on the Essequibo Coast. Efforts
will be undertaken to expand aqua-culture and increase beef exports
in light of new markets.
Further, an IDB-funded agriculture support service system project,
amounting to US $3.4 million , will be made available to sustain
the Drainage and Irrigation system through water users’
association.
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Bauxite
As part of measures to reduce cost, Government
will relieve Aroaima Bauxite Company (ABC) of all historical,
social and community responsibility. Privatization of Limmine,
which will pave the way for increased investment and production,
is slated for the first half of 2004. In addition, Government
will pursue other initiatives to revitalize the bauxite sector.
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Tourism
Tourism is emerging as one of the new areas with
the biggest potential to contribute to foreign exchange earnings,
employment and growth. Government/Private sector collaboration
will be enhanced and training, to equip tourism-based workers,
will be increased. Government will undertake further measures
to promote tourism.
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Crime Fighting and Security
Government will continue to provide the necessary
legislative, financial and technical support to the Guyana Police
Force and other law enforcement bodies in the fight against crime.
Funds have been budgeted to rehabilitate buildings; purchase equipment
and vehicles; and recruit additional police officers, among other
things.
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Amerindian Development
In addition to a $30 million Amerindian Development
Fund, Amerindian Communities will benefit from an exercise and
text book programme, and school feeding programme for nursery
and primary students. A subsidy programme, among other programs.
The expanded infrastructural development and rehabilitation measures
will benefit Amerindian communities.
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Public sector Management
Government is negotiating for US$32.8 to support the rational
and transparent management of its fiscal and financial affairs.
Additionally, all sections of the Fiscal Management and Accountability
Act will become fully operational and regulations to accompany
the new Procurement Act will be drafted this year. Regulations
to accompany these Acts will be drafted.
TOP
Local
Government
An additional $519 million has been budgeted
under the Urban Development Programme to execute works on and
around the six municipalities of Guyana. NDCs will continue to
receive subvention of $3 million.
TOP
Poverty Reduction
Consistent with the poverty reduction strategy,
increased funding has been allocated to target key poverty alleviation
programmes. The continued emphasis on the social sectors and job
creation activities are expected to have a positive impact on
the ongoing fight against poverty.
Increased spending on poverty alleviation programmes and on the
social sectors will continue in an effort to achieve the Millennium
Development Goals. Nursery and primary school children will benefit
from a $100 million exercise and text book programme; a $250 million
school feeding programme; a $350 million school uniform programme;
a $47.5 million CXC subsidy programme; a $50 million oral and
optical health programme and a $109 million nutrition programme
for children and pregnant and lactating mothers.
Under the SIMAP III programme, over $900 million has been allocated
to finance community development, drainage and irrigation and
health projects. Under the BNTF V, $385 million will be used to
rehabilitate roads, construct and/or extend schools. Also LEAP
is programmed to spend $450 million.
Under the Old-age pension and social Assistance programme, approximately
50,000 people will benefit.
TOP
Some
Targets for 2004
- Real GDP is expected to grow by 2.5 percent.
- Inflation Rate projected at 4.5 percent.
- The Exchange rate is expected to remain stable.
- Hundreds of jobs are to be created through new and expanded
investments.
- Merchandise exports are expected to increase
by 6.9 percent.
- Overall Balance of Payments is expected to
improve.
- Investment in infrastructure is expected to
increase.
- Spending in the social sector is also expected
to improve.
2003 Indicators
- Despite unfavourable economic conditions, locally
and internationally, the economy contracted by only 0.6 percent.
- Inflation rate was only 4.9 percent, below
the projected figure.
- Exchange rate remained stable
- Merchandise exports recorded a 4.3 percent
increase from the previous year.
- Public Servants received a 5 percent across-the-board increase
in wages and salaries.
BUDGET PRESENTATION 2004
by - Hon. Saisnarine Kowlessar, Minister
of Finance
Introduction
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 2004. 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.
Mr. Speaker, it would not have gone unnoticed
that the PPP/Civic Government has just completed the third year
of the renewed mandate that was given to it in the March 19, 2001
General and Regional Elections. We, therefore, believe that at
this critical juncture, it would be most fitting to do some stocktaking,
to evaluate how far we have progressed since that time, and to
chart the course for the remainder of this term.
Mr. Speaker, to date, the third term of the PPP/Civic
Government - since it fought for and secured the return to democracy
in 1992 - has been marked by a number of challenging, unforeseen
and unforgettable circumstances. At the domestic level, we have
had to grapple with an unstable political climate, which grew
out of the unwillingness of the main Opposition Party to accept
the results of the Elections and their subsequent pronouncement
to make the country ungovernable. A ray of hope emerged towards
the middle of 2003 when this negative position gave way to constructive
engagement. Sadly, during the intervening period, the country
bore witness to a reign of terror and criminality that caused
a significant number of death and injuries; much discomfiture
to survivors and their families; and destruction of property.
At the international level, the start of this
term coincided with the slowdown in the global economy, which
was caused in part by the downturn of the US economy. This was
then aggravated by the September 11, 2001 catastrophe in the United
States. Although the worst was anticipated in the aftermath of
that incident, the world economy showed encouraging signs of recovery
towards the latter half of 2002. However, this was soon upstaged
by the events of the first half of 2003. I refer here, in particular,
to the outbreak of war in Iraq and the deadly Severe Acute Respiratory
Syndrome (SARS) virus, both of which have had a negative effect
on economic recovery.
Yet, in the face of these adversities, the Government
persevered with the agenda that it had set itself. During 2001-03,
the economy expanded in real terms by about 1% per annum. Although
this is lower than projected for the period, it is still a commendable
outturn since average growth remained positive and comparable
with that of several countries within CARICOM, especially the
tourism-dependent economies. We can also take pride in the fact
that our per capita income has risen to nearly US$900 during that
period.
Growth was achieved in an environment of stable
prices. The fiscal deficit remained within prudent limits, despite
increases in public expenditure that were occasioned, in part,
by higher spending in the social sectors and on the fight to repel
the growing crime wave. We also managed to increase access to,
and improve the delivery of, education and health care services;
provide better housing and basic amenities, particularly to those
in the low-income group; reduce the incidence of poverty; and
generally improve the quality of life of every Guyanese.
Mr. Speaker, our pro growth, pro poor policies
have been reflected in our rapidly improving position on the Human
Development Index (HDI) and the Human Poverty Index (HPI). According
to the UNDP’s 2003 Human Development Report, Guyana ranked
92nd out of a list of 154 countries on the HDI, and 23rd among
92 developing countries on the HPI. These are significant advances,
especially considering the deteriorated social and economic conditions
that the Government inherited in October 1992. While we can pause
to compliment ourselves for these achievements, we cannot afford
to feel comfortable until poverty is completely eradicated from
our society.
Mr. Speaker, we have laid the foundations for
growth and further development of our country in 2004 and the
remainder of our term in office. The thrust of our policies will
continue to centre on addressing critical problems; identifying
and removing bottlenecks and sources of vulnerabilities; as well
as tackling longer term and structural issues. Our interventions
will focus on, among other things, reinforcing macroeconomic fundamentals;
retooling the economy to enhance its competitiveness; supporting
private investment initiatives; venturing into new growth activities;
improving the social and economic infrastructure; human resources
development to meet the demands of an expanding economy; and job
creation. All of these actions are aimed at infusing dynamism
in the economy so as to sustain growth and accelerate development
in our country. This is the thinking that has informed the theme
for this Budget, which is, Investing for Sustained Economic Growth
and Enhanced Social Development.
Mr. Speaker, an exciting period lies ahead. The
successful implementation of this agenda will see our country
making a quantum leap into the second decade of the millennium.
Importantly, however, it will depend on an enabling external environment,
our ability to mobilise the required financing for our projects
and programmes, and our political maturity. Of these, the latter
is completely within our realm. The signing of the May 9, 2003
Communiqué and the subsequent return of the main Opposition
Party to Parliament, the highest decision making forum in the
land, were important steps in establishing trust and engendering
confidence in the difficult process of building this young nation.
We will continue to engage the political parties, civic and other
groups in dialogue and discussions. Our reality and circumstances
dictate that we explore all avenues for achieving lasting peace
and stability.
Equally, we are conscious of the need to build
strategic alliances and partnerships, while offering all stakeholders
opportunities for their full involvement and meaningful participation
in the planning and execution of our policies and programmes.
This is an approach to which we have long subscribed. It continues
to be evidenced by the extensive consultations that we have conducted
during this and previous budget cycles.
