The second budget of the Eighth Parliament was presented by Minister Saisnarine Kowlessar at its first sitting for the year 2002. Readers will recall that the 2001 Budget presented on June 15, 2001 was described as a half-year budget. The sitting was marked by the walkout by the entire parliamentary opposition, the first time since the 1992 return to democracy. In 2001 the PNC/R walked out of Parliament to protest the presence of Mr. Doodnauth Singh S.C who was Chairman of the Elections Commission for the 1997 Elections. This year the PNC/R along with their opposition colleagues staged a similar walkout, this time to protest the few, irregular and unproductive sittings of Parliament.

In what now seems a policy in itself, the Minister announced that there were no new taxes but there was some relief for cinemas and interior resorts.

In 2001, the Ministry of Finance saw a number of new faces including Mr. Neermal Rekha as Secretary to the Treasury and Ms. L. Baird as his deputy. Dr. Ashni Singh moved from the Office of the Auditor General to take up the position of Budget Director, while the long-serving Winston Jordan retained his position as Budget Advisor.

Despite the significant appointments, Minister Kowlessar still appears to be working in the shadows of President Bharrat Jagdeo who retains formal responsibility for relations with the International Financial Institutions, and who also makes most of the appearance and pronouncements which one would expect from the Minister of Finance.

In his review of Global and Regional Economies, the Minister referred to events of September 11, 2001 in the US, coming at a time when the US had slipped into recession. Describing the events as "acts of madness", he noted that security concerns have leap-frogged the international agenda with 'foreboding" implications for Guyana including postponement of the resumption of more robust growth in the economy.

The overall effect was a downturn effect across the world though a few countries including the UK performed creditably.

Unlike last year when the Minister complimented those interest groups who submitted proposals for tax relief and tax reform, this year he indicated that the Government was "only able to accommodate those (submissions) that will have a direct impact on the promotion of growth and the reduction of poverty", hardly generous to all those who took the time and trouble to make submissions.

While in the past two years the National Development Strategy (NDS) was referred to as the principal planning document, the Minister's reference to it appeared to subordinate it to the Poverty Strategy Reduction Paper (PSRP) as well as the PPP/Civic Manifesto.

The NDS was claimed to provide the holistic vision for development out of which the PSRP was supposed to provide a meaningful participatory and effective work plan for poverty alleviation and eradication. There was no reference to the poverty reduction Strategy Credit (PSRC), a mechanism for funding small-scale enterprises.

Once again, voluntarily bound as the country is to the prescriptions of the IMF, the World Bank and Donor, the budget measures, policies and targets offered no substantial changes and again provided very few initiatives. Indeed, as noted on page 13 of this review, prior issues were inexplicably dropped while others were repackaged and restated with no indication of the reasons for their non-implementation. Important issues such as labour participation and unemployment appear to have achieved taboo status and for this year Amerindian Affairs receives no attention.

Articulating perhaps the Government's mission for Guyana, the Minister announced that the government would continue to work towards transforming Guyana from a low income, agricultural-dependence country to a middle income semi-industrial one. He gave no indication of the time frame to achieve this or whether the modest goal was a recognition of the country's special difficulties.

Measured against the pre-budget expectations, the Speech would be a great disappointment. For the fifth year, there has been no movement in the income tax threshold with the effect that workers are now bearing the cost of inflation not only in the goods and services they buy but also in the nominal increases in their salary which make them taxable.

The Global Economy

There was real growth in the global economy of 2.4% (2000 - 3.9%) with growth of 1.1% (2000 - 4.2%) in the advanced economies and of 4% (2000 - 5.8%) in the developing economies. This resulted in a sharp rise in unemployment, particularly in the US. World trade grew by a meagre 1% compared with 12% in 2000. Regional growth was 0.5%, attributed to reduced activities following the September 11th attacks and the slowdown of the world economy. Of the Caricom countries only Guyana and Jamaica reported positive growth.

The Domestic Economy

The economy recorded a positive growth of 1.9% following a contraction of 1.4% in 2000 and a positive overall growth of 3.0% in 1999. In 1998, the economy declined by 1.3% following positive growth in the preceding seven years.

The growth in 2001 was due partly to improved performance in sugar and rice production by 3.9% to 284,474 tonnes and by 10.4% to 322,310 tonnes respectively.

