A hike in the income tax threshold was not in this year's budget due to the unstable political climate earlier this year and the poor performance of the economy last year, Finance Minister Saisnarine Kowlessar said.

Briefing reporters at the Ministry of Finance boardroom yesterday afternoon about considerations impacting on this year's budget, Kowlessar said the $64.7 billion national budget was not a "one- stop document but a distillation of government's plan, policies and programmes that have found expression in the National Development Strategy and the PPP/Civic elections manifesto."

He said it points to the direction in which the economy must move in the next five years if Guyana must be integrated into the new global economy given the pressures of globalisation and trade liberalisation. The budget, he said, was crafted in the context of the local and international environment.

"To say that the budget lacks vision and initiative is to be intellectually and factually dishonest," the minister said, contending that it is a bold and imaginative idea of how the country must move forward.

The budget, he said, sets the pace for Guyana becoming by 2006 a very robust and diversified economy that is both capable of withstanding adverse external shocks and competing effectively within the new globalised environment.

Stating that the economic base of the country has to be diversified and the traditional industries have to become more efficient and effective, he said that all this will occur in a difficult local and international environment but the government is up to the challenge.

In the first instance, the budget sets out reasonable attainable economic and financial targets with a projected real GDP growth rate of 2.8% for this year. Sugar, rice, gold, engineering and construction services, financial services and agricultural activities and other sectors, he said, are expected to show positive growth. And based on these projections the economy is expected to turn around.

In the second instance, he said, inflation is targeted at 6% and government is committed to pursuing a monetary policy that aims to mop up excess liquidity in the system, to maintain macro-economic stability and promote private sector expansion.

Adviser on the budget, Winston Jordan, who was present at the press briefing, noted that the programme of mopping up excess liquidity in the system which is by way of the purchase of treasury bills has been going on since 1994.

Kowlessar also noted that there is also a strong focus on creating conditions for investment, an emphasis on poverty reduction and employment programmes.

Responding to the concerns expressed in a report in this newspaper yesterday by private sector officials that the budget has ignored recommendations made in pre-budget consultations, Kowlessar said that the consultations are integral to the budget formulation process but recommendations which were not encompassed in the budget do not mean that they have not been taken seriously.

But "we have to recognise that not everything will go into the budget. We have to examine them against local and international situations. So it is not fair to say that because you have made a proposal it must be in the budget," he said.

The ministry has "considered them and will continue to consider them," he stated, adding that "in fact the private sector has made some recommendations for reducing the consumption tax and in other areas have made proposals for tax reforms and so on. So it is not that we are treating them lightly but we will continue to consider them when the circumstances are favourable."

In relation to the freeze on the income tax threshold, the minister said that the ministry had actively considered hiking it but because of local and international circumstances could not do so. This was due in part to the political climate which affected investor confidence and post-elections violence which set back revenues and programmes. It is projected, he said, that the government's coffers will lose $3 billion in revenue alone this year.

Post-elections violence "has cost a lot of money as well."

Government, he said, has had to put aside $150 million for compensation to victims of post-elections violence and it now has to find scarce resources to repair infrastructure that was damaged. In addition, that money has to be funnelled into depressed communities' projects and poverty reduction.

He argued that government's record in terms of wages and the income tax threshold has been fairly good. In eight years the threshold moved from $48,000 per year to $216,000, representing a 400% hike. "We have increased the threshold but because of the circumstances that obtained at the moment we have not been able to do anything," he said.

In relation to wages and salaries, he said that government wants a term settlement to this issue so "we have to develop a wages policy."

Moreover, he said government would not like to be accused of not consulting with the union before making a declaration of the actual wage increase. Some consultations with the Guyana Public Service Union have begun, he said.