Review of the Global Economy
2
Mr. Speaker, after an initial period of uncertainty and dampened
growth prospects, the global economy experienced unexpectedly
strong growth towards the latter half of last year. The most recent
estimates suggest that world output expanded by 2.5 percent while
world trade growth increased by 4.7 percent. Sluggish growth in
Japan, Germany and other parts of Western Europe, the war in Iraq,
and the impact of SARS were some of the reasons advanced to explain
the fragility in the first half of the year. These factors have
contributed to a continuation of the economic vulnerability that
has lingered since the tragic events of September 11, 2001. There
was unexpectedly strong upturn in the second half of 2003, which
was attributed to expansionary fiscal policies in the US and Europe.
Despite the official end of the war, oil prices remained high,
hovering at over US$30 per barrel. Given the pass-through effect
that an oil price rise has on the general price level, it was
surprising that global inflation remained relatively stable.
Mr. Speaker, looking at Latin America and the
Caribbean, high oil prices brought increased revenues to the oil-producing
countries, especially Venezuela and Trinidad and Tobago. However,
the rest of the region experienced the effects of the negative
multiplier growth in the economy and the deterioration in the
balance of payments. Such factors could help to explain, for example,
the contraction of Brazil’s economy, the continent’s
largest, by 0.2 percent in 2003, after having grown by 1.9 percent
in 2002.
With respect to the Caribbean, as expected, the
increased oil prices benefited Trinidad and Tobago, but had the
opposite effect on the oil-importing countries. The tourism industry
in particular benefited from the growth in the global economy
and the appreciation of the Euro against the dollar, which helped
to make the Caribbean destination cheaper for European visitors.
On the other hand, although some countries experienced increased
production, output in the critical agricultural and manufacturing
sectors declined.
Mr. Speaker, there are reasons to be optimistic that the global
economy will be stronger in 2004. The latest forecast is for world
output to grow by 3.5 percent and for world trade to expand by
7.5 percent, with most of the demand expected to come from the
import needs of developing countries. However, a worrying militating
factor to the planned economic recovery is the frequent attacks
on US interests and those of its allies. This could have a negative
impact on consumer and business confidence, and global trade and
investment. The cost of doing business will inevitably rise, due
to added risks from these uncertainties, and compliance with new
and onerous regulations and procedures.
Nevertheless, Guyana must be prepared to take
advantage of the expected expansion of the world economy. We must
rise to the challenges, in 2004 and beyond, which will test our
resolve, our resourcefulness and our innovative capability. We
need to continue to take the necessary measures to strengthen
the domestic economy so that we can withstand and mitigate the
impact of these external shocks, whenever they occur.
We believe that globalisation has the potential
to contribute towards increasing trade and capital flows across
countries; however, if not properly managed, it can also spell
disaster for small economies such as ours. This Mr Speaker should
not be an excuse for us to be distressed or to do nothing. Rather,
it should serve as the impetus for catalysed action. As eloquently
expressed by His Excellency President Bharrat Jagdeo, during his
address to the nation on the occasion of the 34th Anniversary
of the Republic, “We must seek to affect the change agenda
as well as mak[e] the necessary mental and organisational leap
in adapting to emerging trends.” While we will continue
to use our membership in the WTO, Caricom, and other international
and regional fora, to advance the case for fair and equitable
trade, we must carve our own niche for economic survival. This
Budget represents another building block towards attaining that
goal.
Review of the Domestic Economy
3
A. Real Growth
Mr. Speaker, largely as a result of a shortfall
in sugar production and gold declaration, the economy contracted
in real terms by 0.6 percent, in 2003.
B. Sector Performance
Mr. Speaker, sugar production declined to 302,378
tonnes, from 331,052 tonnes in 2002. This 8.7 percent shortfall
was due to unfavourable weather conditions that affected both
crops. In the first crop, a prolonged drought reduced cane yield.
In addition, higher-than-normal rainfall later in the year affected
the second crop, resulting in a lower cane quality. On the other
hand, these conditions were ideal for rice cultivation and reaping.
As a result, rice output rose sharply by 23.3 percent to 355,019
tonnes. This turnaround from the slump in 2002 is also an indication
that farmers are slowly recovering from the financial crisis that
hit the industry.
The other sub-sectors also showed positive growth.
Livestock increased by 4 percent. This was mainly due to a 41
percent growth in poultry meat to 23.6 million kilograms. Other
agriculture increased by 2.2 percent. Forestry grew by 2 percent,
reversing the 8 percent decline of the previous year. Good performances
were also recorded for sawn lumber, which increased by 43 percent;
and round wood products, which rose by 15 percent. However, log
production declined by 22.2 percent.
Mr. Speaker, the performance of mining and quarrying
continued to be influenced by the major gold producer in the sector.
The latest estimates show that the sector recorded yet another
decline of 8.7 percent in 2003 following the 6.9 percent contraction
in 2002. Overall declaration of gold was 391,323 ounces compared
to 453,482 ounces in the previous year. Production by Omai Gold
Mines Limited contracted sharply by 16 percent to 285,577 ounces.
The steady decline in the company’s output is a reflection
of the near exhaustion of the mine and the failure to find new,
economically feasible, gold-bearing deposits in other areas. Of
grave concern to the Government was the 9.8 percent reduction
in declaration by the local miners at a time when gold prices
were extremely high. Diamond declaration rose considerably to
412,538 metric carats, an increase of 66.1 percent. This continued
the upward trend that has been observed for the past three years.
Bauxite production was 1,715,705 tonnes, an increase of 4.7 percent.
After growing by 2 percent in the previous year,
the manufacturing sector fell by 2 percent in 2003. This is mainly
attributed to a steep drop of 20 percent in the production of
plywood; lower generation of electricity by Guyana Power and Light
as more large industrial users turned to self-generation; and
a noticeable decline in the production of beverages - rum, 18
percent; beer and stout, 22.4 percent; and malta, 30 percent.
However, improved market conditions and marketing techniques were
partly responsible for the increased production of items such
as stockfeed, cereals, aerated beverages, mineral and distilled
water, and corrugated cartons.
With the exception of distribution, all of the
sub-sectors of the services sector performed positively, and this
resulted in an overall growth rate of 2.1 percent. Transport and
communications grew by 5 percent, largely on account of an increase
in cellular telephone users, inbound minutes, and the volume of
parcels dispatched. Engineering and construction increased by
5.8 percent, reflecting a substantial growth in pubic investment.
Although loans to the commercial sector fell in 2003, income earned
from other financial transactions increased by about 21 percent,
and this enabled the financial services sub-sector to grow by
1 percent. Rent of dwellings rose by 3 percent while other services
increased by 2.6 percent. Distribution fell by 2.5 percent, mainly
as a result of declines in the import of consumption goods and
local manufacturing.
C. Balance of Payments
Mr. Speaker, the overall balance of payments
deficit improved significantly relative to 2002. This was due
mainly to an improvement in the current account, even in face
of a rising fuel import bill.
Merchandise exports earned US$517 million, 4.3
percent more than in the previous year. The value of sugar exported
increased by 8.1 percent to US$129.2 million, on account of a
higher volume. The average export price of sugar declined by 2.4
percent, as Guysuco did not get the full benefit of the extremely
favourable euro/US$ exchange rate. Although there was a 4 percent
increase in the volume of rice exported, there was a small decline
in earnings to US$45.3 million. The average export price for rice
fell by 3.8 percent to US$226. Bauxite returned an impressive
performance with export receipts increasing from US$35.2 million
to US$44.6 million. This was attributed to a 9.6 percent growth
in volume exports and a 15.7 percent rise in the average price.
The category “other exports” recorded a 4.4 percent
growth. On the other hand, export receipts from gold declined
by 3.9 percent to US$130.9 million, reflecting a sharp drop in
volume of 18.5 percent, even though the average price increased
by 17.8 percent. Timber exports declined by 13.5 percent to US$30.7
million.
There was a small increase of 1.5 percent in
the value of merchandise imports, which amounted to US$571.7 million.
There were increases in imports of both capital and intermediate
goods. Significantly, the higher acquisition cost of fuel and
lubricants was reflected in the 17 percent increase, or US$21.4
million, that was recorded. Consumption goods contracted by 5.1
percent to US$149.3 million. Net factor payments abroad declined
by US$5.3 million to US$49.7 million; a similar trend was observed
for the value of net services, which fell by 11.1 percent to US$69.8
million. Net current transfers increased slightly to US$40.3 million.
