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Mid-year report and the Debt party (no pun intended)

Introduction
Almost invariably in discussing recent mid-year reports which the Minister is required to present to the National Assembly under Section 67(1) of the Fiscal Management and Accountability (FM&A) Act 2003, I have made two broad prefatory comments. The first is that it is always misdated.

The Act requires that the report be presented “within sixty days” after the end of the half-year. The second is that comparing it with the half-year report of the Bank of Guyana submitted to the Minister of Finance long before he completes his own report, is like comparing cheese with brick. In content, comprehensiveness and quality they are poles apart.

In 2007, the first full year of tenure of this Minister of Finance the mid-year report was not presented until late November. Subsequent years have seen some wide disparity, none of which however met the deadline, notwithstanding the mis-stating of the date on the reports themselves.

This year the Minister, who was cited by AFC MP attorney-at-law Khemraj Ramjattan for misleading the National Assembly in the small matter of the payment of $4 billion to GuySuCo, dates his report August 27, 2010 two days before the statutory deadline. Until I’m convinced, I shall withhold my congratulations for timely presentation.

As readers are aware the Speaker of the National Assembly Mr Ralph Ramkarran said he did not find a prima facie case against the Minister in the GuySuCo matter although he did find one against the Minister of Housing and Water, despite the Minister of Finance being at least an accessory if the accusation is in fact upheld.

However, it must also be said that the Minister does his reputation no good by the wide disparity between the dates he places on the reports and the dates on which they are tabled.

Breaks and gaps
Since it is routine for reports to be lodged with the Parliament Office between recesses, the Minister would be well advised to lodge the report as soon as it is completed, and issue a press statement to that effect. He can add that “unfortunately, the contents of the report cannot be released until I have had the opportunity to lay it in the National Assembly.” He must also not issue any instructions to the Bank of Guyana or the Bureau of Statistics to withhold their own publications until his report is tabled.

To place in some context what the report should include but does not, I can only draw attention to the concluding part of my commentary on the 2009 mid-year report published in December 2009. I noted there that the mid-year report required more than the year-to-date execution of the annual budget. It requires the report to set out the prospects for the remainder of the year. It also mandates the inclusion of a revised economic outlook for the rest of the year, a statement of the projected impact of the trends on the remainder of the year, and very importantly, a list of major fiscal risks for the second half of the year with likely policy responses that the government proposes to take to meet the expected circumstances.

It was clear then and is more egregious now that the report presented by the Minister falls very short of the requirements of the Act. The result is a report of very limited use and, for any serious reader, when compared with that of the Bank of Guyana, of no practical use.

The best and the brightest
As if to prove that one can fool some of the people all the time, some time in early July, the Parliamentary Sectoral Committee on Economic Services suggested in its fifth Periodic Report that it was likely to recommend that the National Assembly extend the deadline for the submission of the mid-year financial report by the Finance Ministry.

The report suggested that a recommendation be made to the National Assembly that the FMAA be amended to allow for the extension of the deadline for submission to October 9 to coincide with the end of the parliamentary recess. In fact, the committee noted that all the data necessary to compile the mid-year report would not be available by the end of June/early July. Well how much more misinformed can a parliamentary committee be! The deadline is the end of August, not June or July and the committee must have heard of the billion dollar software (IFMAS) in which the government has invested that allows for considerable real time data availability.

And while that ill-informed suggestion would have been music to the ears of the Minister, it is clearly not reading from the same song-sheet as the Chairperson of the Public Accounts Committee Chairperson, Ms Volda Lawrence, who in relation to the 2007 report called the delayed report scenario “gross disrespect” for the people of Guyana and said that it was time people stopped taking such behaviour sitting down.

For purposes of this column and for reasons mentioned in the first paragraph, this column relies on the report of the Bank of Guyana rather than that of the Minister, although it must be said that unlike 2009, the two reports agree on the GDP growth statistics.

Growth
The economy showed what the Bank of Guyana described as modest growth of 2.8 per cent during the first half of 2010. Significantly, the government has now revised the budgeted growth in 2010 from 4.4% to 2.9% for the full year. This would represent the lowest rate of growth in the economy since 2006. In his report, the Minister gave no reason for the significantly lower growth projections, a lacuna that pervades his entire report. And to ensure that they rhyme this year, the Bank of Guyana also projects a 2.9% growth for full year 2010 without indicating whether this is its own estimate of merely a repetition of the Minister’s.