The mining and quarrying sector grew by 1.2%, with gold output being the major contributor, with the highest declaration of gold by the industry, surpassing by 4.8% the production target. Production of bauxite suffered a significant decline to 2.01Mn tonnes, a decrease of 25.2%.

The manufacturing sector grew by 0.2% as compared with a negative growth of 13.9% in 2000. The main contributors to the growth were the pharmaceutical industry (4%), beverages (43.8%), footwear (79%) and garments (45.5%).

There were shortfalls in output of beer and stout (10.1%), malta (7.8%), paint (2%) and plywood (26.6%).

The services sector recorded positive growth in most of the sub-sectors particularly in transport and communication which recorded a 5.5% growth. Engineering and construction grew by 2.1% while distribution recorded marginal growth of 0.5%. There was no growth in government services while financial services declined by 5%.

Per capita GDP for 2001 was US$737.9. (Per Capita GDP is the total output produced inside a country during a given year divided by the total population.)

Debt Relief

The country missed the completion point for the Enhanced HIPC Initiative but benefited from debt write-off of US$6.97Mn by the Commonwealth Development Corporation. In addition, the country hopes to benefit from re-scheduling of debt with Canada and OPEC within the HIPC Initiative.

Balance of Payments

September 11th weakened the balance of payments position due to the falling commodity prices and high import prices for fuel. Trade declined by US$13.6Mn. Earnings from exports continued to decline as it did in 2000 mainly due to a decline of US$15.3Mn in bauxite exports. Sugar receipts also fell significantly due to the fall in the Euro, the currency in which a large portion of the country's sugar output is sold.

Public Sector Investment

The Public Sector Investment Programme (PSIP) again demonstrated an almost perfect achievement ratio of 99%, an increase of 8% over the rate in 2000. The key areas were roads, bridges, air transport, sea defence, the agriculture sector and the social sectors.

The Minister announced that 1,375 house lots were allocated in various areas in 2001. This is a steep fall in the distribution of house lots which were 22,500 in 2000 and 6,500 in 1999.

Banking and Interest Rates

The 91-day Treasury Bill declined to 6.25% from 9.2% in 2000. Despite the significant reduction in inflation, the weighted average lending rate of the commercial banks remained almost unchanged at approximately 17% and the savings rate reduced to 6.7% from 7.28%.

Loans and advances to the private sector increased to $59.3Bn. Significantly, credit to the major economic sectors declined.

The Exchange Rate

The exchange rate of the Guyana dollar to the US dollar remained fairly stable, depreciating by 2.6% and settling at $189.50 at year end. In 2000, the rate declined by of 2%.

Issues in the Financial Sector

The sector showed mixed performances. The Government approved two additional institutions to offer mortgage-lending services, but the country also witnessed the closure of the Globe Trust Investment Company Limited, a non-bank institution which accounted for less than 1% of the assets of the commercial banks.

Ram & McRae's Comments

The fall in inflation appears to have as much to do with the monetary policy as with depressed demand due to falling business and personal income.

The Minister was extremely badly advised on the Globe Trust issue. The matter of a plan submitted for Section 33 of the Financial Institutions Act is quite different from any plan which the Bank of Guyana or an administrator develops under Section 49 which precedes any application for liquidation.

The Minister offered no reasons for the country's failure to meet the Enhanced HIPC decision points, any other implications for the failure and the steps being taken to meet the conditions.

It is difficult to understand the annual complaint by successive Ministers of Finance at the unresponsiveness of the lending rates to the fall in inflation which means that the real rates of interest are increasing. These Ministers seem to forget that they have a controlling interest in a commercial bank and, through the Bank of Guyana, can exert significant influence over the others. Ministers certainly can appreciate that low inflation affects the real value of debt service making repayment more costly.

2001 LEGISLATION

The National Assembly was extremely inactive in 2001, enacting only twelve Acts and meeting for only nineteen (19) sittings since the March 19, 2001 General Elections. Of the Acts passed, three dealt with the General or Local Government Elections, six with constitutional amendments, one with the Medical Practitioners Act and one with the Appropriation of Funds from the Consolidated Fund.

Ironically, the only legislation directly affecting business was Act No. 10 of 2001 which was to clear the ground for the acquisition of the Water Street land of Toolsie Persaud Limited. The Head of the Presidential Secretariat was reported as saying that the land was being acquired to relocate the Water Street vendors by September 30, 2001.