A net inflow of US$78 million was recorded on
the capital account. This 9.4 percent contraction was due in part
to lower net inflows of private capital and higher scheduled amortisation
of the external debt of the public sector. In spite of those developments,
the strong performance of the current account helped to improve
the overall deficit of the balance of payments to US$9.9 million,
from US$25.4 million in 2002. The deficit was over – financed
by debt relief, thus allowing the Bank of Guyana to increase its
net foreign assets position by nearly US$1 million.
D. Monetary Developments
Mr. Speaker, the management of excess liquidity
remained a priority of monetary policy. This was consistent with
our stated objective of fostering an environment of price and
exchange rate stability, as well as an expansion of private sector
credit. During last year, liquidity growth was contained and this
had a positive impact on the inflation and exchange rates.
Currency in circulation and private sector deposits
grew by 8.3 percent. Total deposits of residents, including the
private sector and non-bank financial institutions rose by 7.5
percent to $108.7 billion. The private sector accounted for 79.9
percent of that sum. Public sector deposits expanded by 6.1 percent
to $10.9 billion and this enabled the public sector to remain
a net depositor with the banking system.
Net domestic credit of the banking system fell
by 8.1 percent to $25.9 billion. However, the net deposits of
the financial institutions increased by 18.6 percent. Credit to
the private sector decreased by 17.2 percent or $10.1 billion,
primarily as a result of the transfer of $8.5 billion of GNCB’s
portfolio to a debt recovery institution. Loans and advances to
the manufacturing, agriculture, rice milling and mining sectors
declined by 14.5 percent, 48.4 percent, 42.6 percent and 1.2 percent
respectively. Total liquid assets of the commercial banks amounted
to $40 billion, or 7.2 percent higher than the previous year.
The banks showed a marked preference for short-term treasury bills,
as reflected in the increase in excess liquidity of 3.1 percentage
points between 2002 and 2003.
E. Prices and Incomes
a. Inflation rate
Mr. Speaker, in spite of the steep rise in the price of imported
petroleum in 2003, we managed to keep domestic prices in check.
The inflation rate was 4.9 percent, slight below the 5 percent
that was projected in the 2003 Budget. Inflationary pressures
in the early part of the year did cause a progressive upward movement
in the index, but these slowed considerably towards the latter
half of the year.
b. Interest rate
The 91- day Treasury bill rate, the benchmark for the interest
rate structure, declined from 3.91 percent at end-December 2002
to 3.4 percent at end-December 2003. In line with this development,
the small savings rate fell by 83 basis points to 3.46 percent.
The weighted average lending rate declined faster than the savings
rate, and this resulted in the spread decreasing by 42 basis points.
Mr Speaker, this is a trend in the right direction and we urge
the commercial banks to continue to reduce the spreads as this
would help to stimulate private sector investment and reduce the
excess liquidity. In this regard, the Government commends the
action of the New Building Society (NBS) for reducing the interest
rate on loans for low-income housing to 7 percent.
c. Exchange rate
Mr. Speaker, the foreign exchange market remained relatively stable
during last year. The Guyana dollar depreciated by 1.3 percent
against the US dollar, to close at G$194.25 per US dollar. The
total value of foreign exchange transactions increased to US$2.3
billion, or 11.8 percent, largely on account of higher transaction
volumes by the cambios. The Bank of Guyana did not have cause
to intervene in the foreign exchange market.
d. Wage rate
Mr. Speaker, the Government announced and paid an across-the-board
increase in wages and salaries of 5 percent to all public servants.
This was in line with the inflation rate, and it resulted in a
new minimum wage of $22,099. The combination of the wage increase,
the increase in the income tax threshold, and the holding of the
inflation rate to the targeted level ensured that workers enjoyed
a real increase in their disposable income.
F. Fiscal Accounts
1. Central Government
Mr. Speaker, the operations of the central government
resulted in a deficit of 9.1 percent of GDP, which was well within
the target of 13.2 percent of GDP. Current revenue was $45.4 billion,
or 1.8 percent better than in 2002. This is a commendable performance
given the negative growth in the economy last year.
Collections by the Customs and Trade Administration
Department rose by 2.2 percent to $19.1 billion, principally as
a result of a 4.4 percent growth in consumption tax. Consumption
tax of $15.3 billion represented 80 percent of the Department’s
revenue. The Internal Revenue Department collected $22.4 billion,
which was a 1.2 percent improvement on the previous year. Other
current revenue increased to $3.9 billion, with royalties of $938
million and dividends and transfers of $719 million being among
the highlights in this category.
Current expenditure increased by 3.2 percent
to $49.7 billion. Non-interest current expenditure grew by 9 percent,
reflecting increases in the principal categories: personal emoluments,
other goods and services, and transfers to the public and private
sectors. Restructuring costs, mainly severance payments to the
bauxite workers, increased to $1.5 billion, from $0.5 billion
in 2002. The cost of servicing the public debt declined by 17.2
percent to $8.9 billion. Capital expenditure was $17.3 billion,
an increase of 9.7 percent.
The current deficit of the central government
deteriorated by 20.3 percent to $4.3 billion, while the overall
deficit after grants was $13.2 billion, the equivalent of 9.1
percent of GDP. The deficit was financed by net external borrowing,
$8.3 billion; net domestic borrowing, $2.8 billion; and privatization
proceeds, $2 billion.
2. Public Enterprises
Mr. Speaker, the receipts of the public enterprises
grew by 31.7 percent to $66.5 billion, largely because of the
re-absorption of GP&L into the public sector and a favourable
euro/US dollar exchange rate received by Guysuco. Total expenses
rose less sharply to $64.3 billion or 27.7 percent. The enterprises
transferred $1.1 billion in the form of dividends and taxes to
the central government. Capital expenditure increased by 15.3
percent to $2.5 billion. The overall surplus of the enterprises
increased considerably from $150 million in 2002 to $2.2 billion
in 2003.
3. Non-Financial Public Sector
The consolidated operations of the central government
and the public enterprises resulted in an overall fiscal deficit
of $10.9 billion, equivalent to 7.6 percent of GDP.
G. Public Sector Investment Programme
Mr. Speaker, the Government was able to implement
95 percent of the public sector investment programme (PSIP), which
was budgeted at $16.8 billion. This extremely creditable performance
was due to improved programme and project planning, aggressive
project monitoring, and the cooperation and logistical support
of all stakeholders. I would now like to highlight some of the
key achievements in the various sectors.
1. Physical Infrastructure
During 2003, we continued to upgrade the road
network. The rehabilitation of the 65km road link between Mahaica
and Rosignol commenced. Approximately $1.2 billion of this $4.5
billion project was spent on widening the shoulders and leveling
about 19km of the road. In addition, about $74 million was spent
on designs for 152 km of roadway between New Amsterdam and Moleson
Creek. This project would result in the complete resurfacing of
the Corentyne Highway from the New Amsterdam Ferry Terminal to
the Moleson Creek Ferry Terminal. Another $167 million was expended
to begin work on the conceptual design for an alternative Southern
entrance to Georgetown.
Work started on a four-lane highway, stretching
from the Demerara Harbour Bridge to Mandela Avenue, and on the
road from the Demerara Harbour Bridge to the Best Hospital. Apart
from these major road projects, over $300 million was spent on
improving a number of roads in several communities, including
Mara, Mahaica, Cane Grove, Bachelor’s Adventure, Cumming’s
Lodge, Bartica/Issano, and Kwakwani / Ituni.
More than $1.7 billion was spent to construct
and/or rehabilitate bridges. In terms of the Main Bridges Rehabilitation
Programme, nine bridges and culverts were completed along the
East Coast and East Bank Highways. In addition, about $81 million
was expended to rehabilitate community bridges countrywide. Another
$28 million was spent to rehabilitate bridges at Riverstown and
other locations along the Essequibo main road. A number of structures
were rehabilitated in several areas, including Lima, Queenstown,
Plantain Walk, Kuru Kuru, Hopetown, and Numbers 55, 56, 65 and
66 Villages.
In the air transport sector, over $1 billion
was spent to rehabilitate Runway 2 at the Cheddi Jagan International
Airport (CJIA); install security lights on the runway and perimeter
road; rehabilitate the Control Tower at CJIA; and rehabilitate
the airstrip at Imbaimadai. Also, in 2003, over $300 million was
spent to improve maritime facilities and services, including construction
of a new stelling at Leguan; rehabilitation of stellings at Parika
and Leguan; purchase of navigational aids and buoys, and rehabilitation
of beacons; rehabilitation of MB Baramani, MV Barima, MV Torani,
MV Malali and MB Sandaka; rehabilitation of dredge Steve ‘N’
and dredging of the main rivers; and construction of Phase II
of the Coast Guard Wharf in Georgetown.
