Introduction
Today I conclude the review of the mid-year report for 2011, a statutorily required report under the Fiscal Management and Accountability Act 2003. In doing so I also draw attention and comparisons with the half-year report of the Bank of Guyana which while using the same data seems less inclined than the Minister of Finance to put a political spin on the numbers. Readers may find it of some interest that in this election year and with so much at stake, it is the first year since the Act was brought into force in 2004 that the mid-year report has been presented within the two-month deadline, hence the title of this column. Guyanese who have become quite cynical may not have been too surprised, given that the same treatment was accorded the Guyana Prize for Literature which was held this year after last being held around the time of the 2006 elections.
No wonder then there are many Guyanese who half seriously wish for annual national and regional elections simply for their practical benefits: the fixing of roads, clearing of garbage, completion and dispatch of pensions books to the living and the dead and the prompt announcement of a 5% Christmas gift to public servants under the unilateral collective labour agreement which the government has adopted for its employees. It would also mean that the Minister of Finance would not have to be misleading about the date of release of the mid-year report or the Bank of Guyana hold its hand on the truth.
I now turn to some of the other important indicators.
Balance of payments
The higher production of the major commodities referred to last week and coinciding with higher world market prices resulted in an expansion in export earnings in the first half of 2011 by 34.6 per cent to US$533.1 million. Earnings from sugar increased by 32.4 per cent to US$50.1 million, reflecting a 30.4 per cent increase in quantity shipped to 99,738 tonnes, while rice export earnings expanded by 35.1 per cent to US$92.6 million, mainly attributed to a 26.4 per cent increase in average export price to US$551.4 per tonne, coupled with a 6.8 per cent increase in export volume to 167,945 tonnes. Gold continued to benefit from prevailing conditions in the global marketplace, and the average export prices witnessed a 29.1 per cent increase to US$1,370.3 per ounce, contributing to a 56.4 per cent increase in export earnings to US$229.5 million in the first half of the year. In addition, the bauxite industry earned US$65.2 million, 15 per cent more than in the corresponding period in the previous year due to higher production levels at both bauxite operations, with export volume increasing to 864,570 tonnes compared to 620,776 tonnes.
These significant increases more than off-set the 25.7 per cent decline in the value of timber exports due to a decline in export volume as plywood operations ceased, coupled with a fall in other timber exports.
On the other side of the account, the value of the country’s merchandise imports expanded by 25.7 per cent to US$859.5 million. The main factors contributing to this were: a) a 51.9 per cent increase in the value of fuel and lubricants imported; and b) an increase of 15.8 per cent in other imports with capital and consumption goods increasing by 48.8 10 per cent and 9.7 per cent, respectively, while imported non-fuel intermediate goods contracted by 2.2 per cent.
The overall deficit in the balance of payments at the end of the first half of 2011 was described by the Minister of Finance as a “modest” US$19.6 million but sufficient to warrant a revision of the originally projected surplus for the full year from US$24.4 million to an overall deficit of US$36.1 million by the end of the year.
Net payment for services amounted to US$74.4 million from US$36.6 million for the corresponding period in 2010. The outturn was due to a 43.1 per cent or US$19.4 million increase in payments for non-factor services. This reflected higher payments for freight and travel, which increased by 27 per cent and 252 per cent, respectively.
On the financing side, the Bank of Guyana reported that net current transfers increased by 20.0 per cent to US$216.0 million. This improvement was due to higher inflows to the private sector in the form of other current transfers which increased by 204 per cent or US$68.6 million to US$102.3 million. The Bank reported receipts from bank accounts increasing by 299 per cent or US$72.7 million to US$97.1 million and that the main sources of outflows were workers’ remittances and remittances to bank accounts, which amounted to US$94.0 million and US$53.6 million, respectively.
The Minister of Finance reported an increase in foreign direct investment of 9.2%, concentrated mainly in the energy, telecommunications and mining sectors. However the Bank of Guyana records the nuanced position that short-term private capital recorded a higher net outflow of US$21 million from US$4.5 million for the corresponding period in June 2010. This outflow reflected a rise in foreign assets being accumulated by commercial banks during the reporting period.
Monetary developments
The banking sector saw deposits by private and public individuals and entities and non-bank financial institutions increasing during the review period by 7 per cent to $253.2 billion. Private sector deposits which accounted for 77.9 per cent of total resident deposits increased by 8 per cent compared to the 4.6 per cent expansion in the corresponding period in 2010, attributed to an 8.5 per cent increase in business deposits to $35.5 billion and a 7.9 per cent increase in individual customer deposits to $161.8 billion.