The National Income Accounts was last year rebased to 2006 and until some pattern has emerged it is difficult to assess any one of those indicators.

It would have been useful for the Minister to comment on the impact of the rebased national accounts on the growth statistics particularly in the light of the attention and issues raised by Professor Clive Thomas in his recent columns under captions such as ‘Magnification or manipulation’ and ‘Statistical illusion or real changes’ in the Sunday Stabroek of October 3 and 10, 2010 respectively.

The growth in the economy was attributed to improved performances in the agriculture and services sectors. The livestock and bauxite industries experienced a decline in output while a stable performance was registered in the manufacturing sector.

Bitter sugar
For the first half of the year sugar output was 81,864 tonnes, 1.8 per cent lower than the level at end June 2009 – the year of the turnaround plan – and represented 29.0 per cent of the 280,000 tonnes targeted for 2010. The Bank of Guyana explained that the adverse outturn was due to unfavourable weather conditions in the first quarter of the year which affected cane transport, replanting and irrigation of planted canes.

From an original 2010 target of 280,000 tonnes, the Minister of Finance has announced a revised target of 260,000 tonnes, which would confuse the GAWU members who are being told that their target is 264,000 tonnes. This is not the only confusion in the industry. While the Minister of Finance announces that “works continue on the turnaround plan which would see the realisation of increased acreage under cultivation and improvements in the cane to sugar ratio, the President is expressing fears about the future of the industry due to the failures of “a few individuals.”

Rice output was 168,267 tonnes, 4.6 per cent more than the corresponding 2009 level and represented 49.0 per cent of the 343,373 tonnes target for 2010. The improved performance has to be seen however against the significant amount of “government assistance,” a euphemism for subsidy to the sub-sector, to cushion the effects of the dry weather spell.

Bauxite, another industry that receives wide and valuable government support, saw a decline in its performance which helped to produce in the mining sector a 4.1 per cent decline in growth in real terms. The Bank of Guyana explains that the outcome reflected the decrease in bauxite and diamond output, due to the fall in demand and the “decline in motivated workers.” One cannot but help notice the contrasting attitude of the government to rice/sugar and bauxite, although the government would stoutly challenge any suggestion that ethnicity and politics play a part.

Gold and dollars
Gold again remains an outstanding contributor to the economy and but for its performance the real economy would more than likely have experienced negative growth. Yet, the government continues to hem and haw and dilly-dally on recognising that gold-mining is a key sector that warrants serious attention.

Total gold declarations increased by 8.1 per cent to 142,212 ounces and were 46.0 per cent of the 311,816 ounces targeted for the year. Gold remains by far the largest single export earner with export receipts amounting to US$146.7 million, 22.4 per cent or US$26.8 million more than the June 2009 level. The average export price per ounce increased by 26.3 per cent to US$1061.2 per ounce while export volume declined by 3.2 per cent to 138,242 ounces.

After a much-hyped improvement in the exchange rate of the Guyana Dollar to its US counterpart, the Guyana dollar, vis-à-vis the US dollar, depreciated by 0.25 per cent compared with an appreciation of 0.37 per cent at end-June 2009. According to the Bank of Guyana, the relative stability of the currency is supported by an adequate flow of foreign exchange to the market. It did not add however that the US Dollar itself has been depreciating against some major countries, so the comparison of the Guyana Dollar to the US Dollar is not an accurate measure.

A seemingly unrelated issue is the attraction to keep money in Guyana rather than converting and exporting it to another currency. Interest paid to holders of bank deposits decreased by 17.0 per cent in 2010, showing increases in domestic expenditure. This means that while depositors’ funds in the banking system are increasing their returns are decreasing. That cannot be good news either for the exchange rate or depositors, though it must be added that the extent of the decrease is quite surprising.

Other issues
The NIS also gets a mention by the Bank of Guyana but not the Minister under whose portfolio it falls. The National Insurance Scheme’s (NIS) receipts grew by 12.3 per cent to G$5,328 million as contributions rose by 9.7 per cent to G$4,633 million, and receipts from debtors grew by 91.3 per cent to G$437 million. While the decline in investment income by 10.8 per cent to G$259 million gets a mention, nothing has been said of the increased benefit payments and the status of the 2008 financial statements and annual report. These are languishing on the desk of the Minister of Finance and not being tabled in the National Assembly as the law requires, an indirect casualty of the Clico debacle.