Work to repair critical sections of the sea defence
system was executed. In preparation for the Caribbean Development
Bank (CDB) and European Union (EU) financed sea defence programmes,
over $166 million was spent to begin the development of a shorezone
management system; conduct hydrographic surveys between Mahaica
and Somerset/Berks; commence final designs for over 5000 metres
of new sea defence in Capoey/Columbia, Hague, Dekinderen/Meten-Meer-Zorg
and Tuschen; and complete final designs for 2000 metres of sea
defence structures at Profit/Belladrum. In addition, about $435
million was expended on the rehabilitation of other critical sections
of the river and sea defence system, including raising sea dams
in areas such as Goodman, Freetown/Dorn Haig, Mosquito Hall, Little
Diamond, Friendship, Unity and Lancaster; and construction of
revetment at Rushbrook, Orangestein, Bush Lot, Grove, Craig, Phoenix,
Henrietta and Number 77 Village.
Mr Speaker, a reliable drainage and irrigation
infrastructure is critical to agricultural development, especially
in the low-lying coastal belt of Guyana. In recognition of this,
a sum of $415 million was expended by the National Drainage and
Irrigation Board (NDIB) on several projects, including the rehabilitation
of 300 miles of canals and drains in areas such as Pomeroon, Somerset
and Berks, Leguan, Waakenam, Canal Numbers 1 and 2, Craig, Plaisance,
Buxton, and Ann’s Grove; rehabilitation of 40 miles of earthen
embankment at the East Demerara Water Conservancy; and the rehabilitation
of drainage pumps at Cane Grove, Victoria, Golden Grove, and Stanleytown
in New Amsterdam.
2. Social Sector
Mr. Speaker, in the education sector, the IDB-funded
Basic Education Access Management and Support Systems (BEAMS)
project was launched in March 2003. This project aims to improve
the general standard of education in Guyana, in particular, increasing
literacy and numeracy skills in the most underserved and impoverished
regions of Guyana. Under the Secondary School Reform Programme
(SSRP), over $500 million was spent to, among other things, support
school management and budget planning; and build, rehabilitate,
extend, and renovate the pilot schools. Almost $100 million of
resources provided under the CIDA-funded Guyana Basic Education
Training (GBET) project were used to complete the establishment
of distance education units. Under the Guyana Education Access
Project (GEAP), $470 million was spent to rehabilitate and construct
schools; purchase furniture, equipment and textbooks; and on institutional
strengthening of the Ministry of Education.
In addition, the Ministry of Education expended
$430 million on a range of capital works, including the rehabilitation
of Winfer Gardens Primary School, Uitvlugt Primary School, St
Sidwell’s Primary School, St. Gabriel’s Nursery School
and St. Stanislaus College; and construction of schools at Meten-Meer-Zorg,
Viva La Force, Ridge, Wakenaam, Dora, Soesdyke, Cotton Tree and
Moleson Creek. The science laboratory for the New Amsterdam Technical
Institute was completed while work on the extension of the National
Library at New Amsterdam and the construction of the Upper Corentyne
Industrial Training Centre commenced.
In the health sector, Phase 1 of a new hospital
being built in New Amsterdam, which is funded from a Japanese
Grant of $1.2 billion, was almost completed in 2003. A project
to strengthen the public health system in Guyana, by enhancing
the capacity of the Government to better manage, deliver and monitor
disease prevention and control was started. Funded by CIDA, the
project focused on home and palliative care; prevention and management
of HIV/AIDS and STIs; prevention and management of Tuberculosis;
and education and health administration. Also, the Ministry of
Health completed several capital projects including the construction
and/or rehabilitation of a number of hospitals, health centres
and health posts throughout the country.
The Government invested more than $1.2 billion
in the housing sector to improve institutional and regulatory
capacity, and expand the infrastructure in new and existing settlement
areas. Of that amount $1 billion was spent, under the IDB programme,
to complete about 3,100 house lots at Tuschen, Non Pariel and
Best Village; construct roads, drains and structures at Diamond,
Golden Grove, Foulis, Good Hope, Hope/Waterloo Experiment, Pomona,
Anna Regina, Charity and Amelia’s Ward; design an additional
9,171 house lots at Zeelugt, Tuschen, Caneville, Block 22 Wismar,
Sophia, Parfaite/ Harmonie, Hampshire South, Belvedere, Hope and
Williamsburg South.
The Government spent over $2.1 billion to improve
the supply and delivery of potable water. The bulk of the funds
was used to complete the construction of major water systems at
Bartica, Eccles and LBI; procure supplies and pipelines for stand
alone systems in rural areas; acquire equipment for Linden; and
finalise designs for the rehabilitation of the Georgetown sewerage
and water generation and distribution systems. Under the Urban
Development Programme, approximately $370 million was expended
to complete the New Amsterdam Market, Rose Hall Market and Town
Hall; Mora Street and One Mile Canvas City Road in Linden; and
Mandir Road, White Carib Lane and Market Street in Anna Regina;
and to commence rehabilitation of several roads in the municipalities
and towns.
3. Economic Advancement and Poverty Reduction
Programmes
Mr. Speaker, the Government has been implementing
a number of donor-assisted and locally financed projects and programmes
to complement the macroeconomic effort to promote growth increase
incomes and reduce poverty. In this respect, under the Poor Rural
Communities Support Services Project (PRCSSP), a sum of $108 million
was used principally to establish a revolving credit facility;
execute drainage and irrigation works; provide technical support;
and facilitate community development.
Under the Linden Economic Advancement Project
(LEAP), an amount of $200 million was expended to replace a collapsed
culvert at West Watooka; and conduct workshops and train persons
in the catchment areas. Approximately $45 million was used under
the Basic Needs Trust Fund (BNTF) on roads, footpaths and water
supply in selected areas. Finally, close to $292 million was expended
under the Social Impact Amelioration Programme (SIMAP) to rehabilitate
roads; complete multipurpose buildings; and commence and/or complete
school buildings, day care centres and a market.
H. Institutional Development and Policy Reform
1. Financial Sector
Mr. Speaker, several actions were taken during
2003 to improve the soundness of the financial sector, and improve
the capacity and capability of the Bank of Guyana to effectively
supervise the sector. In this respect:
• The study on a supervisory strategy for
the Bank of Guyana was completed and a report is with the Government.
• A Financial Stability Unit was established in the Bank
of Guyana. Staff for the unit is being identified and a policy
and operational guidelines manual is being prepared.
• The Banking Supervision Department of the Bank continued
to strengthen its capability to detect early warning signals of
financial crises. Directors attended seminars that dealt with
topics such as governance in banking, new accounting standards,
financial soundness indicators, and risk analysis. A handbook
for directors of financial institutions is being prepared.
• Consultations were conducted on the feasibility of implementing
a deposit insurance scheme and a report has been submitted to
the Government.
• The enabling regulations to fully implement the Money
Laundering (Prevention) Act were drafted.
• The Guyana National Cooperative Bank was fully privatised.
This brought to an end both the large financial transfers that
the Government had to make to cover the annual losses of the Bank
and the Government’s involvement in the financial sector.
A plan was put in place to recover the Bank’s non-performing
portfolio.
A number of initiatives were taken in the sector,
which were directly aimed at building a conducive environment
for private sector investment. The stock exchange was officially
launched on September 25, 2003. Since then, the exchange has been
engaged in modest trading in shares of a number of companies.
It is expected that transactions on the exchange will increase
as stakeholders become accustomed to, and confident in, its activities.
Also, the Government gave approval to a regional development financial
institution to offer private equity in Guyana as well as management
services to small and medium sized enterprises. Further, a new
Commissioner of Insurance was appointed and the Office of the
Commissioner of Insurance commenced operations. These actions
brought into force the basic infrastructure that was required
to fully implement the provisions of the new insurance legislation.
2. Public Sector Modernisation
Mr. Speaker, the Government completed staff audits of the core
Ministries, Regional Administrations, and Semi Autonomous Agencies,
and has since shifted focus from undertaking job descriptions
and a performance appraisal system to completing overview studies
and horizontal assessments of the Public Service. A series of
public consultations was conducted as a means of building consensus
for modernisation of the public sector.
Also, the Government enacted the most comprehensive
piece of legislation on budgeting ever formulated in this country.
