A budget is the government’s spending plan for the fiscal year. It is guided by the government’s vision for the country and economic policies for development. Budgets are evaluated based on how well they prioritize and fund core services to the level of public needs, create opportunities for economic success, and invest in the future. Against this background, the 2018 budget was evaluated and findings noted.
The 2018 budget of $267 billion is the largest in Guyana’s history and represents an increase of 8% or $21 billion in 2017. To fund this level of spending, the budget projected general revenues at $208 billion, grant funds at $12 billion, and authorized deficit spending of $47 billion. General revenues of $208 billion is based on a projected 9% or $17 billion increase over 2017. The budget deficit of $47 billion represents an increase of 24% over 2017 and 18% of total spending, up from 16% over 2017.
Overall, budget 2018 is a poor piece of legislation that essentially mortgaged Guyanese’s future and the health of the economy. Despite the record level spending, the budget failed to prioritize needed public investments to improve the level and quality of critical public services, lift families out of poverty, improve the quality of life, and grow the economy. The budget proposed no change in economic policy to stimulate the economy even as growth continues to slow, jobs subside, and investors’ confidence wanes.
How the government spends taxpayers monies is extremely important, given that Guyana is a poor country and there is not enough to pay for all of society’s needs at once. This is especially true in times of economic hardship when families are living on tight funds and society is fraught with many social problems, including a high unemployment rate, chronic and widespread poverty, rising crime, and declining access to quality health care services.
Lawmakers carved out more than $12 billion of the $17 billion in new tax revenues to shore up the government bureaucracy instead of better aligning public investments with social and economic needs. The total cost of running the government increased by 29% for a total of $54 billion, the second largest share (20%) of the total budget.
The unprecedented level of funding for the Ministry of Presidency is a serious concern. The ministry received the single largest percentage increase (64%) and second largest dollar increase (almost $4 billion) of all statutory agencies. Since 2015, funding for the ministry has increased from $2 billion to $9 billion. Moreover, 60% of all funds to the ministry is allocated for “other charges” – a catch-all expenditure category. There is no economic or fiscal rationale behind these allocations. The exact purpose for which these funds are used and their intended public benefits remain unclear.
Simultaneously, the budget cuts the investment to improve the country’s poor and aged infrastructure by 8%. Likewise, it cuts the investment in the agriculture sector for the third consecutive year by 7%. These cuts will hurt agriculture and infrastructure labourers, most of whom are low-skilled workers from low-income households. Moreover, unemployed and displaced workers from the closure of multiple sugar estates and those subject to private-sector payroll cuts are unlikely to find gainful employment in these sectors. Currently, the unemployment rate is above 11%.
The budget increased funding for education and health and human services by more than $6 billion for a total of $97 billion. The budget also increased funding for public safety and security by 6% for a total of $34 billion. However, with more than 70% of all funds controlled by the central government, regional & local governments are unable to improve access to and high-quality services, although they are responsible for service delivery and better knows the needs of their communities.
Finally, increased funding for ineffective policies and programs is simply counterproductive fiscal policy. Currently, taxpayers foot the bill for successively bigger budgets but get very little in return. For example, schools and hospitals, alike, are suffering from shortages of basic supplies, limited access, and poor delivery and quality of services. Police stations, fire departments, and other public safety agencies are still unable to meet basic service standards to keep communities and families safe.
Dhanraj Singh is and Economist and the Founder and Executive Director of the Guyana Budget & Policy Institute.
Guyana Budget & Policy Institute. Annual Budget Report: Mortgaging Guyanese Future and the Economy – An In-Depth Analysis of the 2018 Budget. Policy Report. May 2018.
Guyana Budget, Public Policy, Economic Growth and Policy, Fiscal Management, Public Finance, Taxation.