Our Hard(ly) Working Parliament

The performance of the Parliament in 2001 was by far the least productive for over a decade.

Ram and McRae's Comments

The situation in the National Assembly is now so bad that one commentator has described Parliament as "being in a coma". Indeed, the failure of Parliament to meet is one if not the only reason for the walk out by the opposition members.

Up to the time of the presentation of the Budget, there was no sitting in Parliament in 2002. While important, debating the budget which in the final analysis will be passed without amendment as has happened over the past 30 years, is not the only function of Parliament. Indeed, even if our Parliament were to work full-time, there might still be enough work to last more than one year.

What makes the situation not only disappointing, but also disgraceful is that it is the first time in the history of Guyana that the country has a Minister dedicated to Parliamentary affairs.

For further comments, please see Commentary and Analysis.

UNFINISHED BUSINESS

Every year, Focus tracks the implementation of the key issues and policies identified in previous Budget Speeches.

Disappointingly, last year's list, including the policy issues and targets identified in the 2001 Budget, remains largely untouched. We review these under two headings - repeats and forgotten.

Repeats

The following are unfinished policy issues from last year which are repeated in the 2002 Budget:

* Completing a Tax Reform Study;

* Tabling legislation on bankable property rights;

* Tabling new Procurement legislation and establishing a new Procurement supervisory body;

* Reforming the Civil Service;

* Bringing a new semi-autonomous Deeds Registry into operation;

* Improving institutional framework for trade and investment facilitation;

* Appointing a Commissioner of Insurance and support staff to enforce legal framework;

* Restructuring the rice, sugar and bauxite industries in order to enhance their viability, their ability to compete internationally and their net contribution to society; and

* Diversifying the economic base for the purpose of stimulating investment into new products and services in order to reduce the country's dependence on the traditional production centers.

Forgotten

Prior year issues which seem to have been forgotten are:

* Separating from core civil service 1,000 security guards;

* Appointing a Director of Civil Aviation;

* Working with local and international banks to provide pre- and post-shipment financing and other related services to the manufacturing sector;

* Improving the welfare of Amerindians by developing market networks in the Caribbean for Amerindian art and craft;

* Launching of a Youth Employment Programme;

* Supporting distressed companies - the only concerted effort has been with respect to small operations in the rice sector; and

* Establishing an NGO Co-ordination Unit.

Ram and McRae's Comments

The growing list of policies abandoned along the way and/or not executed raises serious questions about the co-ordinating function and executing capabilities of the several Ministries of Government.

Some years ago, it was announced that a leading advisor to the President when he was the substantive Finance Minister was being transferred to the Office of the President with specific responsibility to monitor the implementation of policies. Perhaps this task should be assigned to a Parliamentary Committee.

While there is a clear imperative for civil service reform, it would be meaningless if this did not have as one of its objectives the reduction in the number of ministries. How can a small country as ours afford two Ministers of Local Government, a Minister of Foreign Trade and a Minister with responsibility for Parliamentary Affairs?

It seems that considerably more work has to be done to make Go-Invest a one-stop shop rather than just another layer of bureaucracy slowing up the work of the Ministries of Tourism and Finance.

No meaningful restructuring of the rice industry can take place without measures to address the financial difficulties facing the large operators in the industry. The assistance of the small farmers while welcome does not solve the problem of the industry or the bankers. It is a systemic problem warranting an inclusive solution.

2002 POLICY ISSUES & TARGETS

In introducing the Government's "key tasks and policies in 2002 and beyond", the Minister announced that the process of creating jobs and rapidly increasing the income levels of Guyanese on which the government has embarked, would be accelerated through the efforts of the opposition members of Parliament and all stakeholders in preserving peace and stability.

1. Maintenance of a stable macro-economic framework.

The Minister identified the following specific policies:

(i) Monetary policies to maintain the stability of the exchange rate, contain inflation, safeguard the Bank of Guyana's external reserve position and support the Bank of Guyana in its quest to reduce interest rates further.

(ii) Fiscal policies to support growth, reduce poverty and increase public sector savings. Specific measures include a comprehensive review of the tax system and staffing the Revenue Authority to its full complement.