A new Fiscal Management and Accountability Act was passed in December
2003. The Act provides for a modern legislative framework for
managing public finances and includes a number of provisions aimed
at widening the scope of fiscal reporting to the National Assembly,
thereby fostering greater transparency, efficiency and effectiveness
of public financial and economic management.
The Government advanced the process leading to
the modernisation of the treasury and improving the transparency,
efficiency and targeting of public expenditures. In this respect,
a contract was signed with a Canadian company, a computerised
financial and accounting system was procured and configured, and
staff was trained. This system will give the government sector
the capability to better manage the budget, appropriations, revenues,
purchasing and assets.
New procurement legislation was approved in June
2003. Among other things, it attempts to regulate the procurement
of goods and services, and construction; foster competition among
suppliers; and promote fairness and transparency, taking into
consideration the ethical issues involved in public procurement.
Other activities undertaken included:
• The establishment of the Demerara Harbour
Bridge Corporation as a statutory body to manage the Demerara
Harbour Bridge.
• The installation of a new management team to manage and
operate the Guyana Power and Light Inc. (GP&L) after the Government
and the foreign partner agreed to terminate all of the 1999 agreements
to which they were parties. The Government purchased the shares
of the investor for US$1 and agreed to the temporary reversion
of the company to the public sector until it could reach a new
deal with an interested equity partner.
3. Debt Management
Mr. Speaker, the external debt stock was reduced
by 13 percent to US$1.08 billion towards the end of last year.
However, that reduction did not reflect itself in actual debt
service payments, which rose by 16.4 percent to US$49.7 million.
Several factors accounted for this increase. First, Guyana did
not get the relief from the reduction in the stock of debt, which
only took effect from December 1, 2003. Thus, the Government had
to meet all obligations due prior to that date.
Another contributory factor had to do with the
delivery of the interim assistance by the Inter-American Development
Bank (IDB) under the Enhanced Heavily Indebted Poor Countries
(EHIPC) initiative. Assistance from that creditor amounted to
US$11.2 million in 2002 compared to US$5.1 million in 2003. This
meant that the Government had to devote more of its resources
to the servicing of the debts to the IDB in 2003. A third reason
had to do with the reclassification of the debts of Guyana Power
and Light Inc (GP&L) from the private sector to the public
sector. This entity made payments totaling US$8.7 million to its
creditors last year.
Mr. Speaker, the debt stock reduction in 2003
arose from the decisions of the Executive Boards of the IMF and
the World Bank on December 16 and 17 respectively, which confirmed
that Guyana met the completion point of the EHIPC. These decisions
resulted in additional debt relief of US$334 million in net present
value terms (NPV). Among the non-Paris Club creditors, China agreed
to cancel three (3) loans totaling US$21.3 million, while India
cancelled the outstanding balance of about US$0.5 million on a
bilateral Line of Credit. Earlier, on September 5, 2003 the IMF
completed the first review of Guyana’s performance under
the PRGF arrangement. As a result of the favourable review, the
IMF released US$8.2 million. In December 2003, the World Bank
disbursed US$13.2 million under the Poverty Reduction Support
Credit (PRSC).
4. Tax Reform
Consistent with the pronouncements in last year’s
Budget, the Government embarked on the implementation of major
reforms to the tax system, with the overall objectives of broadening
the tax base, improving the efficiency of the tax system, and
reducing the scope for discretion, exemptions and evasion. In
this context, the Government took the following actions:
• Passed the Fiscal Enactments Amendment Bill, which, among
other things, removed the discretionary grant of remissions and
exemptions, except on humanitarian grounds; increased the licence
fee for certain categories of professionals; introduced a tax
on services provided by professionals and extended the 10 percent
tax on hotels to services provided in the hotels; introduced a
presumptive tax on self-employed persons; and increased the penalties
for late filing and non-filing of income tax returns.
• Increased the income tax threshold from $216,000 to $240,000
per annum;
• Introduced legislation to extend taxes to selected services;
• Adjusted withholding taxes to a uniform 20 percent;
• Passed legislation to repeal the Sugar Levy Act;
• Appointed a Commissioner General and Deputy Commissioner
General of the Guyana Revenue Authority (GRA);
• Appointed 12 auditors to strengthen key revenue areas
of the GRA;
• Amended the GRA Act to give greater autonomy in the management
of its human resources; and
• Implemented a fuel-marking programme as part of the anti-smuggling
campaign.
In addition, the Government worked with the Caribbean
Technical Assistance Centre (CARTAC) to develop an action plan
for the implementation of the Value Added Tax (VAT). A VAT Implementation
Team was installed in the GRA and the staff was exposed to training
in VAT issues.
Policies, Strategies and Programmes for 2004 and Beyond
4
A. Overview
Mr. Speaker, the Government remains committed
to implementing the broad policy reforms that are outlined in
the Poverty Reduction Strategy Paper (PRSP). The focus of the
PRSP is to raise the level of development and generate sustainable
growth so that all Guyanese can enjoy prosperity and a higher
quality of life.
The PRSP sets out a matrix of policies, strategies
and programmes. These are aimed at addressing the structural and
other bottlenecks, which have acted as binding constraints on
increased growth, investment, trade and incomes. The implementation
of these reforms will result in an economy that is more resilient
and capable of competing in the regional and global economies.
They will also contribute to raising the standard of living and
reducing poverty.
Mr. Speaker, as earlier indicated, for 2004 and
the remainder of this term our interventions will continue to
emphasise reinforcing the macroeconomic fundamentals; retooling
the economy to enhance its competitiveness; venturing into new
growth activities; supporting private investment initiatives;
improving the social and economic infrastructure; human resources
development to meet the demands of an expanding economy; creating
jobs; improving the governance environment; and fighting crime.
I would like to develop each of these in greater detail.
B. Reinforcing Macroeconomic Fundamentals
Mr. Speaker, the Government will continue to
pursue sound macroeconomic policies to ensure strong fundamentals,
such as low inflation rate, adequate savings, healthy international
reserves, a stable exchange rate and a prudent fiscal position.
In addition, efforts will be taken to strengthen economic resilience
to enable the economy to withstand shocks, including broadening
the economic base and deepening the financial sector and capital
market. The macroeconomic prospects for the next two years, 2004-05,
hold much promise, with the average real GDP growth rate projected
to be positive. Beyond this period, growth is expected to be higher,
given stronger growth in sugar, mining, tourism and services.
C. Retooling the Economy to Enhance its Competitiveness
Mr. Speaker, the Government has made steady progress
to retool the traditional base of the economy. Already, these
efforts have begun to bear fruit, as was evident in the increased
production of rice and bauxite last year, though sugar suffered
a temporary setback. Further work will be done to modernise and
diversify these industries so that they could improve their contribution
to GDP growth, exports, revenues and employment. I would now examine
proposed activities in each of these industries.
1. Sugar
Mr. Speaker, the management of Guyana Sugar Corporation
(Guysuco) will continue to implement the strategic plan, which
is geared to increase the company’s competitiveness, profitability
and long-term viability. The plan envisages Guysuco increasing
production to around 450,000 tonnes of sugar and lowering costs
from the current average of US17 cents to about US9 cents per
pound by 2007. The Government has already secured the necessary
financial and technical assistance for the project. The Chinese
company, which won the bid to design, supply and construct the
new factory at Skeldon, will start work in the second half of
2004. In addition, the Government has secured a soft loan of US$25.2
million from India, which will be used to restructure three estates
in Berbice to improve their operational efficiency and productive
capacity. Nonetheless, in spite of the emphasis on the Berbice
estates, the plan does provide for the continuation of the operations
of the Demerara estates. I am compelled to reiterate this fact
because of a number of erroneous statements to the effect that
these estates will be closed.
In the area of product diversification, Guysuco
will examine the feasibility of linking a refinery to the new
factory at Skeldon. Meanwhile, the company will increase production
of organic sugar and Demerara Gold packaged sugar, and will develop
niche markets for these products. The search for new and expanded
markets will be pursued aggressively, especially given shortfalls
by several Caricom countries and the activation of the Partial
Scope Agreement with Brazil. Further, Guysuco has been given approval
for a co-generation project that could see 30 megawatts of power
being generated from bagasse. A Chinese consortium has offered
a soft loan of US$24.2 million to finance the project and negotiations
will conclude shortly.