And the debt spree continues as both domestic and external borrowings continue into the stratosphere. The stock of domestic and external public debt increased by 13.2 per cent (to G$94,760 million), and 12.1 per cent (to US$966 million), respectively from end-June 2009 level. The former is attributed to an increase in the issuance of treasury bills to sterilize excess liquidity, while the latter is due to disbursements from the IDB and bilateral credit delivered under the PetroCaribe Initiative. Both domestic and external debt services were higher on account of higher principal and interest payments.

External debt service increased by a substantial 80.4 per cent to US$12 million from its end-June 2009 level, made up of principal and interest payments amounting to US$6.4 million and US$5.8 million respectively.

The cost of carrying GuySuCo and other public sector entities while the government itself engages in some seriously costly and wasteful expenditure, is borne out by the overall cash deficit of Non-Financial Public Enterprises (NFPEs), including the Guyana Power & Light (GPL) and the NIS. This increased to G$5,026 million at end-June 2010 compared with a deficit of G$721 million in June 2009.

The result of these is that current operating cash balances of the NFPEs moved from a surplus of G$2,298 million to a deficit of G$2,097 million at end-June 2010. This decline was mainly due to a 26.7 per cent increase in expenditure which more than offset a 14.0 per cent growth in revenue.

That perhaps, even more than over-taxing the people of this country, is the story of the financial management of the public sector of Guyana in the first half of 2010.

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The challenge to Minister Singh and the Stats Bureau was for a rational explanation of the dramatic turnaround in the fourth quarter of 2009

I refer to my letter of July 4, 2010 in which I addressed the issues raised by Mr. Rajendra Rampersaud in a letter dated June 28, 2010 on the April 2010 Country Report by the Economist Intelligence Unit (EIU). In my letter I indicated that I would subsequently address the reaction of the Minister of Finance Dr. Ashni Singh to the same EIU Report. I now do so.

Let me first disclose my own long-standing relationship with the Minister who I first came to know shortly after he had completed his outstanding education at Queen’s College. He was too young to be registered as a student with the ACCA and his relatives approached me in my capacity as ACCA International Council Representative to intercede with the ACCA on his behalf for special dispensation. My efforts succeeded. When he qualified he asked me to recommend him for membership, a formality which I readily accepted. Our firm’s boardroom still proudly displays a photograph in which he features with Partner Robert McRae when the firm was awarded a recognition with an international body.

I was the only accountant to publicly acclaim his appointment as a Minister, something not even our national accounting body did. For a long time after that, I had, at his request, shared with him, both orally and in writing, my thoughts on issues of interest to his Ministry and our country. There was one request to which I could not accede and that apparently ended what had developed into what seemed to be a very healthy relationship with Ram & McRae and with me.

But notwithstanding his increasingly personal attacks against me the details of my exchanges with him shall remain private even as he makes the unfounded accusation of me as “a self-confessed partisan politician” (GINA release June 26, 2010), and as part of a “tiny cabal” disparaging every transformative Guyana project (MoF Press statement April 20, 2010).

Now to his attack on the EIU whose recent reports on Guyana Dr. Singh claims “paint a misinformed, distorted, warped, and totally inaccurate picture of economic developments in Guyana”, and was “misled and misinformed by one or two political aspirants and spokespersons who pose as independent correspondents and commentators.”

That aside, let us look at some of the issues the EIU April 2010 report on Guyana raised:

1. That Guyana’s operating environment is “characterised by poor infrastructural facilities, high taxes, rampant crime and corruption.” The evidence on each of these is so obvious and compelling that neither Dr. Singh nor the private sector disputes any of them. Surely they are aware of, if not actually suffer from, the daily blackouts despite the unjustifiably huge sums spent on GPL, the failure to keep the promise of tax reform while imposing VAT at an incorrect, inflated rate on several products and services not previously subject to any consumption tax. Lest they say yes, but what about the items that were subject to consumption tax at higher than 16%, I ask how then did the revenue neutral VAT and Excise Taxes produce excess revenues of 48%, much of it wasted in corruption and nepotism on a scale unprecedented in Guyana? As to the EIU’s statement about “rampant crime and corruption” nothing further needs to be said, as the minister well knows.

