Focus on Guyana’s National Budget 2019 - Caribbean...

Focus on Guyana’s National Budget 2019

‘Every Man, Woman and Child in Guyana Must Become Oil-Minded’

Ram & McRae Chartered Accountants

Professional Services Firm

157 ‘C’ Waterloo North Cummingsburg

Georgetown

November 2018

Focus Guyana’s National Budget 2019 Copyright Notice: Focus on Guyana’s National Budget, © Copyright Ram & McRae 2019. The contents of this publication may be reproduced wholly or in part with due credit given to the Firm. Published by:

Ram & McRae Chartered Accountants Professional Services Firm 157 ‘C’ Waterloo Street, North Cummingsburg, Georgetown, GUYANA

Telephone: (592) 226 1072 / 226 1301 / 226 0322 Facsimile: (592) 225 4221 E-mail: [email protected] Website: www.ramandmcrae.com Facebook: bit.ly/ramandmcrae

Ram & McRae i November 2018 Chartered Accountants

Focus Guyana’s National Budget 2019

Contents Page

Section 1 About this Publication 1

Section 2 About Ram & McRae 2

Section 3 Pre-Budget Comments 4

Section 4 Introduction 6

Section 5 Highlights 8

Section 6 Review 2018 10

Section 7 Legislation 2018 17

Section 8 Unfinished Business 21

Section 9 2019 Policy Issues and Targets 22

Section 10 The Government of Guyana Financial Plan 2019 28

Section 11 Who Gets What in 2019 34

Section 12 2019 Budget Measures 40

Section 13 Commentary and Analysis 49

Upturning the VAT 50

The Curse of Corruption 53

Subverting Democracy and Dark Money 55

CCJ Judges and Decisions 57

Section 14 Conclusion 60

Section 15 Epilogue 61

Appendix A Legislation 2017/2018 (Acts, Regulations and Orders) 63

Appendix B Selected Socio – Economic Indicators 71

Appendix C Sectoral Performance 73

Ram & McRae ii November 2018 Chartered Accountants


Index of Tables and Charts Description Section Page

Ram & McRae Family Tree About Ram & McRae 2

Sectoral Gains and Losses Review 2018 10

Per Capita Gross Domestic Product “ 11

Public Debt: - Domestic “ 13

- External “ 13

Balance of Payments “ 14

Commercial banks: - Financial rates “ 14

- Liquidity “ 14

Principal & subsidiary legislation 2018 Legislation 18

Contribution to Gross Domestic Product by sector 2019 Policy Issues and Targets 24-25

Current Revenue by type Government of Guyana Financial Plan 2019 28

Internal Revenue “ 29

Expenditure Trends “ 29

Capital Revenue by type “ 30

Financial Operations of Central Government (Accounting classification) “ 33

Current Non-Interest Expenditure: By type of disbursing agency Who Gets What 2019 34

By Ministries / Departments “ 35-36

Total Expenditure by years “ 37

By Region “ 37

By Principal Law Enforcements “ 38

Budgeted Current Revenue for Petroleum Commentary and Analysis 52

Ram & McRae iii November 2018 Chartered Accountants


About this Publication

Focus on Guyana’s National Budget 2019 represents the twenty-ninth edition of this Ram & McRae annual publication which highlights, reviews and comments on the major issues surrounding and raised in the National Budget. The first Focus on Guyana’s National Budget was published in the year 1991. The publication was in memorandum format and consisted of nine pages. It has been published each year since that first publication and represents one of the longest continuous not-for-profit publications in Guyana. Each year, Budget Focus is circulated among politicians, the business community and the country representatives of international agencies operating in Guyana. But most importantly for us and the general public, is the wide circulation made possible by the publication, in the Stabroek News, of an abridged but comprehensive version of Focus. We thank Stabroek News for making this possible. The contents of this publication are not intended to take the place of the text of the Budget Speech, relevant law, or of a professional advisor. This analysis is prepared and distributed on the understanding that Ram & McRae is not engaged in rendering professional services to the reader. If financial or other expert assistance is required, please contact the Firm. Ram & McRae also offers the public a unique compilation of Guyana’s tax and business-related legislation (and advice thereon) including our Consolidated Tax Laws of Guyana, as at November 2017 and updated regularly (includes Income Tax, Corporation Tax, Property Tax, Capital Gains Tax, Tax, Income Tax (in Aid of Industry), Revenue Authority, Financial Administration and Audit, and Investment Acts, the double taxation treaties signed by Guyana). Other publications by the Firm, some of which are available on our website, are: Handbook on the Companies Act, Second Edition, 2017 Guyana Business Outlook Survey 1995-2010 (except 1998) Guyana Investors Information Package Focus on Guyana's National Budget 1991 – 2018 Value Added Tax and Excise Tax Handbook, Second Edition, 2017 (includes annotated copies of the

legislation) Annual Tax Planner 2018 Guide to Petroleum Operations in Guyana

Ram & McRae 1 November 2018 Chartered Accountants


About Ram & McRae Established in 1985, Ram & McRae has distinguished itself in the field of professional services. Our client focus, commitment to professionalism, and continuous search for excellence, are the sources of our unchallenged reputation among professional firms. We offer a wide range of services including audit and assurance, accounting, tax, payroll, corporate/legal, litigation support and other business support services. The Firm has secured a premier place in the provision of taxation and advisory services to local and international business operators. Our continuing relationship with international partners provides us with access to worldwide resources and ensures that our clients benefit from business ideas, opportunities and solutions that place them in leadership positions in their industry. Accēdō Inc., a service company of Ram & McRae, offers a wide range of Human Resources services to bring potential employees and employers in contact with each other. Christopher Ram & Associates, Attorneys-at-Law, a partnership company of Ram & McRae, is a law firm focused on providing a complete legal service to clients in core sectors. The firm advises businesses both locally and internationally.

Our partners Christopher L. Ram, FCCA, ACMA, ACIS, LLB, LEC, LLM (Oil & Gas) Chairman and founder of the firm with overall responsibility for quality assurance aspects of the engagement, Christopher has in excess of forty years of experience in senior positions in international auditing firms. He was Financial Consultant to a regional government for several years where he was integrally involved in Budget preparation and Chairman of the National Insurance Board. Christopher is also a practising Attorney-at-law with a masters in Oil and Gas Law. Robert V. McRae, CPA, BSc., FLMI Robert has more than thirty-five years of experience in the areas of audit, accounting and insurance in Guyana and the United States of America. Robert also practises as a Certified Public Accountant in New York. Rakesh V. Latchana, FCCA, CPA, CMA Rakesh, who is the Firm’s Managing Partner, has over twenty years of experience in audit and accounting and serves on the Technical Committees of the Institutes of Chartered Accountants of Guyana and the Caribbean. He is also a member of the SME Implementation Group of the International Accounting Standards Board. Acknowledgements The Partners of Ram & McRae are truly grateful to have been again afforded the opportunity to contribute to society through this publication. We sincerely thank those members of staff who worked so assiduously to produce this publication in such a short period of time. These persons include Chetram Singh, Melissa Ram, Shawn Roopnarine and Zameer Rasheed. Christopher Ram, Robert McRae and Rakesh Latchana November 30, 2018



The Ram & McRae Family Tree

Payroll & Accounting

Ram & McRae Chartered Accountants

Professional Services Firm

Accēdō Inc. Human Resource Solutions

Christopher Ram & Associates Attorneys-at-Law

Search and Recruitment

Business Proposals & Consultancy

Forensic Accounting &

Litigation Support

Corporate Services

Consultancy

Licensed Intellectual

Property Agent

Registration & Incorporation of

Companies

Compensation and Benefits

Conveyancing

Tax & Labour Laws

Advice

Consulting and Advisory Services

Audit & Assurance Services

Taxation & Tax Planning

Probate Training



Introduction Budget Speech 2019, the fourth presented by the current Administration, lasted approximately four and one half hours, testing the stamina not only of the Minister of Finance but the membership of the National Assembly and his audience. The Speech clearly did not lack details, at times sounding like passages from the Gazetteer, and in which the “procurement and installation of 100 LED street lamps” earned a mention. There is also too much evidence of simple reproduction of the 2018 Budget Speech which can inhibit originality and thinking. By his own admission, the Minister failed to comply with paragraph (f) of section 15 of the Fiscal Management and Accountability Act in relation to projected oil revenues. We also note the pattern of failure to comply with paragraph (e) of the same section in relation to explanation for major differences between budget and actual expenditure. Against what he stated was a continuing expanding international economy, the Minister projected domestic end-of-year real GDP growth of 3.4%, compared with an original budgeted growth rate of 3.8%. He announced growth in all the significant sectors of the economy, except sugar, projected to record a “severe contraction” of 25.2%, fishing - 1.9% and gold - 13.5%. See section Policy Issues and Targets for the projected growth rates in 2019. Total expenditure for for 2019 is $300.7 billion, making this the first Budget to cross that threshold, while total income is $248.6 billion, giving an overall deficit of $52.1 billion. The revised deficit for the preceding year 2018, was $41.3 billion. Once again, the Minister is proposing a raft of tax measures, some of which are reversals of earlier measures including VAT credits for electricity and water and the restoration of the gold and diamond miners Withholding Tax as a final tax. Other proposed tax measures deal with Income, Corporation, Property and Capital Gain Tax, VAT, Excise and Customs. These measures are addressed in greater detail in section Budget Measures on page… The Budget contains a number of provisions for people with disabilities and several measures for the employed and the self-employed but is silent on women and gender issues, single mothers, the unemployed, including the recently unemployed, the National Insurance Scheme and the Berbice Bridge which the Government took over earlier this month. These inevitably lead us to conclude, as we did last year, that this Administration does not seem to regard income and wealth inequality as serious issues and accordingly there is nothing in the Budget that could be considered a pro-poor step. The Budget seems to have been prepared along neoliberal lines, hopeful that the benefits of the business friendly measures will trickle down to the rest of the economy. Anyone familiar with the era with which the Washington Consensus is associated will know that all this does is foster inequality and breed dissatisfaction. Yet, the Minister appeared not only confident but comfortable that the business community would welcome the measures. On the other hand, it did not seem to faze him that the market vendor, the single mom and the unemployed and others who struggle at the lower rungs of the social ladder may view the Budget very differently. While the Minister should be congratulated for his stamina, the salient features of the budget are lost in minutiae. Of course, not everyone will have the benefit of the entire Speech but it is also true that not everyone will have the Minister’s stamina or share his passion for details.



Debate on the budget is scheduled to begin on Monday, 3rd December. This should allow for the passage of the Budget before the beginning of the new year, and the certainty which this brings to Budget Agencies and others. This is an impressive achievement that should be enshrined in law. A first inclusion in this publication is contained on page 61 Epilogue. It responds to a statement made by Ms. Volda Lawrence chairperson of the PNC/R, a cabinet member and the leading partner in the Coalition Government.



Pre-Budget Comments

The build up to Budget 2019 was dotted with a number of major events including local government elections, Government’s assumption of control of the Berbice Bridge, the President’s health and an opposition motion of “no confidence” in the Government of Guyana. Taking place three and a half years into the Government’s first term in office, the local government elections saw the two major groups in the APNU+AFC Coalition Government – the APNU and AFC - contesting separately and witnessing their combined support fall from a statistically and politically significant 41.8% in 2016 when they participated jointly in similar elections to 38% in 2018.

The Ministry of Finance conducted budget consultations with several private sector groups, including trade unions, from September 2018. The Private Sector Commission did not make any public statements but its Chairman Desmond Sears was quoted in a Department of Public Information (DPI) release as requesting “… before 2019, especially before oil production, a local content policy which would more or less set the stage for locals to participate.” The Guyana Manufacturing and Services Association presented a lengthy request list including reversal of Government’s policy on VAT, especially in relation to electricity and exports. Other areas covered included public procurement, hinterland road improvement and management, access to finance, and standards and regulations.

The bucket list for the Georgetown Chamber of Commerce included tax relief for a number of sectors, “more farm-to-market roads (in Regions Three and Five), tax relief on pesticides, crafting of a master plan for infrastructure development to improve the rural-urban divide, passage of e-commerce legislation, tax reform, local content legislation’s passage and modernised financial services’ legislation” according to a DPI release.

Among a number of tax measures to widen the tax net and bring relief to others as “taxes have eaten into workers income”, the Federation of Independent Trade Unions of Guyana called for support to the laid off sugar workers and their communities. The counterpart body, the Guyana Trades Union Congress (TUC), made a number of proposals on health care including the impact on the National Insurance Scheme, on whose Board the General Secretary of the TUC sits.