2. Rice
Mr. Speaker, the rice industry made significant
progress in the restructuring of the debts of the farmers, and
this played a key role in the substantial growth in rice production
and exports last year. During this year, the Government will push
for the early and rapid disbursement of the 11.7 million euros,
which has been granted by the European Union (EU) to enhance the
competitiveness of the local rice industry. A Project Monitoring
Unit has been created and plans are moving ahead to appoint a
National Steering Committee for the project. The funds will be
used to rehabilitate the Dawa pump, replace sluices in Golden
Fleece and Westbury on the Essequibo Coast, purchase drain-digging
equipment, provide technical assistance to formulate a national
rice strategy, provide expertise to analyse the financial and
technological needs of millers, market research, and sustainable
water management, among other related areas.
In addition to these initiatives, the rice industry
will benefit from a soft loan of 3.2 million euros for the procurement
of machinery and equipment for use in drainage and irrigation.
Further, under the IDB-funded Agriculture Support Services System
Project, US$3.4 million will be made available to support the
sustainability of the drainage and irrigation system through the
formation of Water Users Association. Rice farmers in Regions
2 and 3 are already benefiting from the IFAD-financed Poor Rural
Community Support Services Programme (PRCSSP). Farmers will continue
to benefit from education and training seminars, while research
and extension work will be intensified with a view of developing
high yielding, blast-resistant varieties of rice. With respect
to the trade in rice, we will pursue aggressively our proposal
for either a regional safeguard mechanism or an increase in the
Common External Tariff (CET). We will also seek new markets in
Brazil, Venezuela, Colombia, Panama and Haiti.
3. Bauxite
Mr. Speaker, efforts to restructure the ailing
bauxite industry will continue this year. In the search for sustainability,
the operations of Aroaima Bauxite Company (ABC), which was merged
operationally with Bermine in September 2002, will be further
rationalised. The company, which has been operating without budgetary
transfers since the merger, has suffered a cash depletion of about
US$2 million since 2001, placing it in a precarious financial
position. This jeopardy will have to be removed, if the company
is to satisfy the contract signed recently with Alcoa to supply
1.5 million tonnes of bauxite over the next three years. As part
of the measures to reduce cost, the Government will relieve ABC
of responsibility of all historical, social and community responsibilities.
In addition, following the cessation of mining at Aroaima, the
workforce will be reduced by about 150 workers by September 2004.
Progress with the restructuring and privatisation
of Linmine continued in 2003 with the contracting out of the management
of the operations to Omai and the payment of separation benefits
to the entire workforce. Since mid-2003, Linmine has been operating
without Government transfers. However, community power and water
for residents of Linden and Kwakwani continue to benefit from
Government subsidies of $1.3 billion. The privatisation of Linmine
is slated for the first half of 2004. This would pave the way
for the planned investment in the company that could see increased
mining of bauxite ore and production of bauxite.
The Government will pursue other initiatives
to revitalise the bauxite sector. In this context, last month,
a memorandum of understanding was signed with the Russian Aluminum
Company (RuSAL) to cooperate in bauxite production. This could
lead to the establishment of a joint venture for the mining and
export of metallurgical bauxite (MAZ) and the production of alumina.
This initiative has the potential of increasing bauxite output
by between 500-600,000 annually, and will have a positive impact
on employment and incomes in the bauxite communities. Two other
initiatives could have a positive impact on the resurgence of
the bauxite industry. First, Brazil is exploring the possibility
of sourcing metallurgical bauxite from Guyana. Second, an overseas
prospecting company has also been studying the extensive laterite
bauxite deposits in the Pakaraimas with encouraging results. Preliminary
sampling by the company suggests deposits in excess of 100 million
tones of 35 percent extractable alumina.
Finally, the Government will redraft the mining
act to take account of international best practices, and to offer
incentives similar to those of other countries to which Guyana
must compete for investment. In addition, an environmental impact
assessment of the mining sector will be undertaken to provide
a common framework for all companies operating in the sector.
D. Venturing into New Growth Areas
Mr. Speaker, in addition to restructuring the
traditional sectors, we have been pursuing new areas and opportunities
for expanding the economic base. In particular, our attention
has been focused on services, tourism, non-traditional agriculture,
and petroleum exploration. In recent years, the contribution of
the services sector to output growth has increased steadily. This
has been attributed in part to the growth of new activities in,
for example, information and communications, housing, garment
manufacturing, and distribution. These and other areas will be
fully exploited to realise their full potential so that they can
drive economic growth and make a bigger contribution to GDP.
Mr. Speaker, tourism is slowly emerging as one
of the new areas with the biggest potential to contribute to foreign
exchange earnings, employment and growth. This is attributed in
part to the importance that the Government has attached to the
sector and the actions taken over the past five years. Last year
saw the establishment of a fully functioning Guyana Tourism Authority
(GTA). As part of the drive to aggressively market Guyana overseas,
the GTA, in collaboration with the Tourism and Hospitality Association
of Guyana (THAG), attended several trade fairs and exhibitions.
The results were reflected in record arrivals for the last three
months of 2003. Already this year, we have seen the largest cruise
ship ever to visit these shores and four yachts.
In recognition of the potential of tourism, the
Government will undertake further measures and will work closely
with the private sector to promote tourism. It will also support
initiatives to intensify tourism product development, since, in
addition to eco-tourism the prospects look promising for developing
other areas such as heritage, health and sports tourism. Training
will be stepped up so as to equip workers with the necessary skills
to meet the varied demands and expectations of tourists.
Mr. Speaker, given the annual food import bill
of Caricom, which is estimated to be US$3 billion, and Guyana’s
comparative advantage in agriculture, the Government will continue
to encourage and promote investment in this sector, in particular
non-traditional agricultural products that have export potential.
This area offers the best hope for creating niche products and
satisfying nostalgic markets in the Caribbean, North America and
other regions with a concentration of Guyanese and their descendants.
Guyana’s fish exports have gained access
to the lucrative EU market. The Government has in place a strategy
for sustainable management of the sub sector, including diversification
into aquaculture. Over 6000 acres are presently under fish cultivation.
The Food and Agriculture Organisation (FAO) has agreed to finance
a project to integrate aquaculture into small rice-based farming
systems to diversify production for increased income and improved
nutrition. Following the declaration that Guyana was free of the
dreaded foot and mouth disease, a private initiative has just
resulted in the country exporting beef.
Guyana also has the potential to export high
quality fruits and vegetables to the world market. A recent study
by the USAID-funded Guyana Economic Opportunities (GEO) project
has identified several commodities, such as bora, boulanger, hot
pepper, cucumber, spinach, papaya, pineapple, and mango that can
be successfully exported to North America, Brazil and the Caribbean.
The Ministry of Agriculture together with agencies such as the
National Dairy Development Programme (NDDP), the National Agriculture
Research Institute (NARI), and the New Guyana Marketing Corporation
(NGMC) will have key roles to play in driving the marketing and
export of these and other non-traditional agricultural products.
These bodies will also be important in pushing
the diversification of the agriculture sector, including greater
downstream processing and the production of value added products.
This process gained momentum last year when a private sector company
invested US$4 million in a juice factory, which currently utilises
a range of local fruits. The income of hundreds of small farmers
has been boosted as a result since the company has been purchasing
hundreds of millions of dollars worth of fruit from them. Two
other projects in the Intermediate Savannahs are geared to produce
passion fruit, oranges, corn for animal feed, peppers, broccoli
and cauliflower, among others. Over $240 million has been invested
in these projects and 70 new jobs have been created. In addition,
about 50 new jobs will be created on the East Coast Demerara (near
Clonbrook and at Hope Estate) and in the Pomeroon when a cocopeat
project, involving the use of coconut husk, comes on stream this
year.
Mr. Speaker, petroleum exploration has also been
targeted as a new growth area. The success of this activity is
of heightened importance to Guyana, especially in view of the
rising fuel import bill and the high prices for oil. While the
Government has moved to settle definitively the dispute that has
led to the curtailing of drilling activities offshore, it will
support onshore exploration for oil. Such activities will continue
this year, as recent surveys on samples excavated in the Berbice
area by Onshore Energy, the local subsidiary of CGX Energy Inc,
have shown promise.
E. Stimulating Private Sector Investment
Mr. Speaker, since coming to Office in 1992 the
Government has espoused the need for the private sector to be
dynamic, if it is to spearhead growth in the country. For our
part, we have resolutely sought to create an enabling environment
for private sector investment to flourish. We are encouraged by
the response to date, which is reflected in the fact that for
the period 1999-2002, Guyana ranked 17th out of 140 countries
on the foreign direct investment performance index. According
to the World Investment Report 2003, this compares with 58th during
1988-90. To its credit, Guyana is just one of five countries in
the Latin American and Caribbean region to be in the top 44 countries.