2. Private Sector Development

* Assist the private sector in export and investment promotion, and expansion of small business and cottage industries and enact small business legislation.

* Appoint a Commissioner of Insurance

* Establish dispute resolution and settlement mechanism

* Establish a Stock Exchange

3. Restructuring the economy

(i) Sugar: Begin massive restructuring and modernisation of Guysuco at a cost of US$110M and resulting in increased output to 450,000 tonnes per annum at a cost of production of US$0.11 per pound of sugar over five years.

(ii) Rice: Development of an integrated sustainable and profitable industry under a 10-year strategic plan initiated by the Guyana Rice Development Board. The plan has four key areas: research and development, improved processing methods, expanding/developing markets and support service including drainage and irrigation, land reform, finance and inputs.

(iii) Bauxite: Noting the Government's repeated attempts to sell the two main state owned bauxite companies, the minister announced his government's commitment to a complete restructuring of the sector.

(iv) Forestry and Gold: No initiatives.

(v) New Growth Areas

Priority areas identified includes:

(i) Manufacturing: the development of government manufacturing plants, in agriculture, the fisheries, other crops, cut flowers and agro processing.

(ii) Tourism: The establishment of the Tourism authority and revamping the incentive regime.

(iii) In Technology, taking steps to attract investors to this sector including tele-centres.

(iv) Job Creation:

(1) Short-term programmes to provide cash and other support to displaced workers.

(2) A temporary employment and maintenance programme to employ 300-400 persons under a contract for G$1,600M which has already been awarded and works out at approximately G$4M per person which suggests that the contractor will be making a huge project

4. Transparency and Efficiency

Ministry of Finance, including the State Planning Secretariat will be strengthened to formulate and implement policies.

Once again the Ministry has announced new legislation on public procurement and tendencies and a new audit act in 2003.

The Government proposes comprehensive amendments to the FIA and Bank of Guyana Act to prevent some of the excesses which surfaced in Globe Trust.

Establishment of a Financial Stability Unit through the scope and objective of such a Unit is unclear.

Ram & McRae's Comments

There is a commitment by the government to put in place an Audit Act by May 1, 2002 as part of an IMF conditionality.

The Minister appears unaware that it is not only the absence of legislation but also the weakness and timidity of regulators which sometimes permit excesses to continue longer than they should.

An announcement has recently been made that the Stock Exchange would go into operation by mid-2002 which appears to be a highly optimistic target.

The Minister appears to ignore the recommendations of the Auditor General that the State Planning Commission be formally dissolved since it now operates as a Department within the Ministry of Finance.

Similarly, the Estimates provide for subsidies to be given to several Departments which operate improperly outside of the Government's pay structure as well as entities which are delinquent in meeting their obligations to have their books audited. It seems improper for the Government to be condoning such misconduct.

The Government is committing itself heavily to the Sugar Industry. The assets employed are quite substantial as are the social considerations. It will be relying heavily on the managers delivering the expected output.

THE GOVERNMENT OF GUYANA FINANCIAL PLAN 2002

The table on the page 21 presents a summary of the Government's projected financial plan for 2002. Some of the 2001 figures, which appeared in the 2001 Estimates, have been restated in the 2002 Estimates without any explanation. The Plan projects a negative current balance of G$2.052Bn after taking interest and current expenditure from current revenue, compared with a negative balance of G$1.942Bn in the 2001 Budget. This is a major turnaround from a budgeted surplus of G$1.393Bn. The principal elements of the 2002 Plan are:

Current revenues are projected to increase to G$43.790.3Bn in 2002 from G$41.426.2Bn in 2001. The Revenue Authority projects an increase of G$3.134Bn or 8.3% over 2001 and now hope to bring in 93% of the total current revenue. In 2001, the Revenue Authority realised decreased revenues of 0.79% over the previous year and fell short of budget by 4.45%. Although collections in 2001 over 2000 of the Internal Revenue Department increased by G$0.719.1Bn or 3.6%, the Customs and Trade collections decreased by G$1.021Bn or 5.6%. The Minister explained that the lost revenue from the Customs and Trade Administration was due to the reduction in international trade from the September 11 aftermath.