Once again, the opposition PPP/C did not participate in budget consultations with the Minister.

On budget day, the Stabroek News carried articles on the reduction of the President’s public engagements as he continues his cancer treatment, and a full page ad by the PPP/C calling on the Government to reverse some of the measures it introduced since coming into to Office (including five dealing with VAT), restore others including the annual one month tax-free salary bonus for the Disciplined Services, and to stop the depletion of international reserves and increased borrowings.

The Kaieteur News carried the same ad, and its Peeping Tom column identified five issues of concern: the Government’s high overdraft, the depletion of the country’s international reserves, measures to attract investments, oversized government and the $30 billion borrowed from the Commercial banks, most of which the editorial indicated is lying idle. The newspaper also headlined the Auditor General’s report on excessive spending by the Ministry of the Presidency on contract employees. The 2018 National Estimates set this number for 2017 at 495 persons on which $1.1 billion dollars was spent.

The press has also been highlighting some of the critical findings on the 2017 audit by the Auditor General, including lack of financial statements to verify spending from the lotto fund since 2015, contracts being executed by losing bidders, and monies unaccounted for under the State’s school feeding programme.



The Minister of Finance was also reported to have announced wages increases to public servants for future years. Since such a commitment has to be recommended in the form of an Appropriation Bill, the promise was seen as hopelessly conceived and improper.

The State owned Chronicle pegged the budget at close to $300 billion while the Minister himself would only comment on increased wages for public servants, increased pensions and increased public assistance. The Minister and long standing trade unionist Lincoln Lewis traded letters in the press on salary increases awarded to Ministers, subsidies for the elderly and bonuses for the disciplined forces. Elsewhere, the Minister continued to maintain – without providing any evidence - that the economy under the previous Administration was propped up by the drug trade and other “nefarious activities”. Ram & McRae once again sought through its internet-based pre-Budget survey to gauge expectations on thirteen items, satisfaction with nine measures presented in the 2018 budget and satisfaction on sixteen other items. Of 187 respondents, 143 persons completed the full Survey with an additional 40 completing the expectations section only. Of the respondents, 15.7% were self-employed while 70.7% were employed and 13.6% were unemployed. In terms of expectations, the top four expectations in order of priority were an increase in old age pensions and public assistance (4.36 out of 5), an increase in wages for public servants (4.25), an economic stimulus package (4.15), and fourth, and an increase in private sector minimum wage (4.13). For the self-employed, an economic stimulus package ranked highest. The 2018 budget measures with which there was the highest level of satisfaction were: removal of VAT on the provision of all educational services (4.15 out of 5), Amnesty for delinquent taxpayers from 1 January to 30 September 2018 (3.48), reduction of the deposit required to lodge an appeal in a tax matter (3.39), acceptance of draft management accounts for tax filing purposes (3.38), and reduction in the Tributor's Tax from 20 percent to 10 percent (3.29). Both self-employed and employed respondents ranked the removal of VAT on the provision of all educational services highest. The greatest area of dissatisfaction was with the increase in Old Age Pension from $19,000 to $19,500 and Public Assistance from $7,500 to $8,000 (2.3 out of 5) where 92 of 147 respondents expressed varying levels of dissatisfaction. Replacement of the current “2% of the gross proceeds” regime for royalties with a sliding scale percentage that is based on the price of gold (3.03), implementation of tax-free vacation allowance in the private sector (3.16), and acceptance of a bond or other form of guarantee to lodge an appeal in a tax matter (3.2) were the other lowest ranked items. Again, both the self-employed and employed respondents agreed on the lowest ranked item. In other matters, the top issues with which respondents expressed satisfaction were: improving infrastructure (2.81 out of 5), the handling of Berbice Bridge contract/rate increase (2.77) and acceptance of Venezuelan Economic Refugees (2.77). For the self-employed respondents, the acceptance of Venezuelan Economic Refugees ranked highest. Among the issues of dissatisfaction were: government’s working relationship with Georgetown City Council (1.64 out of 5) being the area of most concern, government’s handling of traditional industries (sugar, rice, gold) (1.74), handling of oil and gas industry (local content, contract disclosure (1.8), management of the economy (1.87) and handling crime (1.91). Both self-employed and employed respondents agreed on the lowest ranked item. In discussing Crime on Plain Talk - a one hour television discussion programme - one week before Budget Day, former Army Captain Jerry Gouveia called for a shifting of allocation from the Guyana Defence Force to the Police. Allocation to both these Budget Agencies are addressed in the Who Gets What section of this Focus.



Highlights In this section, we set out, without analysis or comments, the key takeaways from the Minister’s review of 2018 and his projections for 2019. For further elaboration of these, please see section 2019 Policy Issues and Targets on pages 22 to 27 and section Government of Guyana Financial Plan 2019 on pages 29 to 34. 2018 Growth in Real GDP of 3.4% compared with an initial target of 3.8%.

Inflation at a rate of 2.0% compared with an initial target of 2.4%.

The Central Bank rate of the Guyana Dollar to the US Dollar at October 2018 was $208.5 compared

with $206.5 in 2017, a change of $2 or 1%.

Average market commercial bank mid-rates for the US Dollar depreciated by 0.02% to $212.61 at September 2018.

Overall balance of payments deficit of US$180.7 million compared with US$69.5 million deficit in 2017, worsening by 160%.

Decrease in merchandise exports of US$45.2 million or 3.1% during 2018, to US$1.39 billion.

Merchandise imports are expected to increase by US$47.8 million or 2.9% during 2018, to US$1.69 billion.

Current account deficit of US$463.8 million, compared to a deficit of US$297.3 million in 2017; and a surplus of US$283.0 million in the capital account, compared to a surplus of US$228.0 million in 2017.

Current revenue of $216.9 billion compared with $195.1 billion in 2017, an increase of 11.2% and an increase of $15 billion or 7.4% from budget of $201.9 billion. Current expenditure of $213.1 billion, an increase of 22.9% over 2017.

Capital expenditure of $59 billion compared with budget of $58.6 billion.

Overall fiscal deficit of $52.16 billion compared with budgeted amount of $54.52 billion and $40.52

billion in 2017.

Gross external reserves of Bank of Guyana at the end of 2018 projected at US$477 million, a decrease from US$581.0 million in 2017, or 17.9%. This represents 2.5 months of import cover.

2019 Targets Growth in Real GDP of 4.6%.

Inflation of 2.5%.

A surplus of US$15.0 million on the Balance of Payments, a reversal from a deficit of US$180.7 million

in 2018, a turnaround of 108.3%.

Size of the Budget: $300.7Bn, 12.3% increase



Merchandise exports to increase by 4.12% or US$57.4 million to US$1.45 billion and imports to increase by 0.83% or US$14.1 million to US$1.71 billion.

Current account to register a contraction of the deficit of US$102.6 million to US$361.2 million. Capital account surplus of US$376.2 million compared with US$283.0 million for 2018.

Current revenue of $238.3 billion, an increase of 9.9%. Current expenditure of $291.0 billion, an

increase of 11.5%.

Capital expenditure of $69.3 billion.

Overall fiscal deficit of $52.2 billion to be financed by domestic borrowings (60%) and external borrowings (40%).



2018 Legislation The following Table shows by number the principal and subsidiary legislation passed between November 27, 2017 (Budget 2018) and November 26, 2018 (Budget 2019).

Type of Legislation Total Relevant to Business

Community Appendix Reference

Acts assented to 22 5 A1

Regulations issued 6 6 A2

Orders made 65 7 A3

The Acts and Regulations and Orders other than those made under the Public Corporations Act are set out in the Appendices. Ram & McRae’s comments The main types of Acts passed and assented to between the two Budget Days are:

• four directly relating to tax matters; • five each to appropriations from the Consolidated Fund and to the Bank of Guyana,

including the Deposit Insurance Act and the National Payments System Act; and • excluding the Deposit Insurance Act and the National Payments Systems Act, five new

legislation: Protected Disclosure; Witness Protection; Cybercrime; Juvenile Justice and Animal Welfare.

The Juvenile Justice Act was brought into operation on 10 October 2018 but none of the other new legislation have been brought into operation and there does not seem to be any financial provisions to make those Acts operable in 2019. On the other hand, the Tobacco Control Act No 17 of 2017 was brought into operation on 11 December 2017 while certain provisions of the Telecommunications Act were brought into operation on 19 January 2018. At long last the Judicial Review Act of 2010 was brought into operation from 31 July 2017 following a Court Order compelling the Attorney General to do so on an application by the former Attorney General Mr. Anil Nandlall. Also brought into operation, on 16 April 2018, were parts of the Insurance Act 2016 while the remaining parts will come into operation from 16 April 2019. Two critical Bills that have been languishing in the recesses of the National Assembly are the Constitutional Reform Consultative Commission Bill 2017, and the Petroleum Commission of Guyana Bill 2017 the future of which is now uncertain given the establishment of the Department of Energy. There were only five Regulations made during the period including the Insurance Regulations to facilitate the operations of the Insurance Act, the Fisheries Regulations establishing an ultra-modern scheme of regulatory obligations and oversight of the sector, requiring both operators’ and State resources for the successful operation of the Regulations.



Regulations 5 of 2018 published made on November 23, 2018 by the Minister of Finance under section 105 of the Income Tax Act seeks to exempt the payment of the retroactive increase in salaries to public servants from the payment of income tax. However, section 105 under which the Minister purported to act only allows for the remission of tax, not exemption which requires an Act of Parliament. Orders Over the period, between the last Budget and this one, there have been sixty five Orders made by various Ministers under various Acts almost fifty percent of which relate to disposals of minor properties by NICIL In view of the significant number of Orders, and to conserve on space, these are summarised in the following table and in the Appendix.

LEGISLATION UNDER WHICH ORDERS WERE MADE

Public Corporations

Revenue Oil and Gas

Mining Electoral Commencement Other Total

30 3 1 6 11 5 9 65 Order 40 of 2017 effected the amendment to Schedules I and II of the Value-Added Tax Act, Cap. 81:05. Notable amendments, some of which were effective 1 February 2017, include:

i) The zero-rating of a supply of electricity and water for consumption in the value of $10,000 and $1,500 and below per month respectively;

ii) The exempting of items used to obtain, generate and utilise electricity from renewable energy sources such as solar panels, water turbines, wind turbines, etc.;

iii) The exempting of supplies of locally produced plywood, logs and lumber of a type and quality used in construction;

iv) The exempting of private educational services; and v) The exempting of complete housing units costing less than $6.5 million and built by or

on the behalf of the Central Housing & Planning Authority. Order 44 of 2017 brought the Tobacco Control Act of 2017 into effect on 11 December 2017. The Act provides for the implementation of tobacco control policies in accordance with the World Health Organisation Framework Convention on Tobacco Control aimed at minimising the harmful consequences of tobacco use to users and non-users.

Order 45 of 2017 effected the transfers of all transported, leased and licenced movable and immovable property at GuySuCo’s Skeldon, Wales, Enmore and Rose Hall estates as well as all shares issued by GuySuCo to National Industrial and Commercial Investments Ltd. (NICIL).

Order 6 of 2018 appointed 16 April 2018 as the day on which sections of the Insurance Act 2016 came into operation.



Order 22 of 2018 provides for the payment of a monthly pension of $30,000 to Sister Mary Noel Menezes which took effect from 1 March 2018. This Order was made under the State Pensions Act.

Order 23 of 2018 repeals the State Pensions (Maximum Annual Rate) Order. The annual rate of a State Pension granted to any person under the Act shall not exceed three hundred and sixty thousand dollars.

Ram & McRae’s Comments

1. It appears that the Government pays huge sums to consultants to bring cut-and-paste legislation to Guyana that can never be fully operationalised since the competence and interest in the real work of enforcement is missing.

2. The total sum of supplementary funds voted by the National Assembly for the year 2018 amounted to $12,041 million or 5% of the budget approved by the National Assembly for the year. For the year 2017 supplementary provisions accounted for 4% of original budget.

3. Financial Paper #3 of 2018, passed under Act 20 of 2018, contained several appropriations which appear to violate section 30 of the Fiscal Management and Accountability Act – Expenditure Initiation and Commitment Control.

4. The decades-old practice of tabling tax measures with the Appropriation Act is being eroded and such measures take legislative form often weeks after the Budget, inhibiting a proper understanding and analysis, and not unusually, dissonance between the pronouncement and the subsequent legislation.