During 2004, we will continue to take initiatives
to provide a more business-friendly environment and, in so doing,
improve our investment ranking. Our investment strategy will continue
to focus on attracting and supporting existing and potential local
and overseas investors to invest in manufacturing and the creation
of value added products and services for export. This strategy
has four components: (i) the diversification of activities across
a wide spectrum of sectors, including processed food, fresh food,
tourism, wood products, information and communications technology,
services, light manufacturing, mining and quarrying, energy, infrastructure,
housing, handicraft, garments and textiles; (ii) the encouragement
of local and foreign investments; (iii) support for micro, small,
medium and large scale enterprises; and (iv) equitable distribution
of economic activities across the country.
To further stimulate private sector investment,
the Government will take a number of initiatives in 2004, including
legislative and tax reforms, financial system reform, debt write
– off and restructuring, land titling, and convening an
investment conference.
1. Legislative Reform
Mr. Speaker, a new investment law was passed
a few days ago. Its key objectives are to offer legal protection
to investment; increase the predictability and transparency of
the legal regime for investment; promote the development of international
best practices for investment; and provide a framework for fiscal
incentives for investors and direct investment. An Investment
Promotion Council will be established to review and recommend
changes to the priority areas for investment, among other matters.
The Small Business Act was also passed earlier
this month. This paves the way for the establishment of a Small
Business Council, which will promote and monitor the development
of the small business sector. The Council will be supported by
a Small Business Bureau, which will offer assistance to the sector
in areas such as marketing and management. In addition, a Small
Business Development Fund will be set up as another source of
financing for small and micro enterprises.
2. Further Reforms to the Tax System
Mr. Speaker, as part of its efforts to make the
tax system more responsive to investment promotion, and to ensure
greater transparency and predictability, the Government, in 2003,
implemented the first phase of a comprehensive three-year tax
reform action plan. Among the actions taken was the passage of
legislation, which defines the geographic areas and sectors that
are eligible for tax holidays and other fiscal concessions. During
2004, work to replace the Consumption Tax with the more broad-based
Value Added Tax (VAT) by 2006 will be accelerated. In this regard,
CARTAC hosted a seminar last month on the VAT for senior officials
of the Ministry of Finance and the GRA. A VAT Steering Committee,
which will be headed by the Minister of Finance, will be established
shortly. Also, during the year, the drafting of legislation for
the VAT, and consultations with various stakeholders will begin.
Efforts to strengthen the GRA will continue.
The tax and customs systems will be improved with the installation
of the ASYCUDA++ and the development, documentation and dissemination
of guidelines and procedures. This will reduce the lead ime for
processing documents by the department, thus removing a perennial
complaint of the private sector. The Internal Revenue Department
will improve its capacity to administer and collect taxes, and
will strengthen its field and audit units so as to reduce tax
evasion. Both Departments of GRA will be linked by a system-wide
management information system that will allow for easy storage,
retrieval and access of data. The implementation of a Tax Identification
Number (TIN) will facilitate the smooth functioning of the system.
3. Debt Write – Off and Restructuring
Mr. Speaker, it will be recalled that the Government
worked with the commercial banks to restructure the debts of farmers,
and this had a positive effect on the resurgence of the rice industry
last year. The Government has decided to extend some relief to
borrowers whose debts are with the Guyana Cooperative Financial
Services (GCFS) as follows:
• 100 percent write-off of loans with a
principal balance of under $1 million;
• 50 percent write-off of loans with a principal balance
of between $1-5 million;
• a case-by-case review of loans with a principal balance
in excess of $5 million.
4. Financial System Reform
Mr. Speaker, the Government has established the
Financial Intelligence Unit in the Ministry of Finance to execute
the functions under the Money Laundering (Prevention) Act. The
Bank of Guyana (BoG) will implement arrangements for supervision
of the New Building Society based on the Financial Institutions
Act. In addition, the Central Bank will conduct on-site inspections
and apply consolidated supervision of all financial institutions.
Further, the Bank will continue to implement the loan risk rating
system and establish procedures for prompt action, in accordance
with international standards. Also, the Bank will begin implementing
the comprehensive human resource strategy for the Banking Supervision
Department.
The Government will start the process leading
to the enactment of legislation on deposit insurance by 2005;
and modify the Financial Institutions Act and its regulations,
and the Bank of Guyana Act to make them consistent with international
best practices. Finally, the Government will complete the restructuring
of the GCFS so that it is better able to manage and collect the
residual portfolio.
5. Land Titling
The Government will continue its programme to
improve land titling and allocation. In this regard, the Guyana
Lands and Surveys Commission (GL&SC) will continue to regularise
land outside of land development schemes. It will process additional
eligible claims to leases and titles and make these available
for issuance to land owners. Priority actions in 2004 will centre
on the implementation of land tenure regularisation in the riverain
areas of Essequibo, Berbice and Demerara; completion of systems
development in land administration; and improving capacity for
revenue management within the GL&SC.
6. Investment Conference
Mr. Speaker, we will continue to encourage foreign
direct investment and, at the same time, try to increase local
investment. Earlier this year, the Government held wide-ranging
consultations with representative organs of the private sector
as a precursor to the convening of an investment conference in
the second half of 2004. This Conference will bring together both
foreign and domestic investors in selected sectors. The Government
will seek the assistance of the international donor community
to prepare for this meeting.
F Increasing the Effectiveness of the Public
Sector and Public Expenditure
Mr. Speaker, another set of policies will focus
on increasing the effectiveness of the public sector and public
expenditure. In today’s world, there is widespread recognition
that good management of public business is crucial for macroeconomic
stability, investment and growth. The public sector must provide,
therefore, the institutional framework and infrastructure for
a pro-business environment. Equally, the Government must make
the best use of its resources to deliver quality services to the
citizens of Guyana. In this context, the Government will accelerate
the pace of reforms in the public sector this year. In particular,
we will be paying attention to stricter fiscal discipline, enforcing
the budget and procurement legislation, and strengthening the
management of the public debt. I would now elaborate on each of
these areas.
1. Strict Fiscal Discipline
The Government is currently negotiating with
the IDB a loan of US$32.8 million for a project to support the
rational and transparent management of its fiscal and financial
affairs. Implementation of the project will start later in the
year. The Government will apply strict cost control measures and
these will be enhanced by a tight fiscal stance and strict fiscal
discipline. Programme budgeting will be strengthened to make budgets
increasingly reflective of the Government’s priorities.
Since January 5, 2004 the computerisation of the public service’s
accounting system was accomplished with the introduction of the
integrated financial and accounting management system (IFMAS).
The system will make available timely financial and programme
information and, more important, increase the capacity to support
effective decision-making in managing budgets and resources. Finally,
under the soon-to-be-passed Audit Act, the Auditor General’s
Office will be strengthened to conduct value for money audits.
The IDB is providing US$0.6 million to build capacity in the Office.
2. Budget and Procurement
Mr. Speaker, all sections of the Fiscal Management
and Accountability Act – which was passed in December 2003
- will become fully operational this year. Detailed regulations
will be drafted for effective implementation of the law, while
the Ministry of Finance will be strengthened to allow it to properly
execute its functions under the new law. A committee has also
been established to review the legislative and policy framework
of all the statutory bodies. This committee is expected to present
a report by March 31, 2004. It should be noted that the new Budget
Law calls for stricter monitoring, reporting and accountability
of these bodies.
The regulations to accompany the new Procurement
Act will be drafted this year. Once implemented in full, the Act
will allow for transparency and competitiveness in tendering and
procurement of goods, services and works. Also, the Government
will revamp the project cycle unit in the Ministry of Finance
to increase its capacity to do proper project identification,
selection, implementation and monitoring. To assist in meeting
this objective, the Government has secured a grant of US$1 million
from the IDB. The money will be used to support the design of
the institutional and operational model for the project cycle
management system; the development and implementation of operating
procedures and methodologies for each stage of the project cycle;
the design of a computerised information system; pre-investment
studies; and the training of staff. Stronger project cycle management
that is backed by rigorous procurement procedures will help to
reduce cost and increase the effectiveness of public spending.
3. Management of the Public Debt
Mr Speaker, following the completion point, Paris
Club multilateral debt negotiations took place in January 2004.
