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Budget Overview: The Real Winners and Losers of the 2018 Budget

Blog · Budget · December 2017 · By Dhanraj Singh

The 2018 budget was presented under the theme “The Journey to the Good Life Continues”. Unfortunately, this is not referring to children, farmers and sugar workers, other low-skilled workers, or low-income families – the biggest losers in the 2018 budget. It actually refers to the ‘Government” – the biggest and largely the only winner in the 2018 budget. The total budget of more than $267 billion for 2018 represents a 7.1 percent ($18 billion) increase over the revised budget for 2017.

Despite the increase, economic growth is likely to continue to slow. Growth at the end of 2017 is projected at 2.9 percent, a downgrade from 3.4 percent at the beginning of the year.  Other vital economic measures also indicate a slow but steady deterioration of the economy. For example, the balance of payment deficit is expected to grow by more than 50 percent for a total of more than G$16 billion (US$80 million). Even worse, the unemployment rate is expected to reach new heights with hundreds of sugar workers being terminated. With the current unemployment rate at 11 percent, further job loses is almost certain to curb private consumption, economic confidence, business investment and accelerate the current economic slowdown.  

Increasing the national budget is important for ensuring adequate investment in critical services, however, prioritizing investment in families is critical for ensuring the gains of economic growth meet the kitchen table of families and the payroll of small businesses to stimulate the economy. Regrettably, like budget 2017, the government gets the lion share of the benefits instead of hard working families and small businesses which employ more than half of all workers. Funding for government administration totals almost $50 billion, an increase of more than 18 percent, a rate that is three times higher than all other service areas. Put differently, almost half of the $18 billion of new funding in budget 2018 is allocated for government administration.  The cost of the government payroll is projected to increase by 8.6 percent, a rate that is higher than the rate of increase for the entire national budget and almost three times higher than projected economic growth for 2018. There is simply no acceptable economic explanation for this allocation except a high level of government inefficiency and a waste of taxpayer dollars.

At a time when 50 percent of children and 40 percent of adults are living in poverty, budget 2018 represents a missed opportunity for the government to reduce poverty and give struggling families a chance at success. While the budget includes additional funding for education and set aside some funding for affordable housing, they are too insignificant to have a meaningful impact on the livelihood of families struggling to make ends meet. The reason is that adults living in poverty are unlikely to return to school for retraining and retooling, and even if they do their prospect of finding a good paying job is likely close to zero. Affordable housing is not affordable if families don’t have good paying jobs and are not earning sufficient income to pay for food and medicine. 

Modernizing the country’s transport infrastructure and investing in creating economic opportunities are necessary to attract private investment, create good paying jobs and stimulate the economy. Disappointingly, budget 2018 cut funding for infrastructure by almost 6 percent (roughly$3 billion), for a total of almost $41 billion. Additionally, the budget cuts total funding for core economic opportunity sectors for the second consecutive year by less than a percent. Specifically, funding for agriculture was cut by almost $1 billion or 5 percent over 2017. Last year, the government cut funding for agriculture by 3 percent. The agriculture sector alone employs 21 percent of the country’s workforce; cutting its funding at a time when the economy is declining is simple backward economic thinking. Ironically, the government hopes that the hundreds of sugar workers being terminated will find meaningful employment in the agriculture sector – another policy failure.

The shifting of funds away from various government ministries with a constitutional mandate to provide public services to the Office of the Presidency raises serious questions about the logic, exact purpose and public benefits derived from these funds.  Funding for the Office of the Presidency continues to grow at an exponential rate, higher than any other budget agency. Total funding for the Office of the Presidency increased by 64 percent, for a total $9.5 billion in 2018. Over the last two years, funding for the Office of the Presidency doubled from $4.8 billion. The economic justification for this level of funding for an administrative office is difficult to understand. Whether these funds are used to fund projects that deliver a social or economic benefit to taxpayers or to fund political pet projects and advance a partisan agenda remains unclear.

Behind the popular sound bites and political talking points, the proposed budget for the fiscal year 2018 falls desperately short of prioritizing the immediate and long-term needs of Guyanese and the economy, despite additional spending. In all likelihood, the proposed budget will be approved without opposition support since the government controls the legislature. This, however, does not absolve the government from ensuring that its budget prioritizes the needs of the hard-working Guyanese families struggling to make ends meet, job creation, and strategic investment to restore economic confidence and stimulate growth. In fact, it is the hallmark of good governance and successful economic policy.  

 

*** This is an overview of the proposed budget for the fiscal year 2018. The Guyana Budget & Policy Institute will follow-up with a more detailed analysis of the budget.

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