5. While the Deposit Insurance Corporation Act asserts its independence, its chairman is the ex officio Governor of the Bank of Guyana which also appoints three of its four directors. The Corporation will also have access to and the use the premises of the Bank of Guyana and be provided with the necessary technical and information technology facilities and staff seconded by the Bank.

6. Commercial banks are currently required to maintain a statutory reserve with the Bank of Guyana equivalent to an average of 12% of the savings and time deposits they hold. With no reference in the Deposit Insurance Act to the statutory reserve, it does appear that these financial institutions will be required to maintain such costly, non-interest bearing deposits while being required to pay half-yearly regular premiums and potentially extraordinary premiums as well.

7. The Central Bank’s principal objectives of domestic price stability and stable credit and exchange conditions, are being compromised by imposing on it responsibility for a range of other functions and responsibilities that are only tangential to those objectives. Focus had previously recommended the setting up of a separate Financial Services Commission.



8. With the exception of the Insurance Act which is a repeal and replacement measure, none of the new substantive Acts have been brought into force. The country’s legislative agenda, one of the most sacred sovereign powers, is being directed by foreign agents without any regard for the country’s human and technical resources capabilities, and whether some of the legislation are indeed relevant to the country. As a result, even if the National Payments System, the Witness Protection and the Animal Rights Commission legislation are brought into force, their effectiveness can hardly be guaranteed.

9. While the 1957 Fisheries Regulations were clearly outdated and were inconsistent with

international conservation obligations, its 2018 replacement is modern to the point of state-of-the-art. The question is whether Guyana has the capacity to implement and enforce it and whether its complexity offers any opportunities for graft and corruption.

10. Having made NICIL one of its targets when in Opposition, the APNU+AFC Government is still unable to decide on whether and in what form NICIL will continue to operate.

11. The Order vesting in NICIL all but three of the GuySuCo Estates left a number of important issues unresolved and have been a cause of friction between key Agencies of the Government. There is no indication that those issues are being actively resolved.



Review 2018 In this section, we summarise, review and comment on the economic and financial performance of the Government for the still incomplete 2018 year. We note that the Preface to Volume 1 of the Estimates offers some limited guidance on how the 2018 data is derived, stating that “revised 2018 figures reflect the latest projected expenditure of the fiscal year”. It would be helpful if readers are informed of the latest month of actual expenditure and whether the statement in the Preface applies to income as well. Economic Performance Against a global economy, which the Minister quotes the IMF Economic Outlook as expecting to remain steady in 2018, the Minister projects real GDP of the Guyana economy to grow by 4.6% in 2019. The Speech recounted that the original target for 2018 of 3.8% was revised downward to 3.4% after the first quarter, then revised to 3.7% after a 4.5% growth reported in the first half of the year. He now projects the full year growth to be 3.4%. Sectoral gains and losses announced by the Minister were as follows:

Please refer to Appendix C, Table 1.1 for Sectoral Performance constructed by Ram & McRae from Estimates of the Public Sector (Volume 1, Appendix I). Ram & McRae’s Comments: It has always been a cause for comment that when major sectors do well, the overall GDP growth is very positive but when they do badly, some of the harder-to-measure sectors always seem to compensate. In this regard, we discussed with persons engaged in those sectors, the growth rate of two sectors – Livestock and Construction. They expressed surprise at the reported growth. In fact, with respect to the livestock sector, our contact questioned the possibility of those numbers in the absence of any livestock data or survey. That person also indicated that given the natural factors involved, a 21.1% increase in one year would be extremely difficult to achieve. In the case of Construction, a major importer of cement, a key product used in Construction, reported that his Company’s import and sale of cement in 2018 has in fact fallen.

Industry Growth Decline

Other mining 46.6 Bauxite 26.3 Livestock 21.1 Other services 15.0 Construction 12.0 Wholesale and retail 6.2 Other crops 5.0 Manufacturing 0.9 Rice 0.2 Sugar 25.2Gold 13.5Fishing 1.9

%



While not directly relevant to this fiscal year, it is worth noting that the Statistical Bureau does not expect a single sector to record negative performance in 2019, a phenomenon that seldom arises, even in an economic bubble. Inflation Based on an Urban Consumer Price Index, the expected inflation rate for 2018 was 2.4%. This is now expected to be 2.0% for the full year. Comment: Regrettably, this number too seems understated in light of the significant collection of Value-Added Tax, a tax borne by consumers and therefore embedded in the cost of the goods and services they buy. To the suggestion that maybe the tax is absorbed by the business, the challenge will be in explaining why income taxes are not adversely affected. Similar to our comment on GDP Growth, a decline in prices for ‘footwear and repairs’ of 5.8% helped to counter the increases of 3.4% and 4.5% in food and clothing prices respectively.

Source: Annual Budget Speeches (2010 – 2018 percentages represents actual while 2019 is a forecast percentage) Per Capita GDP The 2018 per capita GDP, computed by dividing GDP by population, stands at US$4,121, compared with US$4,127 in 2018. By this measure, a nine year streak of annual increases was broken, albeit marginally.

Source: Appendix 1 to Annual Budget Speeches

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Real GDP Growth & Inflation Rate

Real GDP Growth Inflation Rate

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Per Capita GDP 2,358 2,619 2,868 3,148 3,248 3,594 3,741 4,096 4,127 4,121

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00

4,500.00

US

$

Year

Per Capita GDP in US$



At US$4,121, Guyana per capita GDP ranks at number 24 of the Latin America and Caribbean countries. Financial Performance In order to avoid a duplication of material in this Focus, we invite you to look at Appendix C for table 1.2 which forms the basis of the discussion that follows. Current Revenue for 2018 is projected at $216,871 million, exceeding budget by $15,012 million or 7%. Internal Revenue and Customs & Trade Administration receipts are expected to surpass their budgets by $7,413 million and $3,151 million respectively, while Value-Added and Excise taxes are expected to exceed budget by $7,556 million or 9%. In 2017, there was a shortfall of $3,983 million. More specifically, Corporation Taxes and Income Tax, which includes the self-employed, and other taxes, will exceed budget by $2,164 million or 5% and $3,990 million or 14% respectively. Value Added Tax (VAT), which was budgeted to bring in $43,165 million is expected to exceed that sum by $5,484 million or 13%, compared with a short fall in 2017 of $4,789 million. Collections of Excise Tax of $40,477 million will exceed budget by $2,071 million. The GRA is projected to collect $199.5 billion in withholding tax, excise tax, personal income tax and value added tax, an increase of $28.3 billion over 2017. Taxes from international trade transactions including import and export duties and travel taxes are projected to rise to $3.3 billion or 20.5% over the 2017 revenue. In explaining the collections, the Minister indicated that there were significant efficiency gains arising from the creation of a Large Taxpayers Department within the Guyana Revenue Authority. It should be noted that there was a limited Tax Amnesty for tax returns and payments of taxes submitted or made between January and September 2018, which the Minister announced brought in approximately $7 billion in revenues. An alternative explanation is that the Minister may not fully understand the implications and consequences of his proposed Budget measures or deliberately understates these. The Minister also announced that the Guyana Revenue Authority will grant remissions of about $73 billion, up from $49.2 billion in 2017, in relation to investments within the Petroleum sector. On the expenditure side, as almost always happens, Personal Emoluments and Other Goods and Services are projected to be in line with Budget, while transfer payments are expected to exceed budget by $5,132 million. Interest Expenditure for 2018 of $5,850 million is expected to be less than budget by $889 million or 13%. The current account balance in 2018 is projected at $17,609 million against a budget of $6,740 million, due in large measure to the higher levels of revenue and lower realised current expenditure. Capital Revenue and Grants are expected to be $11,933 million compared with budget of $10,719 million while Capital Expenditure is projected at $59,016 million, resulting in a statistically insignificant shortfall of $686 thousand, or 1%. While this suggests better capital projects execution, there is a disproportionately high percentage of the expenditure in the second half of the year as well as payments in advance not commensurate with the completion level of work done. Debt repayment is projected at $11,821 million which is $451 million less than budget.



The overall balance on financial operations for 2018 is expected to be $41,296 million compared with budget of $54,515 million. The overall balance is expected to be financed from external ($18,833 million) and domestic ($22,462 million) sources. Refer to Financial Operations of Central Government (Accounting Classification) on page 32 for amounts. The Global Economy The global economy is expected to grow by 3.7% for 2018. The Minister indicated that the Caribbean and Latin America region expects to slow marginally to 1.2% in 2018, from 1.3% in 2017. A significant risk to the regional economies is the unpredictable weather events such as those seen in 2017 with dire consequences to many of the countries. Domestic Debt The Minister announced that the stock of domestic debt is projected to decline from US$430.1 million in 2017 to US$386.8 million in 2018, or 10.1 percent. However, domestic debt service is expected to decrease by 28.7 percent, from US$10.9 million in 2017 to US$7.8 million in 2018, primarily due to the lower issuance of treasury bills and declining average discount rate. Domestic public debt for the past 10 years is shown below.

Source: Annual Budget Speeches The Domestic Debt includes only central government borrowing and therefore excludes any borrowings by public corporations and non-interest-bearing debt, such as the Special Issue of Government of Guyana Securities by the Bank of Guyana. External Debt The table below shows that over the period 2009 – 2018, the stock of public debt has been increasing after falling to a five-year low in 2015.

Source: BOG Statistics and Budget Speech – All shown at December 31. The increase in external debt payments was explained by the Minister as owing to higher principal and interest payments to several international agencies and one commercial bank. He reported that the cost of servicing the external debt is manageable with only 7 cents of every dollar earned by the government going towards debt servicing. Please see Ram & McRae comments #3 and 4 below. The net international reserves as at September 2018 was US$452.6 million a decrease of $127 million when compared to 2017 of US$579.5 million. Please see Ram & McRae comment #6 below. Balance of payments The balance of payments is projected to show a deficit of US$180.7 million in 2018, a substantial decrease of US$111.2 million compared to 2017 balance of a negative $69.5 million. The balance on the Current Account was a negative US$463.8 million, a significant increase of US$166.5 million or 56% over the 2017 balance of a

Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Domestic Public Debt G$Bn 87.0 100.5 104.9 93.5 98.8 78.4 81.7 90.7 89.3 80.6

Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018External Debt US$ Bn 0.933 1.043 1.206 1.359 1.246 1.216 1.143 1.162 1.241 1.297



negative US$297.3 million. The Balance on the Capital Account for 2018 amounted to US$283 million when compared to 2017 balance of US$228 million. In 2019, the capital account is projected to register growth to US$376.2 million reflecting an increase in capital inflows and foreign direct investment of US$148 million, or 65% when compared to 2017 actual.

Source: Estimates of the Public Sector (Vol. 1 Appendix V) Banking and Interest Rates Prime lending rate reflected a significant decrease of six basis points as of October 2018, while the 91-day Treasury bills and saving rates are likely to remain stable and is expected to continue trending lower towards the end of 2018 due to more competitive bidding practices and reflected excess liquidity and higher demand for treasury bills. The following table shows the movement of these rates for the past ten years.

Source: BOG Statistics Abstract taken up to September 2018 For a comment on these rates, please refer to Ram & McRae comments #5 below.

Balance of Payments Budget Revised Budget Actual Stated in US$ Mn 2019 2018 2018 2017

CURRENT ACCOUNT (361.2) (463.8) (292.6) (297.3) Merchandise trade (net) (256.4) (299.7) (226.2) (206.6) Services (net) (424.6) (453.4) (358.1) (372.3) Transfers 319.8 289.3 291.7 281.7

CAPITAL ACCOUNT 376.2 283.0 212.9 228.0 Capital Transfers 34.7 29.5 18.6 23.2 Non - financial public sector 42.2 54.0 33.0 43.9 Private capital 309.4 209.6 195.5 159.3 Short term capital (10.1) 10.0 (34.2) 1.6

Errors and Omissions - - - (0.3)

Overall balance 15.0 (180.7) (79.7) (69.5)

Financial Rates 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018T/Bill Rate - 91 days 4.18 3.78 2.35 1.45 1.45 1.67 1.92 1.68 1.54 1.54 Commercial Bank Prime Lending Rate 12.17 11.95 11.68 11.08 11.16 10.86 10.65 10.43 10.26 10.11 Small Savings Rate Average 2.78 2.67 1.99 1.69 1.33 1.26 1.26 1.26 1.11 1.04

Commercial Banks 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Total Deposits G$ Mn 214 248 274 316 340 339 356 374 366 396 Total Loans and advances G$ Mn 64 76 93 112 128 139 143 145 140 147 Liquid Assets - Surplus G$ Mn 35 53 51 60 56 36 40 42 39 41



Source: BOG Statistics Abstract taken up to September 2018 Total Deposits, Loans and Liquid Assets all experienced increases by 8%, 5% and 6% respectively when compared to 2017. The Exchange Rate The Central Bank exchange rate of the Guyana dollar to the US dollar remains the same when compared to 2018 but declines were seen in market rates. Average market commercial bank mid-rates for the US Dollar depreciated from December 2017 by a marginal 0.02% to $212.61 at September 2018. However, the average market commercial bank mid-rates for the Euro and Pound Sterling appreciated from December 2017 by 2.0% to $231.96 and by 0.34% to $271.80 respectively at September 2018. Ram & McRae Comments:

1. While the GRA must be commended for the impressive revenue collections, part of this in the case of Value-Added Tax, may be due to late or non-refunds due to businesses not being made in a timely manner, often placing strains on the cash flow of businesses and what the Minister referred to as angst among the business community.