Total Current expenditure is projected to increase by 5.23% from G$35.375Bn to G$$37.228Bn in 2002. It is made up of interest expenditure of G$8.615Bn or 19% (2001-18.43%), personal emoluments of G$15.814Bn or 35% (2001- 34%) and other charges of G$21.413Bn or 47% (2001- 48%). The main allocations of the non-interest expenditure were the Ministry of Finance 14.14%, Ministry of Education 11.21%, Ministry of Home Affairs 9.63%, Guyana Defense Force 7.60% and Ministry of Health 6.29%.

There are several significant projected changes in the allocation of certain expenditure in comparison to the 2001. Major decreases over 2001 include: Office of the Prime Minister (60)%, Elections Commission (36.7%), Ministry of Finance (8.59)% and Ministry of Housing and Water (8.61)%.

Significant projected increases over 2001 include Ministry of Health G$1,213Mn, Ministry of Labour, Human Services and Social Security G$739Mn, Ministry of Education G$606M, Guyana Defense Force G$334Mn, Ministry of Public Works and Communications G$227Mn and Ministry of Home Affairs G$244Mn.



For further details of allocation of non-interest expenses please refer to page 22.

Total interest expenditure is projected to increase by 7.8%% from G$7.993Bn in 2001 to G$8.614Bn in 2002 or approximately 19.67% of current revenue compared with 19.29% in 2001. Interest on domestic and external debts is projected to increase by 5.4% and 11.3% respectively.

Capital revenue is projected at G$9.822Bn (2001-G$5.716Bn) and capital expenditure at G$19.954Bn (2001-G$16.511). The revenue figure is made up principally of HIPC grants ($6.363Bn) and Project and Programme funds ($3.387Bn).

Capital expenditure of G$19.954Bn represents a 21% increase over 2001. This follows a decrease of 3.6% in 2001 and an increase of 37.9% in 2000. The proposed allocation of the capital expenditure includes Ministry of Public Works and Communications 21%, Ministry of Education 13.93%, Ministry of Finance 23.36%, Ministry of Housing and Water 11.78%, Ministry of Agriculture 4.97%, and Ministry of Local Government & Regional Development 4.86%.

Debt repayment is projected at G$3.021Bn (2001-G$3.064Bn) made up of domestic debt repayments of G$176.6Mn and external debt repayments of G$2.844Bn, representing increase of 75% and decrease of 4% respectively over the previous year. There is an overall deficit of G$15.2Bn compared with a deficit of G$15.8Bn in 2001. It is projected that the deficit will be financed from domestic and external sources of G$3.96Bn and G$11.2Bn respectively. The overall balance of deficit before grants is projected at G$25.03Bn which is G$3.51Bn more than the deficit of G$21.52Bn in 2001.

During 2002, Domestic and External Debt Service as a percentage of current revenue is projected at 26.6% compared with a revised percentage of 26.7% in 2001 and 38.6% for the preceding year.

Ram and McRae's Comments

It is surprising that the 2001 Budget presented in mid-2001 could be so wide of the mark. Instead of a positive budgeted current balance of G$1.392Bn, the actual results were a negative balance of G$1,942.3Bn. The principal factors contributing to this turnaround were a decrease in current revenue of G$2.592Bn, and an increase of current expenditure of G$1.842Bn. The deficit would have been greater had there not been a lower than budget charge for domestic and external interest repayment of G$1.098 or 12%.

The composition of projected revenue for 2002 is essentially the same as 2001. Corporation Tax fell slightly in 2001 compared with 2000.

WHO GETS WHAT IN 2002

Current Non-Interest Expenditure

In this section we consider how the budgeted expenditure is allocated among competing Ministries, Departments, Programmes and Projects.

Central Government's non-interest current expenditure (employment costs and other charges) for the year is budgeted at G$34.6Bn which is 0.8% below the revised 2001 amount. The Ministries/ Departments with the most significant allocations are:





* Percentage of total current expenditure

Not unlike last year, the Ministry of Finance, the Ministry of Education, the Ministry of Home Affairs and the Guyana Defence Force receive the most significant allocations. Separate allocations are provided for the Ministry of Foreign Trade and International Cooperation and the Ministry of Amerindian Affairs.

The regions with the most significant allocations are:

* Represents % of regional allocation.