2. That “following severe contractions in production in the first three quarters of the year, to attain real GDP growth in 2009 would have required an incredibly strong growth rate in the October-December quarter …… Moreover, with import compression thought to have made a major contribution, the government’s GDP growth estimate for 2009 masks the weakness of the real economy.”

Why the ministerial vitriol and bombast in response to this? In 2008, half year growth was 3.8 per cent while in 2009 there was a decline of 1.4%, a cumulative turnaround of negative 5.2%. Full year growth in 2008 was 3.1%, representing a decline in the second half of the year, in stark contrast with 2009 when a decline over nine months was transformed into a huge positive not in six, but in three months. The Bank of Guyana data show that the poor performance continued into the third quarter, so the challenge to Dr. Singh and his independent but voiceless professionals in the Stats Bureau was for a rational explanation of the dramatic turnaround in the fourth quarter of 2009. That is all.

3. That there was “little evidence of what was driving growth during the second half.” Dr. Singh offers in response growth in rice, sugar and gold but does not tell us how sectors that account in total for 17% of GDP can account for a turnaround of 3.8% in six months over 100% of the economy.

He adds that “the [official] numbers are sourced from the sectors themselves and can be verified directly with those sectors,” and that it “is nothing short of absurd and dishonest to call into question these numbers.” It is Dr. Singh who is being absurd and dishonest by conflating production numbers into GDP figures. GDP is a value not a quantity and a 3% increase in production does not automatically translate into a 3% increase in value. Prices will simply be another variable in the GDP equation.

4. Dr. Singh’s anger becomes uncontrollable when the EIU report quotes from a 2009 Business Outlook Survey by Ram & McRae in which 60% of the respondents reported no confidence in the economy. The survey is described as “politically motivated, highly flawed, and designed to distort the facts and present a negative picture of Guyana under the current administration”, and the principal of the firm, (i.e. me) as “a self-confessed partisan politician”.

Dr. Singh has never, as far as I am aware, sought from any of the partners of the firm the methodology or software it uses in the Survey and did not have a problem with the Surveys in 2006 and 2007 when reported confidence in the economy was high. Those findings were then welcome and widely publicized in the state media. Nor was I “a self-confessed partisan politician” when I was asked by him and the President for assistance on certain matters; when his party asked for tax ideas on their 2006 Manifesto; or when I was visited at home by a high priced Presidential Advisor for consultations on a range of issues.

5. Further, Dr. Singh should be careful in impugning anyone’s integrity, professional or otherwise. His own situation where the wife of the Minister of Finance is the de facto head of the Audit Office is unique, a violation of all the tenets of professional independence, and an embarrassment to this country; he was complicit in the untruth perpetrated in the National Assembly over the $4 billion paid to GUYSUCO in 2009, participating in, and contributing to the devaluation of that august body; and complicit too about the error in the VAT rate that instead of consumers paying $12.1 billion in VAT in 2007, they actually paid $21.3 billion, that is more than 75% more! He was, we recall, also centrally involved in the unlawful concessions given to the Ramroop group. These occurrences and circumstances all speak for themselves, and require no elaboration from me.

But I will show faith in Dr. Singh and look forward to a higher standard of integrity and competence from him in, among other things: ensuring that public moneys are paid into the Consolidated Fund and not the Office of the President or special accounts; ensuring a strong, independent Audit Office; publishing of the mid-year report within the statutory deadline set in the Fiscal Management and Accountability Act; tabling in the National Assembly annual reports of state entities required by the Public Corporations Act; ensuring that NICIL, the Board of which he is Chairman, begins to operate within the law and its own constituent documents, including having its accounts audited and filed as the law requires; granting concessions under the Income Tax (In Aid of Industry) Act on an objective basis rather than on political grounds; and taking a stand on the high level of corruption that has engulfed public finance in the country.

I know he possesses the integrity to rise to the occasion. I am less confident about his courage. But hopefully he will reflect on the oath which he took on being appointed, and will recognise that more than at any time, Guyana needs from its Finance Minister this level of integrity and courage. While he struggles with these challenges, I also suggest the temperance and language befitting his position.

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These two ministers misled Parliament on the $4B request and should be taken to the Privileges Committee

I refer to the article titled, (Manning admits error on UNC land gift – SN March 16) that described a parliamentary incident in neighbouring Trinidad. I do this to draw attention to an example of the egregious misconduct practiced in the parliament of this very country. The Guyanese example reeks of misrepresentation and deception; of what has become the norm and that which should be found most intolerable.