2. There is also a concept in Public Finance known as taxable capacity and no doubt the Minister would

be mindful as greater and greater sums of tax revenue are required to finance public expenditure. Managing expenditure is as important in public financial management as tax collections and there is no inherent virtue in bigger and bigger budgets when those have to be financed by borrowings.

3. Both External and Domestic debt service is reported in Budget Speech in US$ which makes it somewhat difficult for the average reader or parliamentarian to relate them to the Estimates which are stated in G$.

4. The Minister in his speech referred only to external debt service in relation to current revenue, stating

it as 7 cents of every dollar of revenue. In fact, that figure is 5.45 cents while the combined total of external and domestic debt service as a percentage of current revenue is 8.15 cents.

5. Falling interest rates on loans are typically accompanied by falling savings rates as lending institutions

try to maintain their profitability. They can also signal a levelling off of borrowings in the economy and a fall in investments, a key driver of economic activity and job creation.

6. In spite of the Minister’s comment that reserves at the Bank of Guyana are required at an

internationally-acceptable level, the reserves are currently below the recommended minimum level of import cover of 3.0 months. At its current level of 2.5 months, the country is in negative territory.

7. Under supplementary appropriations in 2018, the Parliament approved for the GDF the sum of $484 million to supplement the sum of $213 million, for the acquisition of 4 aircraft.

8. Equally seriously, Parliament approved the sum of $788 million, in addition to an earlier sum of $300 million for payment of legal costs of burying the Border Controversy with Venezuela to the ICJ. It appears that Parliament had forgotten that the Minister of Finance had justified stashing away the ExxonMobil signing bonus on the grounds that the money was needed to finance the cost of that case.



The Minister had publicly stated that the signing bonus would have been transferred to the Consolidated Fund before any spending therefrom. This does not appear to have been included in the Estimates for 2018 or 2019.


The Focus Guyana’s National Budget 2018

Unfinished Business This section highlights key unresolved issues from high level pronouncements of earlier years. The pre-disposition of the Minister to engage in extensive details and leaving few policy matters to other Ministers necessarily requires a super-efficient and nimble implementation capacity or leaves an increasingly long list of unfinished business. At a broader level, the Minister seems to have left President Granger’s five pillars behind (2016 Budget Speech). We welcome the passing of several pieces of legislation which were hangover from earlier years. As seen in the previous section Legislation 2018, there were seven new and substantive legislation of which one was brought into operation. Still to be brought into effect are the Cyber Crime Act, Protected Disclosures Act, Witness Protection Act, National Payment System Act, Deposit Insurance Act and Animal Welfare Act. We note that in excess of twenty of initiatives announced in the 2018 Budget Speech, remain untouched. These include the Investigative Commission on Corruption, Law Revision and Reform, Draft Public Debt Management Bill, Justice Reform, Public Sector Investment Programme and Public Procurement, a National Agricultural census, development of a bond market and replacement of the Securities Industry Act. We reiterate those issues identified in Focus 2018, including the Return to Free Collective Bargaining, Campaign financing and Constitutional Reform which were fundamental policies of the Alliance For Change, a Number 2 in the Coalition Government. A number of these are indeed important but there ought to be some priority attaching to policies and their measures. It would be useful for Cabinet have someone to identify all these unfinished matters and appoint an Implementation Unit to address them in a systemic and orderly fashion.



2019 Policy Issues and Targets Introduction The theme of the 2019 Budget, the fourth of the APNU/AFC Coalition presented by Finance Minister Winston Jordan is “Transforming the Economy, Empowering People, Building Sustainable Communities” and occupied more than half of the Minister’s lengthy speech. Indeed, describing the Agenda as “elaborate”, the Speech identifies the Agenda of the Government, under ten headings. 1. Macroeconomic Stability:

i. Needing to maintain international reserves at an internationally acceptable level, a

stronger focus on developing the manufacturing sector and expanding exports to form critical element. See Ram & McRae’s comment 2 below.

ii. Rebasing the GDP and development of a fiscal framework based on revenues from the production of oil, growth of the economy to be separated between petroleum and non-petroleum. See Ram & McRae’s comments 3 and 4 below.

2. Green State Development:

i. Draft Green State Development Strategy (GSDS): Vision 2040 has been completed and will

guide national development policies for the next 20 years. See Ram & McRae’s comment 5 below.

ii. Use of the Natural Resource Fund Act to manage oil wealth and to secure a stable future and source of public revenue. Revenues to be channeled into productive public investments by designing and implementing a medium-term expenditure framework to support long term public spending priorities.

iii. Resource extraction to be guided by evidence-based, sustainability guidelines in

keeping with “green state” principles. See Ram & McRae’s comment 5 below.

iv. Modernising traditional sectors, stimulating expansion in high-growth sectors and developing new high value-adding sectors such as tourism, business process outsourcing and agro-processing.

v. Improved monitoring of the performance of key public institutions, reviewing outdated

business regulations and establishing clearer accountability systems.

vi. Transition to 100% renewable and cleaner energy sources; all infrastructure to be resilient to climate risks.

vii. Prioritising investment for expansive land, sea and air transport and

telecommunications networks across the country as well as in housing, sea defences, agriculture, water, sanitation and waste management.



viii. Government to lead the way in working and encouraging integrated approaches and embracing new ways of thinking, designing and doing routine tasks to achieve the Good Life.

3. Better Governance:

Some five areas identified: Constitutional Reform; Local Government; Judicial Reform and strengthening; Anti-Money Laundering and Social Cohesion.

4. Public Financial Management and Institutional Strengthening: Eight specific approaches identified which include: Revenue Management; Public Investment Management; Debt Management, Public Procurement, Results-based Budgeting and the adoption of International Public Sector Accounting Standards. See Ram & McRae’s comments 6, 7 and 8 below.

5. Business and Investment Confidently asserting that the APNU+AFC is the most business-friendly administration in recent history, the Minister acknowledged the role of small businesses in creating jobs and economic growth. See Ram & McRae’s comment 9 below.

6. Natural Heritage

7. Emerging and Transformative Sectors addressed under Knowledge Driven Government and Industries, Managing the Extractive Sector including petroleum, Tourism, Physical Infrastructure, Energy, Sustainable Communities, and Production Transformation and Agricultural Diversification.

8. National Security including territorial integrity.

9. Harnessing Human Capital, identifying seven areas including education, health, Youth, the

Elderly, Persons with Disabilities and Culture and Arts.

10. Hinterland Development

Targets Overall real growth is projected at 4.6% in 2019. The following graph presents the percentage of contribution to GDP at 2006 prices by various sectors:



Source: Estimates of the Public Sector The primary industry groups are addressed separately below. Construction is projected to record growth of 10.5% compared to 12.0% growth estimated in 2018. Transportation and Storage sector is projected to record growth of 3.5% in 2019. Agriculture, Fishing and Forestry The following graph presents percentage of growth expected over the period 2018 to 2019:

Source: Estimates of the Public Sector Sugar and rice are projected to grow by 10.2% and 2.7% respectively in 2019, while other crops are projected to grow by 4.0% and fishing by 1.9%. Mining and Quarrying The following graph presents the percentage of growth over the period 2012 to 2018 and the target percentage of growth for 2019:

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

2012 2013 2014 2015 2016 2017 2018 2019

Perc

enta

ge g

row

th

Year

Agriculture, Fishing andForestryMining and Quarrying

Wholesale and Retail Trade

Construction

Manufacturing

SugarRice

Other CropsLivestock

FishingForestry

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%Growth



Source: Estimates of the Public Sector

In the five years to 2018, Gold and Bauxite grew by 3.38% and 0.49% respectively, while the Other Mining and Quarrying sectors grew by 14.47%. Gold, Bauxite and Other Mining are projected to grow by 2.5%, 8.6% and 5.3% respectively, in 2019. Manufacturing The following graph presents the percentage of growth over the period 2012 to 2018 and the target percentage of growth for 2019:

Source: Estimates of the Public Sector Growth is projected at 4.0% for 2019 in Other Manufacturing and 10.2% for Sugar Manufacturing. Overall manufacturing is expected to increase by 3.9%.

(25.00)

(15.00)

(5.00)

5.00

15.00

25.00

35.00

45.00

55.00

2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9Perc

enta

ge G

row

th

Year

Bauxite

Other

Gold

(45.00)

(35.00)

(25.00)

(15.00)

(5.00)

5.00

15.00

25.00

35.00

45.00

2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9

Perc

enta

ge G

row

th

Year

Sugar

Other

Rice



Monetary Policy & Inflation The rate of inflation (Urban Consumer Price Index – Georgetown) for 2019 is projected at 2.5% compared to the projected rate for 2018 of 2.0%. See Ram & McRae’s comment 10 below. Balance of Payments Overall balance on the balance of payments is expected to reflect a surplus of US$15 million from a deficit of US$180.7 million in 2018. On the trade side, merchandise exports are expected to increase by 4.1% to US$1.5 billion, while merchandise imports are expected to increase by 0.8% to US$1.7 billion. The principal contribution to exports is gold accounting for US$0.8 billion, with bauxite, sugar and rice accounting for US$0.4 billion. The only identified item of imports is fuel of US$0.5 billion, while “Other” accounts for US$1.3 billion. Import of services is projected at US$424.6 million, and private transfers of US$319.8 million, resulting in a net deficit of US$361.2 million on the current account. See Ram & McRae’s comment 11 below. The capital account is projected to have a surplus of US$376.2 million in 2019 (US$283 million in 2018). A net inflow of US$351.6 million is expected from medium and long term capital while a net outflow of US$10.1 million is expected on short term capital. Ram & McRae’s comments

1. The policy targets are unduly specific and contribute to the long list of Unfinished Business identified in this Focus. In fact, many of the areas identified form part of the day-to-day functions and processes of any modern government while there is also significant overlap in between the 10 heads. The ultimate absurdity is that the procurement of 100 LED street lamps find their way in a Budget of $300,000 million!

2. The year 2018 sees a drastic decline in the international reserves from US$581 million to US$477 million, a matter of some concern but one which is not receiving any attention from the Government. A ballooning overdraft and increasing debt domestically coinciding with depleting reserves internationally is a recipe for trouble even with First Oil approaching.

3. Focus has been advocating for this for some time and therefore welcomes the move but cautions against its selective use and manipulation.

4. Astoundingly, the Minister admits that the Medium Projections contained in Volume 2 of the

Estimates do not include any projections for oil revenue, raising the question whether his Ministry has engaged with the Department of Energy or made its own independent calculations. This is not a matter of choice but of law.

5. There is no indication of the process and time frame for concluding this important policy document or making it available to the public.

6. The Administration has implicitly contracted out the petroleum depletion policy to Exxon and its partners under a Petroleum Agreement that allows exclusive decision-making by the oil companies.



7. It is probably intentional that the Minister did not set any timeframe for the commencement and conclusion of the process and that he was careful to assign responsibility to the Prime Minister.

8. Seems that the Minister is underestimating what Public Sector Accounting Standards require for their execution and that only a handful of countries in the world that have applied them in full.

9. Despite the exhaustive agenda identified by the Minister, there is no place for the poor, the unemployed and the marginalised whose interest will lie in trickledown economics.

10. Both the 2018 inflation rate and the projection for 2019 are surprising. The Government’s inexorable reversal of the fundamental principles of VAT taking an endless stream of products out of VAT means that we have returned to the cascading effect of the Consumption Tax and consequential impact on prices. Closer examination of the Urban Consumer Price Index shows food and clothing increasing by 3.4% and 4.5% respectively while footwear and repairs decreased by 5.8%!

