Budget 2000 covers 26% pay hike - no new taxes By Nivedta Kowlessar Guyana Chronicle March 28, 2000 MINISTER with responsibility for Finance, Mr Saisnarine Kowlessar yesterday announced a $62.2Bln national budget catering for a 26.6 per cent pay raise for public servants, projecting three per cent in economic growth and without new taxes, fees or fines. Presenting his first budget as Minister, Kowlessar said the salary hike honours a tribunal award last year which offered public servants 31.06 and 26.6 per cent increases for 1999 and 2000. The 26.6 per cent raise, effective from January 1, 2000, will take the minimum wage to $19,000 from $15,000 a month and is for all public servants, teachers, members of the Disciplined Services, pensioners and recipients of social assistance. Pensioners will now receive 50 per cent of the new minimum wage. In his 90-minute presentation of the 40-page budget themed `Working Together for an Improved Standard of Living', Kowlessar said temporary and unqualified workers willing to be severed from the public service will each get a package of 13 months' pay. The smartly-attired minister told an almost packed Parliament chamber that the World Bank and Inter-American Development Bank will help provide them a "lucrative financial package" which will be based on year 2000 salaries and include a special training grant. The Government has named a committee to help modernise and reform the public service of 11,240 workers and has so far identified 1,100 as temporary and unqualified. Kowlessar said under existing industrial relations arrangements, these could have been severed from the service by just one month's pay in lieu of notice. But, he pointed out, the Government is offering a package that is "lucrative enough to compensate the worker for the time he or she is likely to qualify himself or herself and find alternative employment." "It must be noted that this process was supported by the unions representing these categories of workers during...negotiations and in its presentation to the arbitration tribunal," Kowlessar remarked. He said the tribunal also recommended the Government speed up the reform process and considered this issue when it decided the level of increases to be granted. "It is, therefore, the Government's intention to vigorously pursue (this) process...in order to bring about greater efficiency and a better delivery of service," Kowlessar reasoned. Revenue Current revenue is budgeted to increase by 4.6 per cent to $38.3Bln and Kowlessar said the newly set up Guyana Revenue Authority has been given the necessary resources to ensure it contributes its share of 91 per cent of the target. The minister also reported the Government will be consulting with stake holders on the applicability of a value added tax and the consumption tax to Guyana. An International Monetary Fund study has advised that efforts be shifted from international trade taxes to internal charges on consumption and income. Kowlessar predicted production of key export commodities will remain flat in 2000, earning US$530M, up by US$5M. Imports are expected to improve by 4.5 per cent, netting US$575M, mostly because of higher fuel prices and expansion in the capital programme. The current account deficit of the balance of payments is projected to deteriorate by 2.67 per cent to US$95M. The capital account will, however, improve by 66.2 per cent to US$118.7M Kowlessar said the Government expects some US$322M more in debt relief, reporting that Guyana's case for this aid will be considered by the boards of the multilateral financial institutions later this year. Under the Highly Indebted Poor Countries initiative, the country could get a topping up of relief of some 90 per cent so it could achieve a debt-to-exports ratio of about 150 per cent. "We anticipate additional debt relief of about US$322M...or US$462M over 20 years from our bilateral and multilateral creditors. "We are most encouraged by the willingness of the United States and the United Kingdom to write off 100 per cent of our debts. This would hasten the achievement of our objective to reach debt sustainability quickly," he said. Growth Rate Kowlessar said the Government will be building on last year's moderate recovery of 3.0 per cent from 1.8 per cent the previous year. Sugar production which rose 25.8 per cent to 321,438 tonnes in 1999, is expected to dip to 310,641 tonnes because of lower acreage and damp conditions. Rice is to grow from 365,469 to 365,500 tonnes and other crops and livestock by 4.9 and 6.9 per cent, respectively. Forestry is to expand by 6.1 per cent and fishing by three per cent. Mining is expected to improve by 3.2 per cent; engineering by eight per cent; manufacturing by 4.5 per cent; and financial and other services by 5.5 and 4.5 per cent, respectively. The inflation rate is predicted to reach 9.5 per cent because of cost-push effects of increased oil prices, electricity tariffs and major partner-country prices. "In light of developments in the Government sector and the balance of payments, the thrust of monetary policy in 2000 will be to promote price stability and support private sector growth. "In this context, broad money is projected to increase moderately, albeit at a slower pace than the growth in nominal GDP. As a result of the anticipated net repayment by the public sector to the banking system, credit to the private sector should grow strongly," Kowlessar predicted. Packed