Significant changes from the previous year's latest estimates occurred in the following Ministries/ Departments:





The substantial increases in the allocations for the Ministry of Local Government and Regional Development; the Ministry of Tourism, Commerce and Industry; the Ministry of Health; the Public Service Ministry and the Ministry of Labour, Human Services and Social Security were because of the restructuring of the ministries and the discontinuation of the Ministry of Local Government, the Ministry of Trade, Tourism and Industry, the Ministry of Health and Labour, and the Ministry of Human Service & Social Security.

Capital Expenditure

Central Government's capital expenditure for the year is budgeted at G$21.5Bn which is 15% above revised 2001 and 36% of total 2001 expenditure. The Ministries / Departments with the most significant capital expenditure allocations are:





The Office of the Prime Minister receives no allocations for 2002. The largest increases are in the following Ministries: the Ministry of Finance (125%), the Parliament Office (67%), the Ministry of Health (64.5%), the Ministry of Local Government and Regional Development (52%), the Supreme Court (50%), the Ministry of Labour, Human Services and Social Security (40%) and the Public Service Ministry (100%) had the most significant increases in allocations. The substantial increase in the capital budget for the Ministry of Finance is due to an allocation of $1,228Mn for the rehabilitation of GUYSUCO and a $1,500Mn loan to LINMINE.

Regional Allocations

Once again Region 6 (East Berbice/Corentyne) whose share of the country's population is about 20%, received approximately 20% of the total current expenditure amount allocated to the regions. The situation regarding the total expenditure allocation is similar. Region 6 gets 19% while the even smaller Region 3 (Essequibo Islands/West Demerara), with a population share of 12.5% gets 16% of the amount of the regional expenditure, up from 14.2% in 2000. On the other hand, Region 4, with 42% of the country's population receives only 16% of the total expenditure allocated to the regions.

Ram & McRae's Comments

These percentages remain largely unchanged from the previous year. Region 4 has the greatest unfavourable disconnect between population and expenditure while Region 6 receives an allocation that is almost commensurate with its population.

2002 BUDGET MEASURES

COMMENTARY AND ANALYSIS

Income Tax Threshold

The Government appears to have experienced some difficulty in concluding its Budget for the current year and missed several target dates going back to January 2002. The Budget when measured against expectations would be a great disappointment as it offered none of the wishes or concerns of stakeholders. It seems unbelievable that the Government would leave the threshold of the personal allowance untouched for four consecutive years. The current allowance granted was set in 1997 and is therefore worth approximately G$23,000 which is within the 20% tax rate.

It is hard to believe that the Government's failure to respond to the popular and universal request as insensitivity. It seems more reasonable to assume that the IMF would have insisted on this position given the state of the economy. This is the price we pay for abandoning our economic sovereignty to an institution where poverty and its alleviation seem to be more concepts than reality. It is also the price we pay for pursuing a policy of debt relief rather than growth and development.

So entrenched are we in the IMF Programme that we have no exit strategy and in that case we simply have to submit to all their conditionalities.

Over the past several years, the country's economy has deteriorated substantially and the projected growth rate of 2% is inadequate to take us out of our current state of poverty. Our per capita GDP has stagnated against a dream of doubling it within 10 years which would have required a compounded growth rate of 8% per annum. Over the past several years, the Government has developed a warm relationship with the private sector and appears not to have any regular dialogue with the labour movement. While the slowing of the inflation rate protects the workers' income and savings, even modest increases in income to compensate for inflation can take the income into the taxable bracket.

Failure to address the threshold therefore is likely to be a huge disappointment not only to employees, but to employers as well since the burden of meeting.

Debt

There is much that has been written about the country's debt problem and much of the credit for the substantial debt relief from which the company has benefited is claimed by the current Government. Indeed, the President claimed that when the PPP/C came to power the debt service ratio was some 90% of export earnings. The reality is slightly different, largely because of the way the numbers were being computed. The IMF insists that public estimates be drawn up as though all scheduled debt services would be met. In practice however, Guyana had for several years not been meeting its obligations to creditors and the Hoyte Administration had initiated action to reschedule maturities of principal and interest payments falling due between January 1, 1989 and December 31, 1994.

In 1989 the country had total debts of US$1.9Bn, of which a significant portion represented arrears. As a result of the approaches to the international community and the buy-back of certain debts, by October 1992 the country had cleared most of its arrears and its debt service ratio would had been reduced to 33%.