11. Our exports are still heavily based on our traditional sectors, while fuel and lubricants is a key component of imports. It is unfortunate that of imports, 75% are stated under the heading ‘Other’.



The Government of Guyana Financial Plan 2019 The Government's projected Financial Plan for 2019 is summarised on page ___of this Publication. The current balance projects a surplus of $19,017 million, an increase of $1,408 million or 8% over revised 2018. Current revenue of $238,322 million represents an increase of $21,452 million over the latest estimate for 2018 of $216,871 million (9.9%). Budgeted current expenditure is $213,101 million, an increase of $19,690 million (10.2%) while Interest Expenditure is budgeted at $6,204 million, an increase of $353 million (6%) giving a Current Balance of $19,017 million compared with latest estimates for 2018 of $17,609 million. Capital Revenue and Grants are budgeted at $10,240 million compared with $11,933 million for 2018. Budgeted Capital Expenditure is $69,279 million which is some $10,263 million over 2018. After Debt Repayment of $12,135 million, an overall deficit of $52,156 million is projected, compared with a deficit of $41,296 million in 2018, 39% of which is expected to be financed by borrowings from external sources and 61% from domestic sources. Of the current expenditure, personal emoluments account for approximately 33%. Debt service as a percentage of current revenue is projected at 7.7% in 2019, down from 8.1% in 2018. The main elements of the 2019 Plan are: Total current revenues are projected to increase by $21,452 million to $238,323 million or by 9.9%. Of this, the Guyana Revenue Authority is expected to account for revenues of $223,583 million or 93.8% of total revenue, an increase of $24,092 million or 12.1% when compared to 2018. Not only does increasing tax revenues appear to be a major policy objective of the Government but instead of using the increases to reduce the Budget deficit, the Government chooses to incur sometimes extravagant and avoidable expenditure. As a result, 2019 will see a widening of the deficit from $41,300 million to $52,156 million. With more than $7,000 million of 2018 revenues deriving from the concluded Tax Amnesty, it means that the Government is budgeting to increase tax revenues in 2019 by some $31,000 million, all by way of taxes. The only item for which a reduction is budgeted is Other.

Current revenue by type Source: National Estimates (G$ Millions) Of the GRA’s collections, Internal Revenue is projected to account for $99,024 million compared with $87,850 million in 2018, a 13% increase, while Value-Added and Excise Taxes are expected to earn $99,669 million

2,000

27,000

52,000

77,000

102,000

127,000

152,000

Actual 2017 Revised 2018 Budgeted 2019

Customs and Trade Taxes

Value Added and ExciseTaxes

Internal Revenue

Dividends, Other Taxes,StampDuties, Fines, Fees, etc.



compared to $89,126 million in 2018, an increase of 11.8%. Collections by the Customs and Trade Administration are anticipated to be $24,890 million, an increase of $2,374 million or 10.5%.

Analysis of Internal Revenue by type of taxpayer

Source: Estimates of the Public Sector, Volume 1. All amounts shown are actual except 2016 and 2018 being revised and 2019 being budgeted (G$ Millions) Total current non-interest expenditure is projected to increase by $19,690 million from $193,412 million in 2018 to $213,102 million for 2019. Personal emoluments of $70,151 million represent an increase of 19% or $11,213 million over the revised figures for 2018. As a percentage of current non-interest expenditure, personnel emoluments account for 33%, Other Goods and Services 28% and Transfer Payments 39%. Transfer payments are payments from the Government to individuals, organisations or other levels of Government made with the specific objective of furthering Government policy or programme delivery and for which the Government does not receive directly any goods or services.

Expense trends from 2010 to 2019

Source: Estimates of the Public Sector, Volume 1. All amounts shown as actual except 2018 and 2019 being revised and budgeted respectively (G$ Millions)

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2010 -Actual

2011 -Actual

2012 -Actual

2013 -Actual

2014 -Actual

2015 -Actual

2016 -Revised

2017 -Actual

2018 -Revised

2019 -Budgeted

Total

Companies

Personal

Self-Employed

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Current Non-InterestExpenditure

CapitalExpenditure

InterestExpenditure



Capital revenue and grants in 2019 are projected to decrease by 14.2% or $1,692 million to $10,240 million of which Project and Programme funds are projected to increase by $532 million or 5.5%, whereas HIPC and MDRI will not contribute in 2019.

Analysis of capital revenue by type

Source: National Estimates (G$ Millions) Capital expenditure of $69,279 million represents a projected increase of $10,263 million or 17.4% over revised 2018 of $59,016 million. The top five ministries in terms of capital expenditure are:

1. Ministry of Public Infrastructure; 2. Ministry of Finance; 3. Ministry of Agriculture; 4. Ministry of the Presidency; 5. Ministry of Public Telecommunications;

Significant Capital Expenditure of more than $1,000 million are as follows: Ministry of Public Infrastructure

• $3,600 million provision for institutional strengthening and upgrading of electrification system – financed by IDB/EU/IsDB,

• $2,229 million provision for studies and construction of by-pass road – financed by INDIA for East Bank,

• $2,200 million for upgrading of highway – financed by CHINA for Highway Improvement East Coast Demerara,

• $2,000 million for the rehabilitation of Hinterland roads and payment of retention, • $1,955 million for completion, construction and rehabilitation of roads and drains in various

communities and payment of retention, • $1,950 million for reconstruction and rehabilitation of sea defences, • $1,800 million for provision for rehabilitation of Sheriff-Mandela Road – financed by IDB, • $1,400 million for the completion, construction and rehabilitation of sea and river defences and

payment of retention, • $1,130 million for provision for modernisation of Airport and payment of retention under the CJIA

Modernisation Project and,

- 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Actual 2017

Revised 2018

Budgeted 2019

MiscellaneousCapital Revenue

External Grants

External Loans



Ministry of Finance • $1,400 million for the provision for Low Carbon Development Initiatives – financed by Norway, • $1,257 million for the provision of buildings, software, vehicles, furniture and equipment for the

Guyana Revenue Authority;

Ministry of Agriculture • $2,086 million for completion, construction and rehabilitation of drainage and irrigation structures,

pump stations and payment retention;

We draw attention to spending on the Ministry of Presidency • $713.6 million for the provision of furniture and equipment under Citizenship and Immigration

Services, • $659 million for the provision of sport facilities for National Sports Commission, • $350 million for provision for Jubilee Republic initiatives under Social Cohesion, • $200 million for the provision for institutional support for oil and gas sector IDA/IDB under the Oil

and Gas Sector Development Programme, • $163 million for the provision for upgrade of geodetic infrastructure survey and electrical works

under Lands and Surveys, • $150 million for the provision for management of selected protected areas – financed by Germany, • $95 million for the provision for developmental, humanitarian and other activities, • $57.8 million represents provision for buildings, security hut, lights, ceiling and windows for the

Office and Residence of the President;

Ministry of Public Telecommunications • $2,040 million is for the provision for National Broadband Project – financed by CHINA under the

National Broad band Project. Major funding sources are China, India, the IDB, Japan and IDA. While the Ministry of Finance has shown a penchant for the Islamic Development Bank, this lending is still minor compared with the traditional sources. Please see section Who Gets What in 2019 for the allocation of current and capital expenditures by ministries and departments. Interest expenditure is projected to increase by 6% or $353 million to $6,204 million. Domestic interest is projected to decrease by $275.2 million or 21%, while interest on external debt is projected to increase by $628 million or 14%. The average rate of interest paid in 2018 on domestic debt is 1.57% while on external debt the average rate is 1.72%. The principal element of debt repayments is projected at $12,135 million (2018: $11,821 million), made up of domestic debt repayments of a projected $280 million (2018: $280 million), while external debt repayments are projected to increase to $11,855 million (2018: $11,541 million). The projected overall deficit of $52,156 million is expected to be financed by external borrowings of $20,493 million and from domestic sources of $31,663 million. Ram & McRae’s Comments 1. The trend of major deficit financing continues with deficits over the period 2015 actual to 2019 budgeted

as follows: 2015 - $24 billion, 2016 - $38 billion, 2017 - $42.4 billion, 2018 – $54.5 billion and 2019 $52.2 billion - a total of $211 billion. A major contributor is in respect of personnel emoluments and the absence



of any efficiency oversight by this Administration. This omission, or strategy is inadvisable and unsustainable.

2. Personal emoluments have increased from $44,661 million in 2015 exponentially to a projected $70,151 million in 2019, an increase of 57% or $25,489 million. This is a staggering increase particularly having regard to low inflation undermined by this perpetuation of borrowing. In 2010, personal emoluments totalled $28,367 million or 26.3% of current revenue.

3. The danger of deficit financing is that all things being equal, oil revenues for the early years after First oil will simply go to bridging the deficit and little left for investments and savings.

4. Included in pension costs is an amount of $3,875 million for Pension increases or 20.5% of the total pensions and social assistance budget. Given the modest salary increases announced by the Minister, this provision requires considerably more explanation.

5. With taxes increasing at a much faster rate than the growth of production sector, the oxygen is being depleted from the economy. This is not a good strategy for preventing the Dutch Disease.



Financial Operations of Central Government (Accounting Classification)

Source: Estimates of the Public Sector 2015 to 2019 (G$ millions)

Budget Revised Budget Actual Actual Actual Actual 2019 2018 2018 2017 2016 2015 2014

CURRENT REVENUE 238,322.7 216,871.2 201,859.9 195,060.3 177,322.0 161,710.2 145,725.8 1.1 Guyana Revenue Authority 223,582.9 199,490.7 181,370.9 171,150.0 151,745.5 142,896.3 135,889.7 1.1.1 Internal Revenue 99,024.4 87,849.7 80,437.2 76,245.5 67,197.2 60,933.2 56,725.4 1.1.2 Customs & Trade 24,889.5 22,515.2 19,363.9 18,890.0 16,382.0 13,156.3 13,454.8 1.1.3 Value Added and Excise Taxes 99,669.0 89,125.9 81,569.9 76,014.0 67,507.0 68,806.8 65,709.5 1.2 Other 14,739.8 17,380.6 20,489.0 23,910.3 25,576.5 18,813.0 9,836.1

CURRENT EXPENDITURE 213,101.8 193,411.8 188,379.5 173,373.3 163,425.0 141,152.2 127,494.1 2.1 Personal Emoluments 70,151.1 58,938.4 58,952.4 54,444.2 49,360.5 44,661.7 42,305.6 2.2 Other Goods and Services 59,843.0 52,599.5 52,685.2 49,236.0 46,800.6 43,175.9 40,106.2 2.3 Transfer Payments 83,107.7 81,873.9 76,741.9 69,693.0 67,263.9 53,314.5 45,082.2

INTEREST EXPENDITURE 6,203.5 5,850.5 6,739.7 6,171.5 5,483.2 5,225.2 4,739.1 3.1 Internal 1,057.3 1,332.5 1,422.2 1,970.3 1,884.8 1,716.5 1,544.9 3.2 External (Cash) 5,146.2 4,518.0 5,317.5 4,201.2 3,598.4 3,508.8 3,194.2

CURRENT BALANCE 19,017.4 17,609.0 6,740.7 15,515.5 8,413.8 15,332.8 13,492.6

CAPITAL REVENUE & GRANTS 10,240.4 11,932.7 10,718.8 11,235.5 6,909.3 6,329.2 3,275.9 5.1 Grants 10,236.4 11,931.4 10,711.8 11,218.5 6,892.4 5,329.2 3,275.9 5.1.1 HIPC & MDRI - 2,227.0 1,484.7 742.3 1,484.7 1,484.7 2,364.2 5.1.2 Project and Programme 10,236.4 9,704.4 9,227.1 10,476.2 5,407.8 3,844.5 911.7 5.2 Other (inc. Sale of Assets) 4.0 1.3 7.0 17.0 16.9 1,000.0 -

CAPITAL EXPENDITURE 69,278.6 59,016.1 59,702.4 58,618.3 46,618.1 30,664.9 51,013.6

DEBT REPAYMENT 12,135.2 11,821.0 12,272.1 8,656.8 6,750.0 15,038.8 29,000.7 7.1 Internal 280.2 279.9 279.9 279.6 35.5 35.5 35.5 7.2 External (Cash) 11,855.0 11,541.1 11,992.3 8,377.2 6,714.5 15,003.4 28,965.2

OVERALL BALANCE (52,155.9) (41,295.5) (54,515.1) (40,524.1) (38,044.9) (24,041.7) (63,245.8)

TOTAL FINANCING 52,155.9 41,295.5 54,515.1 40,524.1 38,044.9 24,041.7 63,245.8 9.1 External 20,492.9 18,833.4 21,103.3 17,286.1 12,824.7 14,710.8 36,752.3 9.2 Domestic 31,663.0 22,462.0 33,411.7 2,328.0 25,220.2 9,330.9 26,493.5

Total Domestic and External DebtService as a % of Current Revenues 7.7 8.1 9.4 7.6 6.9 12.5 23.2

Particulars



Who Gets What in 2019

Analysis of expenditure

Source: National Estimates Introduction Properly executed, the Policies and Targets are reflected in the allocation of available funds via the various Ministries and other Budget Agencies. Most times execution is done directly, but at other times, via subventions and contributions to other entities. Expenditure in the National Budget is incurred under a number of categories. These are: statutory payments which are direct charges on the Consolidated Fund, including allocations for constitutional bodies and offices and public debt payments of interest and principal; Ministries; Departments and Regions; and Statutory bodies. Expenditure is further divided between Current Revenue and Current Expenditure, Interest, Capital Revenue and Grants, Capital Expenditure and Debt Repayment. In this section, we look at the allocations to the principal Budget Agencies largely by examining the details contained in Volume 1 of the National Estimates.