agenda Kowlessar, delivering what he termed a "packed policy agenda" for faster development, reported macro-economic indicators are expected to deteriorate because of a difficult external situation and the $1Bln one-off expenditure budgeted for general elections in January, 2001. But he said that in spite of this, large external capital inflows will reduce the Government's need for financing from the domestic banking system, allowing the private sector to access a greater amount of credit. The Government intends to expand the scope and impact of public expenditure in pursuit of development with a human face and proposes to invest more than 33 per cent of the budgetary resources to stimulate and energise growth in all sectors, Kowlessar announced. "In so doing, we are laying the foundation and establishing the conditions to transform the economy from its traditional dependence on primary agricultural commodities, to one that is anchored on a truly manufacturing and industrial base, thriving on market policies and a vibrant private sector and sustained by a healthy, well-educated and trained workforce." Improving business climate Kowlessar said the Government will be tabling small business legislation this year to help catalyse that sector's growth and ensure its orderly development. It will also give priority to increasing skills in technical and vocational areas and the Guyana National Service is to offer two six-month courses in catering, office procedures, refrigeration, electrical installation, joinery, tailoring and handicraft. "These training programmes will supplement those that are being undertaken in the private sector. The immediate objectives...are to rebuild our capacity and capability in these areas, bring the disadvantaged and unemployed into the mainstream of economic activities and in the context of the expansion of private and public investment, ensure that the skills are available during implementation." He said the portfolio of public investments envisages major construction, reconstruction and repairs in several key areas. The Government, he reported, is examining five detailed proposals for a bridge across the Berbice River; expects to complete studies for a deep water harbour by year end; begin the University of Guyana Berbice campus classes in October; develop the Rupununi Savannahs to create a Caribbean corridor to Brazil and start the Linden diversification project this year. Kowlessar announced a priority list topped by health, which gets a $4.7Bln injection for repairs, maintenance, strategic reform, training, drugs and supplies. Education secured a $9.3Bln allocation to be used to build 13 new primary and 13 nursery schools, repair 42 schools, increase teaching materials, supplies, equipment, furniture and other fittings and for critical maintenance. The third priority is to complete three major integrated water systems at Pouderoyen, West Bank Demerara, Rose Hall and New Amsterdam and repair and construct the Bartica, Eccles, LBI and other systems. Kowlessar said the Government will also replace and refurbish the dilapidated sewage disposal system in Georgetown, overhauling and/or replacing all pumps and lift stations. The life of the Mandela Avenue waste disposal site in the city will be extended by two years. Under priority four, some 20,000 house lots will be prepared for distribution and a US$30M loan will be used for a low income settlement project. Some $1Bln will also be used to upgrade and regularise squatting communities, and develop new sites and services for expanded house construction. The fifth priority area of economic infrastructure sees agriculture getting $1.3Bln to reopen and clear clogged drainage and irrigation channels and build and rebuild derelict, damaged or worn sluices, kokers, regulators and other structures. Some $30M will also be spent to repave the runway at the Cheddi Jagan International Airport, install new approach lighting, create a Civil Aviation Authority and improve operations in compliance with the International Civil Aviation Organisation's standards. The programme covers the private sector development of the Ogle airport and the upgrading of ferry vessels and stellings. Essequibo Road Kowlessar assured the Essequibo Coast road will be completed this year, bringing "relief and affording easy and comfortable transportation to thousands of residents and users...". The extension of the Soesdyke/Linden highway to take in Burnham Drive will also be completed and negotiations have started with multilateral donors to repair the Mahaica to Rosignol road and resurface the Corentyne highway. A $700M allocation will cover other roads such as the Mabura/Lethem stretch. The six municipalities are to benefit from a US$24M urban development programme and $241M will be paid to the Georgetown City Council in rates and taxes. Tourism Kowlessar also announced that $20M has been set aside for tourism and that the European Union will fund the renovation building to house the headquarters of the Tourism and Hospitality Association of Guyana. The National Assembly was for the first time chaired by a woman, main opposition People's National Congress member, Mrs Clarissa Riehl, yesterday. And that party's back benches were also graced by the presence of member, Mr Aubrey Norton after several months. He had stayed away from sittings following a fall out with leader, Mr Desmond Hoyte. Debate of the budget is scheduled to start on Monday.