Information carried in the 2006 National Budget confirms the accuracy of the unofficial statistics carried in my article last Sunday (January 22). I was unaware at the time of writing that this was on the eve of the Minister of Finance's budget speech. Growth of real GDP declined by 3 per cent prolonging the depression and confirming that the average rate ofannual growth for the period 1998-2005 was less than one half of one per cent (0.5%).
The budget data also supported the expectation that last year's floods would have been a major contributor to this unfortunate outcome.
Despite the widely held view that, as always has been the case historically, the actions of the sugar plantations to protect their crop compounded the adverse effects of nature, sugar did not escape unscathed. Sugar production fell by one quarter compared to the previous year, with output as low as 276 thousand tonnes. Rice farmers do not have a similar capacity as sugar to intercede into the coastal drainage and irrigation system, but rice output fell by about one-seventh compared to the previous year.
The most catastrophic effect seemed to have been felt by the cash-crop farmers. As the budget indicated their output fell by a whopping 80 per cent. And because these cash crops are produced in the main by small farmers the impact on the livelihoods of poor rural communities was horrendous. The continuing tragedy is that in several of the farming areas the floods are recurring and a similar outcome could well be already in the making for this year.
This observation makes the budget projection of a 4.2 per cent rate of growth for this year quite optimistic. This rate, if attained, would exceed that of any year since 1998!
There is of course the possibility of the well-known 'statistical illusion' that appears in the national accounts after a natural disaster. Expenditure to repair the damage adds to the net flow of goods and services and hence the country's output (GDP). The damage to the environment, however, is not normally 'accounted for' as our methods of national income accounting do not take environmental degradation into account in a satisfactory manner. On the contrary, investments in repair and rehabilitation are fully taken into account.
The budget also recognises the equally adverse impact of high oil prices on the economy. It reminds us that 30 per cent of our foreign exchange expenditure goes towards the importation of oil (energy) and related products, which are indispensable inputs to all economic and social activity.
The budget, apart from anticipating the return of the current administration to office, does not dwell on the traditionally adverse impact of national elections and its aftermath on business outlook. The approach taken may well be a case of 'the less said the better.'
Making the obvious invisible
The set of analyses of the Guyana economy that I am pursuing at this point in the series does not require an analysis of the budget per se.
My focus is on more systemic issues. From this standpoint the national budget is only one element and this is not central to our concerns at this stage as the budget and the debates that follow are more ritual and posturing than a serious effort to engage the sort of systemic issues we are attempting to explore. Consider the following three examples from the present budget as an illustration of what I mean.
Guyana is a HIPC country locked into a development strategy programme and policy framework, of which it is clearly not the intellectual author. Proof of this can be observed if one compares the measures that are being pursued in Guyana with those being pursued in other HIPC countries. Debt relief comes with conditionalities. This has always been the case and will always continue to be the case.
The concern of those offering the relief is to ensure the resources they are surrendering are well spent. I acknowledge however that there is a 'polite charade' in which we all participate. Publicly we pretend the country and particularly the elected political directorate has 'ownership of the process' but privately snigger as we understand fully there is no such policy space or autonomy possible as long as Guyana remains in the HIPC programme. The budget, however, is silent about the HIPC targets, goals and other conditionalitites. Regrettably, try as it may the budget cannot by its silence on the matter make the IFIs and HIPC requirements 'invisible.' While well-informed Guyanese may smile at this shallow stratagem, the grave danger is that it does disservice to what should be an organised national effort to exit the HIPC programme.
I have not been able to read the printed budget with all its tables and appendices as I am abroad. I have had to rely on the version on the GINA website. But, to the best of my reading the budget document effectively ignores the famed National Development Strategy (NDS). All political parties pay lip service to this document, now badly in need of updating.
The truth of the matter, however, is that there has never been any articulation by the government between the NDS, the Poverty Reduction Strategy Paper (PRSP), and the budget. The 'invisibility' of the NDS in the National Budget reflects accurately the reality on the ground. The NDS is little more than a paper document that exercises little or no influence on economic choices and policies.
Wanted: A graduate in every household
The third example is the case of the university. The budget talks of ICT development, technology improvement; the production and use of statistics; the introduction of new methodologies for budgeting, economic forecasting and analysis; improvement to drainage and irrigation systems; health and education upgrading; and, yet does not indicate a major allocation for university education and research.
How can anyone seriously envisage Guyana developing without sufficient improvement to and outlays on higher education remains a mystery to me. Without a 'graduate in every household,' Guyana stands no chance of standing still in today's world - let alone advancing.