In this section, Focus looks at the current and capital expenditure by the type of agency. The chart above shows the allocations with “Others”, representing Commissions, the judiciary and the Defence Force.

Central Government's non-interest current expenditure (employment costs, statutory expenditure and other charges) for the year is budgeted at $213.1 billion which is 10% more than the revised 2018. The Ministries/ Departments with the most significant allocations and the largest changes between 2018 and 2019 are:

- 50,000

100,000 150,000 200,000 250,000 300,000

Actual2017

Revised2018

Budget2019

Capital expenditure 58,618 59,016 69,279Subsidies & Contributions 36,300 43,965 38,262Regions 31,087 33,988 39,322Others 17,162 18,489 23,323Ministries 88,824 96,970 112,195

G$

Mill

ions



Ministries/Departments Budget 2019 Revised 2018 Budget 2018 % Inc./ (Dec.)

G$Mn %* G$Mn %* G$Mn %* Ministry of Finance 30,965 14.5 23,790 12.3 23,866 12.7 30.2 Ministry of Public Health 22,051 10.3 20,783 10.7 20,947 11.1 6.1 Ministry of Education 18,070 8.5 16,636 8.6 17,116 9.1 8.6 Ministry of Social Protection 17,737 8.3 16,539 8.6 16,587 8.8 7.2 Ministry of Public Security 17,778 8.3 15,400 8.0 15,557 8.3 15.4 Ministry of Agriculture 9,702 4.6 17,821 9.2 12,256 6.5 (45.6) Guyana Defence Force 12,977 6.1 11,513 6.0 11,513 6.1 12.7

Ministry of Presidency 9,061 4.3

7,745 4.0

8,480 4.5 17.0

Ministry of Public Infrastructure 8,710 4.1 7,831 4.0 7,879 4.2 11.2 Ministry of Foreign Affairs 6,303 3.0 5,849 3.0 5,089 2.7 7.8 Others including regions 59,748 28.0 49,505 25.6 49,089 26.1 20.7 Total 213,102 100.0 193,412 100.0 188,380 100.0 10.2 * Percentage of total current non-interest expenditure Source: Budget Estimates, Volume 1, Table 6. Ram & McRae’s Comments While the Ministry of Finance consistently ranks at or near the top, the expenditure is not all incurred within the Ministry. For 2019, it includes payments for GRA of $6.8 billion (2018: $6 billion); other subsidies and contributions of $1.5 billion (2018: $1.4 billion); “other employment costs” which includes provisions for public service salary increases of $11.6 billion (2018: $6.2 billion) and pension increases of $3.8 billion (2018: $3.3 billion). The significant provisions for salary increases was the primary driving factor for the 30.2% increase in the ministry’s budget and represent approximately 19% of the current budgeted employment cost. The Ministry of Public Security, comprising the Police Force, Prison Service, Police Complaints Authority, Fire Service and Customs Anti-Narcotics Unit, is allocated $11.5 billion for employment cost, representing 65% of the Ministry’s 2019 Current Budget. As with the Ministry of Finance, salary increases remain the driving factor for the increase in the ministry’s budget and to a lesser extent overhead expenses and other operating expenses. The allocation for the Ministry of Agriculture of $9.7 billion represents a decline of $8.1 billion compared to the revised 2018 allocation, attributable to the non-recurrence of severance payments for GuySuCo which was affected by appropriations in 2018. The major subvention for 2019 is to be made to the National Drainage & Irrigation Authority amounting to $5.5 billion, an increase of $1.9 billion or 58%, reflecting the additional work taken over from GuySuCo which had previously handled drainage and irrigation in the communities surrounding the closed estates. Current expenditure allocation for the Guyana Defence Force is $12.9 billion, up from $11.5 billion in 2018. Between 2014 and 2019 total expenditure on the Army would have risen from $7.4 billion to $12.9 billion, placing the Army at #6 of the 40 Budget Agencies, higher than the allocation for the Ministry of Agriculture and for each of the ten Administrative Regions.



Proposed expenditure of $9.1 billion for the Ministry of the Presidency - a super-ministry with a massive ten Programmes including Defence, Citizenship, Social Cohesion, Energy, Environment, Culture, Youth and Sport - represents a 17% increase over actual 2018. For the newly created Department of Energy within the Ministry, the budget allocation is $424 million. By comparison, the Office of the Prime Minister which according to the APNU+AFC Manifesto should have seen a rebalancing of the powers and responsibilities of the President and the Prime Minister has a single programme, described as the Prime Minister’s Secretariat. Capital Expenditure Central Government's capital expenditure for the year is budgeted at $69.2 billion which is 17% above the revised 2018 and 24% of total 2019 expenditure. The Ministries/Departments with the most significant capital expenditure allocations are:

Ministries/Departments Budget 2019 Latest Estimates 2018 Budget 2018 % change 2017-2018

G$Mn %* G$Mn %* G$Mn %* Ministry of Public Infrastructure 26,212 37.8 24,438 41.4 24,186 40.5 7.3 Ministry of Presidency 3,366 4.9 1,670 2.8 1,163 1.9 101.6 Ministry of Communities

5,550 8.0 4,788 8.1 4,751 8.0

15.9

Ministry of Agriculture 4,615 6.7 3,967 6.7 4,603 7.7 16.3 Ministry of Finance 4,977 7.2 4,504 7.6 4,427 7.4 10.5 Ministry of Public Security

3,868

5.6 3,213 5.4 3,156 5.3 20.4

Ministry of Education 3,795 5.5 2,430 4.1 2,871 4.8 56.2 Ministry of Public Health

3,172

4.6 2,144 3.6 2,508 4.2

47.9

Others 13,724 19.8 11,862 20.1 12,038 20.2 15.7 Total 69,279 100.0 59,016 100.0 59,702 100.0 17.4 * Percentage of total capital expenditure Source: Budget Estimates, Volume 1, Table 8. Ram & McRae’s Comments Further details on the budgeted capital expenditure of the Ministry of Public Infrastructure, Finance, Agriculture and Presidency are included in section The Government of Guyana Financial Plan 2019 of the Focus on the Budget. The Ministry of Public Infrastructure continues to finance the CJIA Modernisation project with $1.1 billion budgeted for 2019, evidence that the project is finally coming to conclusion. Additionally, the Ministry provided $120 million for the maintenance of the Berbice River Bridge pontoons, since the Government took over the Berbice Bridge Company in early November 2018. The legality of the takeover remains questionable and there will no doubt be a legal battle over compensation if the Government chooses to retain control over the Bridge. Under the Ministry of Presidency, there is a curious provision of $95 million as Capital Expenditure for “developmental, humanitarian and other activities”, a term so amorphous that the funds can be used for



practically any purpose far removed from Capital Expenditure. There is too the continuing capital expenditure programme for which an allocation of $57.8 million is made provided for works on the office and residence of the President. Pre-2015 we criticised expenditures on the office and residence of the President under the previous administration; however, post 2015 capital expenditure renders the pre-2015 expenditure miniscule in comparison to funds expended post 2015. Total expenditure since 2016 has shown an upward trend as reflected in the table below.

Noteworthy capital provisions under the Ministry of Education for the nursery to tertiary levels includes $250 million, up $100 million or 67% compared to the 2018 budgeted amount for integrated curriculum reform in the nursery to secondary level and provisions for the strengthening of the Faculty of Health Sciences and Construction of the Health Sciences building at the University of Guyana, Turkeyen Campus. Provisions of $448 million are also made for infrastructural upgrades and rehabilitation of Campus buildings, which is up $298 million or 199% compared to the $150 million revised 2018 budgeted amount. Included under the Ministry of Public Health are provisions of $439 million for the construction of the Ministry’s Head Office Complex and a laboratory for the Food and Drugs Department. This provision is up $275 million or 168% compared to the revised 2018 budget. Rehabilitation of various hospitals is budgeted at $380 million, up $244 million or 179% compared to the revised 2018 budget. $650 million has been budgeted for enhanced health care delivery and improved health facilities, up $610 million from the revised 2018 budgeted amount of $40 million. An analysis of expenditure per person using the 2012 Census as the basis is as follows: Region Population Revised

2018 Budget

2019 Exp. per

person G$K Change

G$Mn G$Mn 2018 2019 $K % No. 1 Barima/Waini 27,643 2,057 2,823 74 102 28 37 No. 2 Pomeroon/Supenaam 46,810 3,545 4,048 76 86 11 14 No. 3 Essequibo Islands/West 107,785 4,895 5,746 45 53 8 17 No. 4 Demerara/Mahaica 311,563 5,863 6,617 19 21 2 13 No. 5 Mahaica/Berbice 49,820 2,855 3,287 57 66 9 15 No. 6 East Berbice/Corentyne 109,652 6,039 6,921 55 63 8 15 No. 7 Cuyuni/Mazaruni 18,375 2,262 2,585 123 141 18 14 No. 8 Potaro/Siparuni 11,077 1,547 1,712 140 155 15 11 No. 9 Upper Takutu/Upper 24,238 1,899 2,242 78 92 14 18 No. 10 Upper Demerara/ Ber 39,992 3,024 3,342 76 84 8 11 Total 746,955 33,988 39,322 46 53 7 16 Source: Budget Estimates, Volume 1, Table 6 and Census, Bureau of Statistics.

Description Revised 2018 Actual 2017 Actual 2016 Actual 2015

Total Expenditure 270,099,423 246,820,058 221,624,328 192,068,882 % Increase/(decrease) 23,279,365 25,195,730 29,555,446 (20,178,613) $ Increase/(decrease) 9.43 11.37 15.39 (9.51)

G$"000



Although Region No. 4 appears to receive the lowest direct allocation per person, agencies such as the Georgetown Public Hospital Corporation (GPHC) are located in this region and receive allocations outside of the regional administration. The GPHC is slated to receive $9.1 billion, an increase of 3.7% over 2018.

1. The following are the top five local organisations slated for subvention in 2019:

• Guyana Public Hospital Corporation $9,100 million; • Guyana Revenue Authority $6,850 million; • University of Guyana $2,250 million; • LINMINE Community Power $2,200 million; • National Data Management Authority $1,847 million.

2. Some notable subventions and grants for 2019 are as follows:

• Development of Cultural and Creative Industries $20 million; • The allocation for Decade of Peoples of African Descent $100 million, up from $68 million in

2018; • Under Social Services the Together in Peace Project of the Guyana Women Miners Association

gets $10 million; • Under Childcare and Protection which falls under the Ministry of Social Cohesion, nineteen non-

governmental organisations will receive $200,000 each, while two new organisations are granted $12 million each.

3. The Commissioner of Information gets nothing raising the question whether this Office is now being abandoned.

Ram & McRae’s Comments

1. The Guyana Defence Force continues to receive allocations that appear beyond the country’s capacity and the Force’s contribution to the country. That the Force is also one of the major beneficiaries of supplementary provisions suggests some special treatment and poor oversight that cannot be excused on security grounds. We conclude therefore that the resources allocated to the Army are mis-directed and we support the recommendation by former Army Captain Gerald Gouveia that those resources should be reallocated to the Guyana Police Force and to social services merit serious consideration.