Guyana received debt relief in excess of 90 percent in Net Present
Value (NPV) terms, with most of the Paris Club creditors providing
100 percent relief. We have already initiated discussions with
our bilateral creditors to give effect to the decisions of the
Paris Club. We have also contacted our multilateral creditors
to conclude implementing agreements regarding their delivery of
debt relief to Guyana under the framework of the EHIPC initiative.
We will also be communicating with our non-Paris Club creditors,
from whom we are obliged to seek comparable terms.
Mr. Speaker, with the grant of the EHIPC, Guyana
exited from the Paris Club arrangement. This has occurred at a
time when our debt ratios are still high and are expected to remain
so in the medium to longer term. The ratio of debt to revenue
is projected to peak at 248 percent in 2007 before falling marginally
in the outer years. It is therefore imperative that we pursue
further avenues for debt relief. But more important, we must enhance
our capacity to manage the public debt. In this respect, we will
continue to adopt prudent borrowing procedures, including restricting
new borrowing to priority areas of intervention that facilitate
private sector development and poverty reduction; and accessing
outright grants or borrowing on highly concessional terms. This
will be reinforced by the Debt Strategy Technical Working Group
(DSTWG), which has been formally established to serve as a coordinating
body to develop, implement and monitor the debt strategy and to
support and ensure consistent debt management implementation.
Mr Speaker, the Debt Management Division (DMD)
will be expanded to include the management of the domestic debt.
Other activities that will be pursued include the upgrading of
skills; acquisition of equipment; and the improvement of the physical
environment. A National Debt Strategy and New Financing Workshop
will be convened in April 2004. The workshop aims to strengthen
the human and economic capacity of the Government in debt strategy
and new financing issues that apply in a post-HIPC context.
G. Improving and Expanding the Infrastructure to Support Economic
Activity
Mr Speaker, improving and expanding the physical
infrastructure has been a cornerstone of the Government’s
strategy to boost investment and stimulate economic growth. We
have spent billions of dollars in constructing, re-constructing,
rehabilitating and repairing the decrepit infrastructure facilities
that we inherited in 1992. We intend to continue this approach
in 2004.
1. Transport and Communication
We have budgeted to spend $3.4 billion to improve
the network of highways, roads and bridges. This year, work will
be completed on the rehabilitation of the Mahaica/Rosignol road;
the construction of the 4-Lane highway; the rehabilitation and
expansion of the West Demerara main road; and the designs for
the rehabilitation of the New Amsterdam/Moleson Creek Highway
and the southern entrance into Georgetown. The project to reconstruct
the Corentyne Highway will be presented to the IDB in June. Almost
$700 million has been allocated to refurbish community roads countrywide.
Mr Speaker, a bridges rehabilitation programme
has complemented the rehabilitation and expansion of the road
network. We will spend over $2.2 billion to complete the construction
of the two new main bridges at Mahaica and Mahaicony, and the
construction and/or replacement of smaller bridges and culverts
between Timehri and Rosignol. Routine maintenance will be carried
out on the road and bridges network on the national highways throughout
Guyana. In February 2004, work restarted on the construction of
the Takatu Bridge that will link Guyana and Brazil. Also, the
IDB has agreed to finance the pre-feasibility study for a multi
model project involving the construction of a heavy-duty cargo
highway linking Guyana and Brazil, and a deep-water port in Guyana.
In the interim, a local private sector company has been given
the contract to improve and maintain the road. Finally, discussions
are continuing on the most feasible option for constructing the
Berbice River Bridge.
The completion of these projects will not only
result in a continuous throughway between Eastern Guyana and Southern
Brazil but will also open up new lands, investment and trading
opportunities. This will redound to the benefit of Guyana, especially
Linden and the surrounding communities, which would be further
challenged economically with the planned closure of Omai Gold
Mines next year. The Government will also spend $100 million on
the repair of minor bridges throughout the country.
In the air transport sector, a sum of $670 million
has been programmed, of which $573 million will be used to execute
works under the IDB Air Transport Sector Reform Project, specifically
the upgrade of the runway, rehabilitation of the Arrival’s
Terminal and the sewerage system, and acquisition of X-ray equipment
and a sweeper truck for the main airport. The Hinterland Airstrip
Programme will continue with the rehabilitation of airstrips at
Orinduik, Annai and Port Kaituma. Under the Airport Security Programme,
$17 million will be spent to strengthen security at Ogle and Cheddi
Jagan International Airports, including the procurement of equipment
and the redesign of security procedures.
In terms of our maritime facilities, we will
spend $295 million to complete the construction of the Leguan
stelling; continue the rehabilitation of phase 2 of the Coast
Guard Wharf; rehabilitate ferry stellings at Georgetown, Vreed-en-Hoop,
New Amsterdam and Stanleytown; and refurbish buoys and beacons,
among other projects. The Guyana National Shipping Corporation
will spend about $19 million to upgrade port facilities and improve
security, including the installation of security cameras to monitor
the movement of people and cargo. Also, the Government is examining
a proposal of the Shipping Association of Guyana to acquire a
Container Inspection System that can be used by all the ports
in Georgetown. All of these efforts are designed to meet the new
regulations of the International Maritime Organisation by July
1, 2004. Finally, the Government will be focusing attention on
developing a coherent transport sector policy. We have already
secured financing from the EU to conduct a study to develop an
integrated transport network that will allow for smooth movement
among air, water and road. The study will begin this year.
2. Sea Defence and Drainage and Irrigation
Mr Speaker, during 2004, we will expend $955
million to improve our sea defences. In particular, $457 million
will be spent on the rehabilitation of critical sections of river
and sea defences at areas such as Johanna Cecelia, Lower Pomeroon,
Maria’s Pleasure, Blenheim, La Grange, Hyde Park, Grove,
Turkeyen, Buxton/Vigilance, Belladrum, and Cornelia Ida; $345
million will go towards the construction of sea defence at Profit/Belladrum;
and $153 million be used to continue our shorezone management
programme, and finalise the designs and prepare tender dossiers
for the construction of sea defences at Capoey/Columbia, Hague,
Dekinderen/Meten-Meer-Zorg and Tuschen.
The National Drainage and Irrigation Board (NDIB) will spend $400
million on a range of D&I projects. In addition, the Government
has approached the IDB for a loan of $5 billion for an Agriculture
Sector Support Programme. This programme will bring under beneficial
occupation over 120,000 acres of prime farmlands in Regions 3,
4 and 6. Feasibility studies and final designs are currently being
done.
3. Electricity
Mr Speaker, after the departure of the foreign
investor, the new management of Guyana Power and Light (GP&L)
was tasked with the immediate responsibilities of stabilising
the company’s operations, fixing the erratic billing system,
and reducing commercial and line losses. While the Government
is exploring options for re – privatising the company, a
business strategy covering the period 2004-08 has been prepared.
It calls for an investment of US$64 million to tackle many of
the problems.
The company is discussing the reformulation of
the Unserved Areas Electricity Project Loan with the IDB to focus
attention on technical and commercial loss reduction activities.
This could result in a reduction of technical and commercial losses
of approximately 11 percent over 5 years. This is in addition
to new connections to homes that are currently not served with
electricity. The number of persons that will benefit will exceed
25,000. The company needs to add in excess of 50 megawatts of
new generating capacity in the next five years. It will negotiate
purchasing power agreements wherever possible and, in this regard,
anticipates purchasing the excess power from Guysuco when the
co-generation project comes on stream.
4. Telecommunications
Mr. Speaker, I wish to reiterate the Government’s
commitment to a liberalised telecommunications sector - one in
which the consumer benefits from freedom of choice and competitive
rates. In this regard, the Government obtained funding from the
IDB for a project to modernise and promote competition within
the telecommunications and information sector, including developing
the regulatory framework. In tandem, the Government approached
IDB for a loan of US$22.5 million for an ICT project but the Bank
halted processing after the local telephone monopoly company mounted
a legal challenge. Since the dismissal of the court action, some
progress has been made in the negotiations between the Government
and the telephone company. The Bank has made the successful settlement
of the issues a precondition for the renewed processing of the
loan.
Meanwhile, the telephone company has embarked
upon a major expansion programme this year that would result in
many existing and new areas benefiting from the addition of 11,000
landlines this year. The company is also the major provider of
cellular services, which has grown phenomenally over the last
three years. Consumers in this market will benefit tremendously
from the entry of another cellular provider.
5. Urban Development
Mr Speaker, the works, which commenced on several
streets in New Amsterdam, Rose Hall and Corriverton, will be completed
this year. Another $519 mi
Monday,
March 29, 2004