There was a lack of coherence in the Budget speech
Kaieteur News – A good example of how to structure a Budget was provided earlier this year by the Chancellor of the UK Treasury. His Budget clearly outlined the government’s priorities and the measures being adopted to achieve these objectives.
The UK Budget identified three main priorities, namely: protecting the jobs and livelihoods of the British people; strengthening public finances; and pushing investment-led recovery from the pandemic.
These priorities determined the structure of the Budget. For all of them, policies were clearly linked with the aim of achieving these objectives.
By contrast, Guyana’s marathon Budget speech lacked that kind of cohesion. He listed six main priorities: 1) keeping the population safe from COVID-19, including spreading the virus, securing treatment and vaccination, when available, and gradually re-opening the economy; 2) ensuring a diverse and resilient productive sector; 3) initiate catalytic infrastructure investment; 4) establishing world-class social services; 5) improve the quality of the public service; and 6) ensuring respect for the Constitution, the rule of law and good governance.
But in terms of linking policies and programs to each of these objectives, the Budget did disappoint. The only exception was in relation to the government’s catalytic infrastructure agenda.
Not listed among the main objectives was the environment. Yet the Low Carbon Development Strategy (LCDS) received honorable mention in the Budget Speech. The PPP / C wants to resurrect the LCDS. It announced that it would revitalize the LCDS and develop it into a comprehensive development strategy. This is an implicit admission, if ever there was, that the original LCDS was never a comprehensive development strategy. It is unclear which of the six main objectives this fits into.
No sooner had the vaccination campaign begun, the government found itself in reply. It had to acquire the Sputnik V vaccines from the United Arab Emirates (instead of Russia) at a price of G $ 800M. In making the announcement, the President noted that adjustments to the Budget would have had to be made to accommodate this, a clear oversight that insufficient provision had been made to accommodate such large expenditure on vaccines.
Disappointingly, the rest of the Budget speech turned into a long diatribe, including much criticism of the previous government, and without unambiguous coherence between these objectives and the many measures announced in the Budget, except for objective three which dealt with them the catalytic investments. But then again, Guyana has been hearing this tune under the PPP for more than a decade.
A recent report in this newspaper informed the public that plant and equipment acquired for generating and using electricity from renewable energy sources is now exempt from value added tax. This would mean that VAT is no longer payable on solar panels, solar lamps, deep cycle batteries, solar generators, solar ovens, solar water heaters, solar refrigerators and freezers, solar air conditioners and inverters.
Similar exemptions have also been reported to apply to water turbines, wind turbines and energy efficient lighting, including compact fluorescent lamps and LEDs. In addition, the supply of machinery and equipment for the use of alternate energy technologies and renewable energy options, such as gasifiers to use biomass and harness renewable energy through wind, solar and water, as determined by the Commissioner, were also exempt from VAT payments.
Surprisingly, the section dealing with “Measures” to be implemented in 2021 did not mention the removal of VAT on these items. That would fit squarely into the Low Carbon Development Strategy. This really shows the non-contact approach taken in relation to the Budget.
After the Budget was passed, an order reducing the customs taxes on petroleum was passed to facilitate a reduction in the price of petrol at the pumps. Since then, the price has continued to rise. These ad hoc interventions to buffer the price of petrol are not desirable and one would have expected that more attention would have been given in the Budget speech to reducing the floating rate of customs taxes on petroleum as the price rising as the price rose. world market, consumers know what the price will be at the pump. This failure is another example of the disjointed approach to the nation’s financial planning.
The government has previously announced plans to install another 400MW of energy, including through renewable sources. With this target in mind and the fact that the government can easily meet more than half of this target through a mix of renewable energy sources, it is necessary to question why it is necessary to rush a gas project to shore.
Why not take the time to carefully consider not only the feasibility of the project but also whether it would ever be needed in such a small economy. But the answers to those questions are part of the absence of an internal logic not only to the Budget but also to much of what the government says it will do.
(The views expressed in this article are those of the author and do not necessarily reflect the views of this newspaper.)