In the SN article, which relied on original coverage in the Trinidad Express, it was reported that the T&T Prime Minister Manning expressed his regret in the Parliament for an earlier statement which, after subsequent enquiry, he found to be false. The report stated that if one gives false information to the Parliament, “it is the proper parliamentary thing to do, to return to the Parliament as soon as possible and correct the inaccuracy.” It goes without saying that this incident was characterised by standards and conduct of a truly higher calibre.

Just a few weeks ago, our own National Assembly was apparently deliberately misled by the Ministers of Finance and Housing concerning the specific matter of a payment of $4 billion to the state-owned GuySuCo. The occasion was the presentation of Bill No. 1 of 2010 on January 11, 2010, in which the Minister of Finance sought approval to pay [in the future] that sum of money into the Corporation, while the Minister of Housing, Mr. Irfan Ali, added to the deception of the timing of the payment when, in answer to a question by AFC MP Sheila Holder as to how soon he could spend the $4 billion, he replied, “we are ready.” Notwithstanding the title of the bill, Supplementary Appropriation (No. 3 of 2009) Bill 2010, the two ministers, through both submissions, pretended-and led the parliament to believe-that this payment to GuySuCo had not been effected, and that such payment was an event in the future.

I am now in possession of irrefutable evidence that when the Bill was presented by Dr. Singh for approval, and the supporting/corroborating statement was made by Mr. Ali, the money had already been paid to GuySuCo. Repeat: it had already been paid. Given the amount involved, the forum, the appropriation bill procedure, and the collusive ministerial effort, it appears that a crass subterfuge of the lowest order was perpetrated. It was where a known occurrence in the past was being capriciously parlayed as a future event; one requiring the attention and action of members of the highest body in the land; and one then unknowingly and inaccurately inscribed in the records.

There seems no doubt that the two ministers have committed a grave transgression for which they should be taken before the Privileges Committee of the National Assembly. In view of the evidence, there can be no reprieve or safe harbours of procedure, timing, semantics, misunderstanding, communication gap, or ignorance. The ministers knew what they knew, and very deliberately foisted what rises to the level of a blatant falsehood on the parliament.

To the detriment of this country, deception in public life has become unexceptional, and casual everyday, among our politicians; it is time that we start to root this out. In the circumstances, the acceptable options open are limited, unambiguous, and mandatory. The two ministers must: first, apologise to the parliament and the nation; and, second, immediately tender their resignations. Such mitigating actions would be decent and honourable. It is timely to recall that Dr. Singh is the person who persisted-and succeeded-in bringing his parliamentary colleague Ms. Deborah Backer before the Privileges Committee, for a statement she made about torture by members of the Guyana Defence Force.

In the interests of fairness and consistency, the two ministers should be subject to the same process.

I stand ready to participate in any truth finding procedure or inquiry.

And while I am committed to protecting the confidentiality of my source, I am prepared to present this evidence to the Speaker of the National Assembly, under the condition of credible commitments to information and source security. Still, the actions along the lines contemplated should not be left solely to a private citizen. It would be a most heartening development for parliament to activate forthwith available mechanisms to have this issue investigated as a matter of urgent, national importance.

Anything less would be a travesty; would pave the way for future misconduct; and could expose this deliberative body to further ridicule, and total irrelevancy.

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Estimates do not disclose total cost of overseas visits for Office of the President

In responding to concerns about the cost of presidential travel, Finance Minister Dr Ashni Singh is quoted as saying that “over the past three years, the average annual expenditure for the entire government on travel has been $200M.”

The 2010 Estimates which Dr Singh presented just three days ago has a head ‘Transport, Travel and Postage’ under which is a line item ‘Overseas Conferences and Official Visits.’ The Estimates disclose nil costs for the Office of the President, the Ministry of Foreign Affairs and indeed all the ministries, departments and regions, barring the Finance Ministry and the Guyana Defence Force. It is under these two budget agencies from which Dr Singh would have derived his $200 million figures. But it would have been helpful and reassuring if Dr Singh had indicated, at least for the Office of the President, the total cost of overseas visits for the period, the subject of concern and speculation.