2. The State Assets Recovery Agency (SARA) is budgeted to receive $285 million, an increase of $25 million or 9.6%, from the $260 million received in 2018. Like many other public bodies, SARA appears to have breached the law in respect of the duty to have its annual plan tabled in the National Assembly and the prerequisite steps, to lay a Code of Practice and to have its report filed in the National Assembly. The Agency has clearly failed to live up to the hype and fanfare which accompanied its establishment when it was expected to recover several billions of State Assets each year. The Government may wish to consider scrapping this Agency altogether and assigning its functions and responsibilities to the Special Organised Crime Unit (SOCU) of the Guyana Police Force.

3. Linden residents will continue to receive a $2.2 billion contribution towards electricity charges.



4. The Department of Public Information has been granted $310 million, up from $250 million in the

prior year (to the then Government Information Agency).

5. Contributions to the Financial Intelligence Unit to rise by 8% which is ironic as the 2018 budget reflected the exact percentage decline compared to 2017.

6. The Guyana Energy Authority is budgeted to receive $510 million subvention for 2019 up $246 million or 93% when compared to budgeted amount for 2018.

7. It does appear that Subsidies and Contributions are being used to favour particular interests and without any rational consideration.



Budget 2019 Measures In this section we consider the measures announced by the Minister, analyse them, evaluate their impact and discuss the extent to which they provide useful economic benefits to stakeholders. Section 6 of the 2019 Budget Speech contains some forty-five Budget measures. This follows the staggering number of fifty-seven in 2017 and twenty-five in 2018. The proposed changes are subject to statutory amendments and are likely to take effect from January 1, 2019.

We now look at these measures and offer our comments.

Measures in Support of a Green Agenda

Measures R & M Comments

Write off of capital expenditure over two years and waiver of import duties and VAT on new equipment for companies utilising alternate energy technologies; renewable energy options, such as gasifiers to use biomass; and harnessing renewable energy through wind, solar and water.

Some of these items are already exempt from import duties and VAT including duty waivers on items for renewable sources of energy and alternative sources of energy for household purposes.

The accelerated depreciation on the items would be a welcome development for businesses but it does not seem that the incentive is being extended to individuals making similar investments to reduce their carbon footprint at home. A system of tax credits would have been welcome.

Relief from import duties for cars with a capacity equivalent to 2000 cc in Watts; exempt change-over kits from VAT and import duties; exempt electric motor cycles from Excise Tax. To prevent abuse, if the vehicles are modified within two years to accommodate gasoline or diesel, the full duties and taxes would become payable.

The Minister announced that Government “will be piloting the first ever, fully electric vehicle in the public service, and that all Budget Agencies have been mandated to ensure that vehicles to be procured, should be rated at least 25 miles per gallon and equipment be energy star compliant, with inverter technology where possible.”

The budget measures do not refer to energy efficiency – only what seems to be fully electric vehicles.

With hybrid and electric motor vehicles already being exempt from Excise Tax, the measure brings relief mainly from import duties.

The capital budget provides for scores of new vehicles and it will be interesting to see the circular to be issued to ensure compliance. Focus 2018 described the Green Agenda budget measures on vehicles and refilling stations as being unlikely to have any immediate impact. We consider that the 2019 budget measures will not be any different.


Focus Guyana’s National Budget 2019 Measures to Increase Workers’ Income


Increase in Personal Allowance from $720,000 or ⅓ of taxable income, whichever is higher, to $780,000 or ⅓ of taxable income, whichever is higher.

This provision does not benefit those persons earning in excess of $195,000, since they are already benefiting from the ⅓ provision. Should there be any increase in the NIS Ceiling, some persons will take home a lower net salary.

Exemptions for Public Officers/Public Officials


Alignment of Excise Tax rate with that of other importers for vehicles less than 4 years old.

A rate of 30% would continue to apply for vehicles with engine capacity above 2,000 cc imported by Public Officers/Public Officials while rates in excess of 100% would apply to others.

Exemptions for Remigrants


Introduction of a system of credits up to a limit of $5 million for vehicles imported by a remigrant.

These measures are reasonable and can reduce abuse. Removal of 6 months ownership rule.

Students completing at least 3 years of continuous study to be eligible for remigrant status.

Measures in Support of the Elderly and those in Difficult Circumstances


Increase in Old Age Pension from $19,500 to $20,500.

These increases are equivalent to 5.1% and 12.5% respectively. The increased benefit equates to $674 and $296 per day. Increase in Public Assistance from $8,000 to $9,000.

Measures in Support of Persons Living with Disabilities


Exemption from import duties, excise tax and VAT on vehicles for use by persons with disabilities.

Public places have an alarming lack of parking facilities and access to buildings by persons with disabilities. Some concomitant measures are necessary to help persons with disabilities.

Measures in Support of the Private Sector




Gold mining

Amendment of Income Tax Act to treat royalties on declaration of gold to the Guyana Gold Board as a final tax.

The income must be from individual gold mining (sales to the Guyana Gold Board) and not from the sale of gold or the rental of blocks.

The Minister noted that the amendment in the prior year law did not align with his Speech but gave no indication of whether this would be remedied for the prior year(s).

Sales to dealers authorised by the Guyana Gold Board should also be included in this exemption.

Small Business

Reduction in income and corporate tax rates to 25 percent on taxable profits where the business is registered with the Small Business Bureau, and is involved in either manufacturing or construction activities.

The business would have to satisfy at least two of the following conditions to meet the definition under the 2004 Act:

(i) employs not more than twenty-five persons;

(ii) has gross annual revenues of not more than sixty million dollars;

(iii) has total business assets of not more than twenty million dollars.

The intention of the measure is welcome but the several restrictions and conditions may significantly limit its impact. Since the rate applicable to non-commercial is being reduced to 25 percent, the benefit will accrue only to small businesses which are not companies.

Non-Commercial Companies

Reduction in corporate tax rate to 25 percent on taxable profits for manufacturing and non-commercial companies.

Manufacturing companies are non-commercial companies and the distinction is unnecessary.

The tax rate for companies dips below that of individuals (employed and self-employed); but the differential might not be sufficient to encourage incorporation given the other costs of compliance.

Property tax – Individuals and Companies

Increase in the threshold for filing a Return from $1.5 million to $40 million for individuals and from $0.5 million to $40 million for companies. This amount will be free of property taxes.

The $40,000,000 tax free amount was introduced for individuals in 2013 and is now being extended to companies.

The Minister did not announce the cost of these measures but Property Tax collections are projected to increase from $4.4 billion to $4.5 billion.

Reduction in the rate for both individuals and companies from 0.75% to 0.50% for the first $20




million in taxable net property, with the remainder being taxed at 0.75%.

Capital Gains Tax

Exemption from Capital Gains Tax where proceeds from the sale of a house is reinvested in another home, of equal or greater value, during the same year or within 60 days of the end of the year.

This is unlikely to help elderly persons desirous of moving into smaller quarters or to monetise part of their house’s equity to meet increasing elderly care expenses.

Exemption from Capital Gains Tax for the first $500,000 of capital gains.

This applies to the net chargeable gain in any one year to a person and not the net chargeable gain in respect of any individual asset.

Removal of exemption from Capital Gains Tax for property held for more than 25 years; taxes will be applicable on the gains accrued between the 2011 valuation or the date of acquisition, if later, and the selling price of the property when assets are disposed of, regardless of the date of acquisition.

This is one of the more significant exemptions available under the existing legislation but we believe the Minister is not correct in describing property values between 2011 to current values as being ‘realistically closer’. Care needs to be taken not to tax inflation.

Wear and Tear Allowance

Introduction of a 2% wear and tear allowance (on cost) on buildings used for services and warehousing.

A welcome development but some clarity will be needed on whether “services and warehousing” represent a single activity or separate activities.

Introduction of initial allowance on buildings used for services and warehousing.

A 10% initial allowance is granted under the Income Tax (In Aid of Industry) Act and presumably that rate will apply.

Ram & McRae also recommends that consideration be given to make Tax Holidays, a concession available under this Act, to persons other than companies.

Export Allowance

Extension of benefit to exporters of non-traditional products who are paid in a recognised tradable currency (effectively removing the restriction of the benefit from trade within CARICOM).

This is a welcome development and could spur growth in exports.

On strict economic grounds, there is no reason for not treating services on the same basis.

Exemption from Import duties, Excise Tax and VAT

Reduction of the Excise Tax charged on Shandy and other beverages containing less than 1 percent alcohol by volume, from $126 per litre to $65 per litre.

Reduction in the Excise Tax charged on indigenous wines and other fermented beverages that are manufactured using 100 percent local inputs, from $150 per litre to $65 per litre.

The Minister removed locally produced items from the VAT Act and introduced the Environmental Tax on non-returnable containers to ensure that both imports and locally manufactured products were treated equally, “thus ensuring that Guyana




complies with the provisions of Article 90 of the Revised Treaty of Chaguaramas.”

Why the Minister would now re-introduce provisions which give preferential treatment to locally produced products is illogical.

New regime for taxing tobacco consisting of a combination of ad valorem and specific taxes as follows: Excise Tax of $2,500 per 1,000 sticks, together with Import duties of 100 percent and VAT of 14 percent.

Exemption of pesticides used in the agriculture sector from import duties and VAT.

Pesticides were zero-rated prior to 2017 and the Minister once again is forced to make an about turn on a badly thought out imposition of taxes in the agriculture sector.

Exemption of limestone used in the agriculture sector from import duties.

Exemption of aircraft engines and main components/parts from VAT.

Although not specifically listed, engines and propellers were granted zero-rating prior to the coalition assuming office – this was granted through investment development agreements.

Exemption of concrete blocks used for housing and construction from VAT.

Concrete blocks were zero-rated prior to 2017 so that no VAT at any stage of the value chain would be passed on to the final consumer. The Minister then made these taxable with the product attracting VAT at every stage in the value chain, including to the individual home-owner.

By making it exempt now, VAT inputs at the various stages are still embedded in the cost. Accordingly, any benefit is likely to be not significant.

Exemption of equipment and chemicals for water treatment and production plants from VAT.

Exemption of orthopaedic appliances and artificial parts of the body from VAT.

Exemption of Educational Robot Kits from VAT.

Exemption of boats used in rural and riverain areas designed for the transport of goods and persons not exceeding 7.08 cubic metres from VAT and import duties.

VAT Credits for Electricity and Water




Introduction of a tax credit to exporters in the equivalent to the applicable VAT paid in relation to water and electricity.

The policies in relation to exporters continue to make Guyana’s products uncompetitive in the international market and this stop-gap measure is not sufficient to reverse the serious harm done to exporters.

Remission of VAT

Amendment of the VAT Act to allow the Minister of Finance to make regulation (sic) to remit, in whole or in part, the VAT and interest thereon, where good cause is shown.

Care must be taken to ensure that this measure is not abused and the Minister must report on all remissions granted as is required by the Fiscal Management and Accountability Act.

Tourism


Reduction in the rates of Excise Tax on the importation of overland transportation used for tourism purposes in Region No. 10.

This concession will be applicable to vehicles between 2,000 cc and 4,000 cc that are used exclusively in the tourism sector for the transport of persons by incorporated entities that have been operating in those regions for at least five years.

For vehicles 2,000 cc to under 3,000 cc and which are less than 4 years, the Excise Tax would be slashed from 110 percent to zero; for vehicles over 3,000 cc to 4,000 cc and which are less than 4 years, the Excise Tax would be reduced from 140 percent to zero.

As Ram & McRae noted in Focus 2018 when this measure was introduced for Regions 1, 7, 8 and 9, the qualifying requirements limit the benefit of this measure as it fails to attract new investment in the tourism industry.

The rationale of adding Region 10 – other than it being a politically beneficial move for the coalition Government – is unclear.

Introduction of a tax credit, equal to 75 percent of income and corporate taxes payable on profits from tourism activities, for persons investing in Regions 1, 7, 8, 9 and 10.

The qualifying conditions for this tax credit is unclear.

Exemption from the payment of import duties and excise taxes on motor buses with twelve (12) or more seats, not exceeding four years old, purchased and used exclusively for the transportation of tourists anywhere in Guyana, and (by a person) registered and licensed as a tourism operator by the Guyana Tourism Authority.

There seems to be some overlap between this measure and the overland transportation measure mentioned above. The earlier measure seems wholly unnecessary if this measure is implemented.

Passports


Introduction of a 46 page, machine readable passport at a cost of $10,000.

Passports are still valid for only five years and travellers would benefit more from a ten year validity period as obtains in the ABC countries,




Barbados, Trinidad and others for those sixteen years or older.

Refunds of Revenue


Amendment of the Customs Act and the Income Tax Act to allow for the payment of import duties and income tax refunds to be done out of the import duties revenue and the Income Tax revenue, respectively.