Many Guyanese may not be aware as well that for several years prior to 1992, Guyana had not been paying its indebtedness either to the international financial institutions or to commercial creditors. Accordingly, it had not been possible for the Government, particularly during the years 1985 to 1990 to borrow any money or to contract commercial credit. Questions like where did the $2.1Bn go must be considered extremely ill informed since a substantial portion represented interest and penalties for non-payment over several years.

Since 1992, Guyana has made remarkable strides in obtaining debt write-off but the cost has been significant since it required a commitment on the part of the Government to meet its re-scheduled obligations. During the period since 1992, the country has borrowed approximately US$600Mn of external debt while its domestic debt has increased from $18.1Bn to $49.7Bn!

In the process, we have paid out interest of G$39.3Bn on our total external debt and G$40.0Bn on our internal debt for the period 1993-2001. Debt management will remain a critical issue for our policy-makers for years to come. Accordingly, we must follow basic principles that ensure that we utilise borrowed funds on projects and programmes which at a very minimum produce financial and/or economic returns to enable the country to service those debts.

Businesses in Distress

In his 1999 Budget Speech, Minister Kowlessar announced his Government's intention to assist businesses in distress. Despite systemic business failures affecting rice, lumber, manufacturing, gold and even the commercial sector, the Government has shown a marked reluctance to intervene, even when problems could spill over and threaten the financial system - the very foundation of an economy.

Even as the Minister was preparing to go to Parliament to present his 2002 Budget, he would have noticed that another three leading businesses had been taken to Court because of their inability to meet their obligations to their creditors. About 1,300 borrowers in the rice industry owe approximately $15Bn to the commercial banks of which approximately 1,200 account for about 10% of the indebtedness. Despite the integrated nature of the industry, the Government only assisted the small operators, leaving the large players to make their own case with their bankers. The Minister needs to revisit his stated commitment to distressed businesses and recognize that given the systemic difficulties which several industries are experiencing, only Government intervention and the co-operation of the bankers can stave off further business failures and costly shocks to the economy.

The Investment Code

The Government on numerous occasions had committed itself to a legally enforceable Investment Code and the Minister proudly announced in his Budget Speech that his Government had tabled such a code in Parliament. The Code tabled however was not a legally enforceable document and excluded many of the strong provisions of the Draft Code which had been the subject of widespread consultations. Some of the provisions which were taken out included steps to lend transparency and certainty to the issue of tax concessions which is now purely a matter of political discretion; a more streamlined Go-Invest and clearer roles for investment. The Government appears to have lost a number of points as well as credibility as a result of its failure to honour a commitment made to the international community. In order to restore credibility with donors as well as investors, the Government needs to revisit the Code.

Corruption

The Minister spoke about the need for transparency and efficiency of the economy. In this connection, Parliament has already passed laws to strengthen the Office of the Auditor General giving it not only greater resources, but also legislating for its stronger independence. Despite taking some steps to deal with corruption, the Government is still perceived to be soft on the issue. Corruption however, is not limited to the Public Sector and while many consider that corruption persists in matters of tender procedures, procurement and tax revenue transactions, some action needs to be taken to deal with corruption in and by the private sector. In this connection, some new forms of audit arrangements, legislation to encourage whistle-blowing and stronger penalties to deal with wrong-doers need to be considered.

Budget Process

Over the past several years, Parliament has been called upon to approve substantial sums of money which had already been expended. While this may be partly due to emergency or failings in the budgeting system, the extent has been so pervasive that it seems to cast doubt on the entire Parliamentary approval system. New forms of constitutional arrangements may be necessary so that a built-in Government majority cannot automatically approve sums which did not fall within the rules. The graph below shows the extent of sums for which Parliament gave subsequent approval:

Total Supplementary Funds Approved (TSFA)

The Role of Parliament

Guyana operates a Parliamentary democracy, but the records show that Parliament has been found wanting. During the entire nine months following the March 2001 elections, Parliament met on a total of 19 occasions with half of those dealing with the 2001 Budget. Guyanese invested greatly in constitutional reform and looked to their Parliament to chart a course for national development. Every Guyanese must feel that he/she has been betrayed by the Parliament. It is time that this situation be rectified since there is no acceptable alternative to Parliament. Our Parliamentarians must get to work.