Dr Singh should have explained whether that line item includes per diem allowances and other costs associated with overseas visits, and indicate if payment for any such trips is reflected under any other line item, or channelled through any other government agency or controlled entity. The entourage to witness the President receiving an honorary doctorate in Russia included Mr Winston Brassington, head of NICIL. Details that would indicate the propriety of the financial arrangements for that trip (which had some private elements to it), would help to dispel many of the public concerns and neutralise speculation.

The in-country costs of presidential visits are invariably met by the host country. Dr Singh should disclose whether Dr Jagdeo has been receiving per diem for such visits, and the amounts paid to him for the past three years.

Finally can Dr Singh please say whether he agrees with a response to an Audit Office 2003 query on overseas travel, that the “concerned official” (suspected to be the President) is exempted from clearing his travel advances. If the President is not exempted, can Dr Singh tell us the number and value of advances the President has outstanding.

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Budget 2010: Looking back

Introduction
The Minister of Finance has announced that he would be presenting the country’s National Budget tomorrow February 8, 2010. This can be considered early, given that the law allows him to present the budget by March 31 of each year, while providing him with the money to run the business of government until the budget is passed. The relative timeliness of the 2010 National Budget is commendable. It is, however, in obvious contrast with his annually late presentation of the mid-year report which goes way, way, beyond the two month deadline, even though as this column has consistently pointed out, the report is routinely misdated. Hopefully, the Minister will tell Parliament how his ministry finds it possible to present the full year accounts five weeks after the end of the year but needs about twenty weeks to present the half-year report.

It is a matter of speculation whether the timing of the budget presentation has anything to do with the education the government would have received about the constitution and the law on the public finances of the country during a recent debate on supplementary funds and the Contingencies Fund, or to pre-empt the publication of another damning audit report on the use and abuse of public funds.

Constitutional deprivation
The Minister has shown that, certainly in relation to the National Budget, he has no time for Article 13 of the constitution which requires that citizens and their organisations be provided with opportunities to participate in the management and decision-making processes of the state and, more specifically, “on those areas of decision-making that directly affect their well-being.” Let us see whether any organisation, trade union, the ubiquitous and loquacious Private Sector Commission, the Guyana Manufacturers’ Association, the multiplicity of Chambers of Commerce, the Consumers’ Association and other private sector bodies will make even a murmur on this constitutional deprivation. If the budget, the principal policy instrument affecting every citizen not incidentally or singly, but in almost every aspect of her/his life is not considered appropriate for, not only consultation on, but meaningful participation in, then Article 13 should be repealed by any constitutional means necessary. If it is so considered, then it is time that this disdain be ended and the constitutional rights of citizens, and the corresponding duty of the government and its ministers, be respected and observed.

Today’s Business Page, barring a few minor comments, will not attempt a preview of the 2010 budget, but instead look back at some of the main issues Ram & McRae had raised in their Focus on the 2009 Budget, and offer a preview of some of the issues which the firm will be raising in its review of the 2010 one. Having examined three budgets and speeches from this once promising Minister, witnessed his utter lack of imagination and his passion for long and expensive spending lists, and been overcome by the tedium of increasingly partisan political rhetoric, I no longer expect much from Dr Singh’s budget speeches. That prevents any disappointment and allows for pleasant surprises.

The state of statistics
One thing I will certainly hope for and that is that the Minister will put to rest the confusion he and the Bank of Guyana caused when, in their respective half-year reports, one was reporting growth in the economy while the other reported a decline – both using the same source, the Bureau of Statistics. It will be fascinating to see what the Minister announces as the 2009 growth (decline) and inflation rates to be, which no doubt will be attributed to the same Bureau of Statistics. In this regard, the Minister will be ahead of the bureau, which up to three days ago had posted on its website inflation data only to September 30. It would be unfortunate if, soon after the Minister announces his number, the information on the website is updated. If it were, that would do little for the integrity, independence and professionalism of the bureau. If we cannot rely on the quality and integrity of the official statistics or the competence of the Audit Office, it is near impossible to engage in any meaningful analysis of or discussion on the country’s economy or finances.

