Minister of Finance, Saisnarine Kowlessar announced yesterday that the government had embarked on the strict monitoring of current expenditure to ensure that the economy, which was experiencing a fiscal deficit due to lower domestic production, export prices and fuel costs, did not deteriorate markedly.

Briefing reporters yesterday at the Ministry of Finance boardroom, Kowlessar said the deficit would be financed by strong capital inflows.

He stated that slower growth in activities in the domestic economy and the global recession had impacted negatively on government revenue. He noted that a substantial amount of taxes was collected from international trade, therefore, government anticipated a shortfall in revenue collection by the Guyana Revenue Authority.

The minister said there would also be delays in the implementation of some capital projects to keep the deterioration of the balance of payments position in check.

Referring to the September 11 terrorist attacks on the US, Kowlessar said that some of the effects were direct and were being felt immediately in the local economy. In other areas, he said, the impact would not be felt until next year.

He said government was still examining how the Guyanese people would be affected by the American recession and had not yet put a cost to it.

Budget Adviser, Winston Jordan, who accompanied the minister to the media briefing, along with newly appointed Budget Director, Dr Ashni Singh, and Chief Statistician Lennox Benjamin, said that there was no need for any inordinate concern over the sliding dollar.

Jordan said that the exchange rate of the dollar as against the US dollar was still reasonable when compared to previous years, given what was happening in the US. He pointed out there was a slowdown in commerce after September 11 and since government's revenue was derived from taxes on trade there would a shortfall. Adjustments would have to occur and there would be cutbacks in some programmes, he said.

He stated that the Poverty Reduction Strategy Programme would feature much in next year's budget and a lot would be done to stimulate growth and investment.

The minister also pointed out that the 2001 general election was not incident-free and the violence which followed disrupted economic activities and damaged costly infrastructure.

He stated that in spite of this and the unfavourable global outlook, government presented a $64.7 billion budget this year, which was its biggest and also free of new taxes. The main highlights were a 2.8% growth rate, 6% inflation

and an $18.1 billion public sector investment programme. "We were reasonably confident that these targets could have been achieved. However, nothing prepared Guyana and the rest of the world for the cataclysmic events that occurred on September 11."

He stated that the attacks accelerated the world economy's slide into recession, with attendant unwelcome consequences for Guyana's economy. The minister stated that slower growth could be expected for the latter half of this year than the 1.3% experienced in the first half.

He said the inflation rate was still projected to be well within the target and international reserves were expected to be higher than projected.

Kowlessar disclosed that mortgage lending had increased. "A less heartening feature is the fact that while interest rates have been declining the spread between the savings and lending rates has increased," he said.

He said that in the meantime, government was going ahead with preparations for the 2002 national budget. He also noted that there had been a short period to implement this year's expenditure and many programmes were not completed.

The minister observed that many of the CARICOM countries depended heavily on tourism, while Guyana dealt a lot with commodities. And while, the impact on the tourism sector was greater after the September 11 attack on the US, in Guyana there would also be reduced remittances from relatives overseas and insurance premiums would increase.