Redefining the Role of the Public Sector in Guyana 1988-1992 By Mellissa Ifill
Stabroek News
October 24, 2002
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Soon after the accession to the President's office by Desmond Hoyte after the death of Forbes Burnham in August 1985, the new administration immediately took steps to implement policy changes in the domestic economy. The new administration employed measures that contrasted with the co-operative socialist ideology that the PNC had previously espoused and assured of its commitment to a market-oriented development strategy that would entail enhancing their relationship with the Western financial community. Evidence of the latter was seen when the administration took a decision to re-establish Guyana's relationship with the IMF and the World Bank in 1986.

A number of factors made such a transformation from a socialist oriented strategy to a capitalist oriented one necessary. One of the most important factors was the severity of the socio-economic crisis that Guyana faced at this time. The country was faced with a debilitating external debt burden, which was aggravated by the continuous increase of arrears to all its international creditors. The state was increasing unable to generate enough foreign exchange to service the debt and found that it was practically impossible to obtain any significant external funding. The Hoyte administration recognised that in order to acquire financing from international creditors, the government of Guyana first needed to enter into arrangements with the IMF and the World Bank because international creditors premised their interaction with developing states on them agreeing to structural adjustment arrangements under the guidance of the two international financial and developmental institutions.

The Guyana government began negotiations with the Fund and the Bank in the early months of 1986 and the formulation of a Policy Framework Paper (PFP) was completed in 1988. After formulating the PFP in 1988, Guyana was obligated to implement an IMF supervised agreement that was approved in April 1989. On the basis of IMF approval, bilateral donors signalled their willingness to grant some measure of financing.

Guyana's structural adjustment programme was expressed in the broad economic strategy of the Economic Recovery Programme (ERP) that was officially initiated in early 1989 under which a number of strategies were implemented between 1989 and 1992. The ERP contained two major features. One concentrated on external financing and the other on the economic measures to be implemented as a condition for this financing to be continuously secured. Guyana needed external financing for balance of payments assistance, to reschedule the outstanding debt, and to clear the country's arrears to the IMF, World Bank, CDB, and the Caribbean Multilateral Clearing Facility. These had to be satisfied before Guyana could become eligible for credit from these institutions since with a history of heavy default she had been deemed ineligible for further loans.

Under the structural adjustment implemented in Guyana, a number of policy and operational measures were instituted including devaluation of the exchange rate, price deregulation, wage control in the public sector, increased bank rates and privatisation.

Structural adjustment was also linked to the practice of good governance from the early 1990s. In Guyana, several aspects of governance were addressed as part of SAPs including the manner in which citizens were governed, the manner in which the affairs of the state were administered and the quality of management and institutional capacity of public agencies. This translated into: implementation of competitive multi-party elections, drastically diminishing the role of the state in economic affairs; public sector reform; building structures of accountability and transparency in public sector operations and transactions; and establishing an effective judicial framework.

Restructuring the Public Sector
In mid-1988, the Government announced that it was implementing a significant redirection in Government policy. At the core of this redirection was a virtual reversal of the roles of the private and public sectors in facilitating development. This reversal was seen as necessary to reverse the deteriorated condition of both private and public sectors. By the mid 1980s, arising out of the nationalisation programme that had been undertaken in the 1970s, the Government of Guyana had controlled over 80% of recorded import and export trade and 85% of total investment.

This control of the economy by the public sector did not yield many developmental gains rather most public sector infrastructure had deteriorated sharply. For instance, power and water supplies were erratic, the road system was in deplorable condition, the sea defences, which protected the most productive agricultural lands required major reconstruction, and social services were in poor condition - schools and hospitals needed basic repairs and equipment.

The government determined with the guidance of the international financial institutions that it needed to reduce its participation in a number of these activities. A privatisation programme was therefore started under which - over the next three years - a number of government managed industries and sectors were sold, closed, leased or were being prepared for complete or partial privatisation. These state owned agencies were privatised by international, regional and local companies such as the US Virgin Islands-based Atlantic Tele Network and CLICO Trinidad Ltd. In addition, a number of initiatives were also implemented to train and equip the local private sector to function as the primary stimulators of the economy.

International financial and developmental institutions also advised that good governance would also be promoted through public sector reform. As early as 1983, the IFIs opined that the administrative capacity of the public sector required crucial adjustments to reflect the latter's new role in the political economy of Guyana.

Initially, public sector reform meant a programme of restructuring ministries, eradicating overlapping tasks among government departments and readjusting their activities to facilitate enhanced economic management. For instance by mid 1991 the number of government ministries had been reduced from 18 to 11 in addition to which, dispensable designations within the reduced ministries were eliminated. Further, a limited number of specified professional categories including medical doctors and teachers were separated from the general public service to make easier the payments of higher salaries to these professionals.

These measures, although necessary, were however inadequate to address the structural deficiencies and crisis which gripped the public sector. Evidence of the crisis included lack of professionalism, corruption, lack of transparency and accountability, acute shortage of skills at higher grades, overstaffing at the lower grades and inadequate salaries and emoluments - all resulting in a demoralised, politically dominated public service.

Accountability and corruption in the public service was also addressed as another hindrance to the practice of good governance. The World Bank indicated that the decline of the public sector was partially "a result of the decline in real wages". One strategy used therefore to address this was to increase the salaries to sufficiently attractive levels with the hope of curtailing corruption.

The issue of securing public accountability under a liberalised political climate went much further than attractive salaries however, since a number of the basic instruments of accountability had been allowed to lapse or deliberately sidelined under the Burnham regime. For instance, reviews of the activities of various ministries were hardly held and Parliament had not been presented with public accounts statements in approximately 10 years. To improve these accountability mechanisms, the Hoyte government embarked on a number of initiatives including enhancing salaries of those in revenue and audit departments, and hiring qualified non-political personnel to head various departments. These were designed to begin the process of restoring confidence in the public service since it was recognised that this restoration process would invariably be a long term one.