Flood and drought
Last year, the Minister of Agriculture Robert Persaud, responding to public disquiet over the delay in addressing the flood problem, announced that the government was treating the construction of a $3B Hope Relief Channel as “a priority,” a decision that met with dismay from a number of professionals who raised several questions, including the source of the technical study and advice on which the multibillion dollar investment was being made. Even though the country is now experiencing a drought, the debate on the budget should at least answer those questions. For if the critics are right, then not only will we have wasted three billion dollars, but we will have lost valuable time and done little to remove the danger of a recurrence.

Focus 2009 constructed what the firm referred to as the expectation gap – the difference between the growth rate set out in the Economic Recovery Programme – 4% – and the actual growth rate. The Guyana economy performed better than many of the more open economies which are only now recovering from some steep declines. The Minister would of course, be reluctant and disappointed to announce that for the first time under his stewardship, the economy recorded a decline, particularly after projecting growth in real GDP of 4.7%. The graph will be updated in Focus 2010.

Oversized government
Last year Focus examined the explosion of the size of government, including the huge increases in the number of ministries, corresponding with a large growth in the number of statutory bodies. Space constraints do not allow for the table presented last year showing how from eleven ministries in 1992, the number has increased by 50% in 2009, with many of the ministries now having two ministers, dozens of ex-ministers, scores of advisors, and hundreds of contract employees. Budget Focus will tabulate some of the more shocking cases of contract employees, noting that the concern is not about the concept, as much as about the numbers and who some of those advisors are.

We recalled last year that the 2003 budget speech had reported that an IDB-financed Public Service Modernisation Programme was expected to be concluded and the consultant’s final report would be used as input into the design of a major modernisation project. We recommended that the IDB financed report be tabled and considered in the National Assembly and its recommendations critically reviewed with a view to implementation. That recommendation was clearly ignored by the government which seems more concerned to provide jobs for members of the ruling party, and increasingly their children.

Meanwhile the obviously over-financed IDB, the EU and others, continue to make further billions available for the government to spend, sometimes in the most wasteful manner, even as large segments of the population live in poverty.

The regulatory environment
In regulatory matters, last year belonged to Clico – the insurance company that represented perhaps the worst case of regulatory failure this country has ever witnessed. Focus 2009 identified and discussed the level of effectiveness of the multiple regulatory bodies, with most of them not equipped with adequate in-house, full-time analytical skills or legal expertise, and each operating well below what can be considered a moderate level of effectiveness. It recommended the establishment of a Financial Services Commission (FSC) under which is brought the supervisory functions of the Bank of Guyana, Securities Council and the Office of the Commissioner of Insurance. It further recommended that the Financial Intelligence Unit be placed within the Bank of Guyana or under the FSC.

Despite the colossal failure of the Office of the Commissioner of Insurance, the only action taken by the government in 2009 was to bring that office under the Bank of Guyana, which itself was at fault in Clico’s collapse. One particular statement by that unit, responding to a press statement about Clico, signalled an unacceptably harsh tone from an otherwise moderate institution.

Meanwhile the policy-holders and depositors of Clico find themselves in legal limbo even as the Bank of Guyana holds more than three billion dollars in funds available to pay them.

Other issues
Some of the other issues addressed in Focus 2009 were sugar, about which we continued to hear much almost throughout the year, debt management which has continued its inexorable rise during 2009 and for which Ram & McRae has recommended a statutory borrowing cap. Focus 2009 touched too on tax reform which has assumed the status of an annual, obligatory promise. The GRA recently announced that it had substantially exceeded its 2009 collections budget, even as the hugely expensive and much touted TRIPS was cheated to the tune of more than $300 million. I doubt whether the Minister would even bother to mention this, the largest single cash fraud ever to have been perpetrated on a state institution in Guyana.

2010
Focus 2010 will revisit, as appropriate, some of these matters but will look at others as well. It will examine in some detail the serial violations of the constitutional and legal provisions governing receipts and expenditure, supplementary appropriations, and the Contingencies Fund. We will look as well at the abuse of the contracts to undermine the self-undermined Public Service Commission, the abuse of the Public Corporations Act to divert proceeds of privatisation from the Consolidated Fund to the politically controlled NICIL, whose executive head is Mr Winston Brassington himself at the centre of the QAII deal, and who secured funds from NIS and NBS for the Berbice Bridge Company.

We will touch too, the debate on the LCDS that was probably the biggest issue in 2009, the limitations, conflicts and performance of the Audit Office, the allocation and distribution of the national sports budget, and take another look at the Companies Act 1991, and the Deeds Registry.