Private sector credit at end June 2011 amounted to $119.8 billion. The main sectors of increased lending were agriculture (20.3%), real estate mortgages (10.3%), distribution (9.4 %), other services (7%) and mining and quarry sector (4.7%). The public sector remained a net depositor of funds with the banking system at end June 2011.
Foreign exchange market transactions grew by 19.2 per cent to reach US$2,861.7 million. Transactions at the cambios and the Bank of Guyana grew by 23.5 per cent and 27.5 per cent, respectively. The Guyana dollar vis-à-vis the United States dollar retained its path of stability, depreciating marginally by 0.25 per cent.
Shocking employment numbers
A few days ago the Minister of Labour shocked the nation with the announcement that the country’s unemployment rate had fallen to 10.9% (he made sure it was not 11%) but nowhere did he say where he pulled those figures from, or what the last official rate was. Interestingly, there is no mention of such numbers in the reports by the Minister of Finance and the Bank of Guyana. Indeed the Bank of Guyana reported a downturn in employment within the central government of 1.67 per cent. Without stating its source the Bank of Guyana did however report that preliminary estimates indicated improvement in private sector employment especially in the growth sectors. The wholesale and retail, construction and other services sectors showed increased employment.
A few days later Barbados announced an unemployment rate of 12.4% which must have made the Minister blush that Guyana could be doing so well! And with all of this the registered number of employed and self-employed persons under the National Insurance Scheme stubbornly refuses to increase.
Inflation and falling medical cost
The Bank of Guyana reported that the year-to-date change in the Urban Consumer Price Index (CPI) for June 2011 is registered at 2.97 per cent. The Bank sought to explain this level of inflation as due to price increases in the food category and unstable fuel prices “occurring from conflicts in the Middle East.” It reported price increases in transport & communication, housing, footwear & repairs and miscellaneous goods & services, which rose by 10.1 per cent, 1.1 per cent, 1.9 per cent and 1.5 per cent, respectively. In addition, education and furniture recorded a small price rise of 0.9 per cent and 0.6 per cent, respectively. Amazingly, it reported that the price index for medical & personal care and clothing categories decreased by 14.5 per cent and 0.3 per cent, respectively during the review period.
Apart from the fact that the reports seem to find it convenient at times to speak of year-on-year indicators and at other times – as in the case of the rate of inflation – of year-to-date rates, the average member of the public would have to ask which planet the Bank of Guyana could be referring to that had a 14.5% decrease in the price index for medical and personal care.
Debt
There was a 7% increase in the country’s total external public debt, from US$1,042.7 million at the end of December 2010 to US$1,110.9 million. These arose from new disbursements of US$69.3 million from the IDB and Venezuela. External debt service payments totalled US$18.4 million compared to US$12.3 million for the same period in 2010, a 50% increase.
On the other hand, the Bank of Guyana shows the movement of the debt year on year, which reports that the stock of domestic and external public debt increased by 9.1 per cent and 15 per cent, respectively from end-June 2010 level. The level of domestic debt at June 30 2011 was $103,390 million making the country’s total debt well over $1.6 billion. The Minister of Finance clearly felt that he should disguise these numbers.
Fiscal position
The non-financial public sector registered a deficit of $149.6 million during the first half of 2011 with central government revenue for the first half of 2011 amounting to $61.5 billion, 12.8 per cent higher than in the corresponding period for 2010. Tax revenue collections for the period amounted to $57 billion, 11.4 per cent above 2010 collections. As a result of these developments, projected current revenue for 2011 has been revised upwards to $119.7 billion from $112 billion.
But the troubling side is with expenditure. In the first half of 2011, non-interest current expenditure amounted to $38.3 billion, an increase of 16.2 per cent. Already the Minister has been going to the National Assembly for supplementary funds to meet expenses for what could effectively be deemed vote-buying. On the capital side the Guyana Power and Light Inc continues along with GuySuCo to be major financial burdens with hardly any light visible at the end of the tunnel.
Conclusion
For all we know about the illegal and criminal economies and the attendant tax evasion and money-laundering, these matters receive no mention in either reports. Key indicators seem way out of line with reality, particularly with respect to certain components of the consumer price index and those relating to employment which admittedly came from Mr Nadir and not the Bank of Guyana or the Minister of Finance. But it is on the financing side that this will not be a good year. With continuing uncertainty about the receivability of the Norwegian funds the rest of the year will see increasing expenditure financed by a growing debt burden.