This is a welcome amendment and by virtue of provisions in other Acts such as the Corporation Tax Act and Property Tax Act, the amendment will also apply to those other taxes.

The efficacy of this measure will depend on the conditions attaching to the payment and the paradigm shift by the GRA in respect of refunds.

Miscellaneous Matters


Amendment of the Tax Act to include the ten established towns - Anna Regina, Bartica, Corriverton, Georgetown, Lethem, Linden, Mabaruma, Mahdia, New Amsterdam and Rose Hall - for licence purposes.

These amendments will extend the licence requirements to all towns from the current limited application to Georgetown, New Amsterdam, and in some cases, Linden.

This is a revenue earning measure and may cost more to police than it raises.

Amendment of the Motor Vehicle and Road Traffic Act to increase the duration of a driver‘s licence from 3 years to 5 years, and a small increase in the fee from $4,000 to $5,000.

This is a welcome amendment.

Amendment of Section 60A of the Income Tax Act to reduce the cost of reprint/replacement of a TIN certificate from $5,000 to $2,000.

The cost of $2,000 still appears exorbitant for a document that many institutions including commercial banks request to see an original.

The cost of a new TIN certificate remains at $1,000 and we believe this cost should be removed as the certificate is an instrument the Revenue requires for administration and not one that gives the holder any particular privilege.

Amendment of section 39 of the Income Tax Act to bring greater clarity to the definition of contractor, for the purpose of deducting the 2 percent withholding tax.

The implementation of the withholding tax was plagued with problems causing the Guyana Revenue Authority to issue several guidance pieces which narrowed the scope of the tax. We await the revised definition.

While rumours that the Minister was seeking to repeal the tax could not be put to rest, amending the definition might not be sufficient to reduce the




administrative burdens of managing this withholding tax.

Amendment of the First Schedule of the Tax Act to include the profession of Tax Preparer, to allow for a tax practice certificate to be issued to persons who, in the opinion of the Commissioner General, are so qualified to offer accounting and tax services to taxpayers.

A registered Tax Return Preparer who is not a member of a recognised accounting body will be required to pass a competency test covering such issues as taxation, preparation of individuals‘ tax returns, and ethics.

This measure seeks to regulate the so-called tax consultants.

However, the application of increased fees for tax practice certificates to medical professionals and attorneys has been locked in a legal battle since 2003, with little or no progress towards a resolution.

This fee acts as disguised taxation and a barrier to entry into the relevant professions for which additional practice fees are payable to sector specific bodies.

Reform in this area is long overdue.

Amendment of the Income Tax Act to remove the requirement for the Commissioner General to send Notices of Assessment to taxpayers whose liability is less than $1,000.

The law will also be amended to provide for the service of Notices of Assessment either by e-services, regular post or registered post.

Assessments form a most fundamental precept of taxation and dispensing with it should require considerations beyond the cost, administrative burden and level of tax.

For example, based on the announcement, a loss making entity or one which has overpaid taxes will not receive an assessment. This measure is therefore fraught with considerable danger.

We believe the rules on assessments should be strengthened to specify a time period by which an assessment should be made by the GRA since the current provisions are being abused.

One also hopes that the law would be amended to allow filing of notices of objection by taxpayers via e-services and to relax the burdensome time periods for which the taxpayer may object to or appeal an assessment.

Overall comments

The Minister has had the benefit of at least two tax studies and recommendations for reform. A piecemeal approach of multiple amendments in every Budget Speech while weel-intentioned can result in complications and anomalies and the embarrassment of subsequent reversals.

While many of the measures provide incremental benefits, the removal of exemptions from Capital Gains Tax is likely to spark heated debate.

Again, few measures have their associated price tag and it is therefore not possible to assess their budgetary impact.


Focus Guyana’s National Budget 2019 Tax laws cannot be divorced from tax administration as demonstrated by a recent letter in the media (Stabroek News 23 November 2018) alleges that the “(Guyana Revenue Authority has) embarked on a campaign of disallowing anything and everything that is submitted, and then demanding astronomical amounts in additional assessments.”



Commentary and Analysis The purpose of this section is to draw to the attention of policy makers the challenging issues faced by the country, whether arising out of the Budget presentation or otherwise. Where we consider certain matters of special importance we may even repeat them, as we have done in the past with the Corruption, National Insurance Scheme and the state of our democracy. In last year’s Focus, we dealt with income inequality in Guyana and we note that there is nothing in the Budget that could be considered a pro-poor step, the New Demerara River Bridge of which Budget 2019 provides for $100 million for consultancy services, Management and Investment of Oil Revenues, Local Content and the need for a Taxpayer Charter. In this Section we address the following:

1. Upturning the VAT; 2. The Curse of Corruption; 3. Subverting Democracy and Dark Money; and 4. CCJ Judges and Decisions.

Ram & McRae 49 November 2018 Chartered Accountant


Upturning the VAT Widely regarded as an invention of Continental Europe, and its paternity in 1954 attributed to France, VAT is an indirect tax collected mainly by businesses but borne by consumers. The term VAT itself is misleading because value as in Value-Added means no more than the cost and mark-up added at each stage in the production/distribution chain. VAT’s rapid growth has often been described as the most dramatic and probably the single most important fiscal development in the area of taxation in the latter half of the twentieth century. In fact, while in the late 1960s less than ten countries utilised any form of VAT, according to the Organisation for Economic Co-operation and Development (OECD), some 166 countries operated VAT or General Sales Tax (GST) in 2016. Other jurisdictions are recent adopters, such as Malaysia and Tanzania (2015), Egypt (2016), India (2017) and Member States of the Middle East’s Gulf Cooperation Council (2018). In Guyana, support for the introduction of the Value-Added Tax in 2007 was canvassed not so much for its revenue gathering potential but that it repealed several taxes which had a cascading effect on prices. Nevertheless, in the very first year of its introduction in Guyana, VAT accounted to a whopping 26.8% of the tax revenue of Guyana, despite the promise by the then Administration that the tax would be revenue neutral.

One of the major taxes was the Consumption Tax which was charged, at the modal rate of thirty percent (30%) while a small number of items were taxed at rates in the three-digit range, which were added to the product’s cost as it passed through the supply chain to the consumer. VAT it was argued correctly, had several superior virtues including the credit system under which the VAT paid at stage one of the supply chain was allowed a credit at the second stage, and so on. This system had several other virtues. For example, it could seamlessly apply to services as well as goods; it required a VAT invoice to be used in the case of each taxable supply; it allowed a veritable self-auditing process since the VAT input of one registered supplier is verifiable to the VAT output of another.

Another major feature of the Value-Added Tax is articulately set out in the OECD International VAT/GST Guidelines noting that fundamentally VAT is a tax on consumption and that while it is collected by businesses, it is borne by the final consumers; that businesses should not bear the burden of the VAT, hence the embedded mechanism allowing for a refund or credit of the tax levied on transactions between businesses; and finally, that in relation to international trade, VAT is based on the destination principle, meaning that exports are free of VAT and imports are taxed on the same basis and at the same rate as local production. The Guidelines note that the destination principle is sanctioned by World Trade Organisation rules. It seemed the perfect tax – imposing the larger share of the fiscal burden not on income but on expenditure and introduced the novel idea of a zero rate so that while the price to the consumer is free of VAT, the supplier at any stage of the distribution cycle is allowed to recover any input tax paid on any other supply. It is for this reason that unlike other tax laws, VAT law automatically permits the collecting agency – the GRA in our case, to make refunds without any parliamentary appropriations.

The past and current Administrations both caused to be reviewed the tax system with one report in 2014 under the Ramotar Administration and two under the Granger Administration, one in 2015 and the other in 20161.

1 Duke, Tax Reform Committee and CARTAC. Ram & McRae 50 November 2018 Chartered Accountants


The consensus of the Reports, shaped by their terms of reference, was that the list of zero-rated items needed to be trimmed. Duke’s recommendation was to “severely limit zero-rating outside of exports and to use income-tested tax breaks or welfare payments to offset possible adverse impacts of VAT on low income persons”2. The TRC recommended a dual rate of 14% and 7% and a reduction of the list of zero-rated items, shifting some to the intermediate rate of 7% and applying the standard rate of 14% to other items3.

CARTAC recommended that “all semi-processed and processed foods and beverages, non-prescription drugs and health supplements, items for household use, computers and peripherals, appliances, and other final consumer goods, at the standard rate.” They also recommended to exempt a short-list (10 – 15 items maximum) of currently zero-rated unprocessed (staple) foodstuffs4.

Over the life of this Administration, there has been a continuing recession from several of the fundamental principles of VAT - and an implicit rejection of the recommendations - with a systematic removal of an endless number of items off the VAT list (standard-rated and zero-rated) to the non-VAT, exempt list.

Without a functioning Consumers Association this pattern of action has met only with a muted response, paradoxically when the Government imposed VAT on education services galvanising the chauffeur moms into protests outside the Ministry of Education and the National Culture Centre, forcing the Government to back pedal after one year. In 2017 and then again in 2018, significant segments of the private sector were affected by these unprincipled changes which caused a war of words in which the Administration accused the Private Sector Commission of not understanding the VAT, oblivious to the fact that the PSC had made a submission of substance to the Select Committee to which the Draft VAT Bill 2005 was referred. It was this submission that caused the Select Committee to make many modifications to the VAT Bill and its subsequent unanimous approval for the eventual introduction in 2007.

The main issue of contention which has arisen between the Administration and the private sector is the decision by the Administration not to treat as zero-rated any export item which is included in the exempt list for domestic purposes. What this means is the rejection of one of the most fundamental tenets of VAT – that exports should not bear VAT, not only on any technical basis but for the common sense reason that in depriving the exporter the right to deduct input taxes, the exporter faces the economic dilemma of either absorbing the VAT with the consequence of reduced profits and reduced taxes, or attempting to pass on the tax in the form of higher prices risking making the product less competitive on the international market.

At first, as though it was not self-evident, the Administration asked the sectors to bring the evidence to show that they were not adversely affected by this dubious decision. But despite overwhelming evidence provided, the Administration has stubbornly persisted with its misguided policy. In fact, the matter is considered so serious that one exporter has taken the Government to court over the matter.

It seems hard to fathom that the Administration is unable to recognise that many of the affected sectors, including rice, sugar and fisheries and certain manufacturing businesses, are critical to rural employment and development, that they employ large number of persons and are earners of foreign exchange. It is therefore no wonder then that of roughly ninety countries featured in the EY World VAT Guide 2018, not a single country causes any exporter to bear any VAT. This is as true of all the

2 Executive Summary of TRC Report 3 Ibid Appendix III. 4 Executive Summary of CARTAC Report Ram & McRae 51 November 2018 Chartered Accountants


Caribbean, Asian and South American countries as it is in the European Union countries, from Austria and Belgium to Yemen and Zimbabwe, and for those countries of the EU where Exempt with Credit is the term used to ensure that no VAT is borne by their exporters.

No tax, including VAT, should be seen and applied only for their revenue garnering potential or simplicity for tax administrators. By treating VAT as a one-way street with heavy emphasis on no credits and no refunds, he is virtually returning to the unpopular Consumption Tax. If on the other hand he wants to ensure the competitiveness of Guyana’s exports, to avoid the Dutch Disease and to demonstrate his acceptance of the fundamental tenets of VAT, then he needs to balance the tax’s virtue of gushes of revenue with its other advantages, as well as the work and the cost that goes with processing refunds.



The Curse of Corruption

“Discord within the ranks of the membership, long-winded debates in the legislature, unnecessary delays in the passage of important legislation, graft, corruption and other unseemly conduct by some members.

“Saddled with an Administration, remarkable for bribery, corruption and nepotism which sapped the resolve of the honest and stifled the opportunities of the dedicated.

“Members were self-seekers, lacking in any party spirit, policy or the capacity for organisational effort.”

That the majority of readers probably think that the above complaints and comments were about the APNU+AFC Administration or its predecessor suggests that they could equally apply to this or the previous Administration. In fact, all these quotations are about the Interim Administration of 1954 which was installed after the suspension of the 1953 Constitution and the jailing of some of the political leaders. The second quotation was in fact from Dr. Alan John Knight, Archbishop of the West Indies. The 27-member Administration included leading members of the then British Guiana society such as Sir Frank McDavid, WOR Kendall, Jane Phillips Gay, Sir Lionel Luckhoo, P. A. Cummings and Eugene Correia, who might have been thought to be immune from corruption particularly after a mere three years in Government and under the watchful eye of the Governor of the day.

It seems that there is something in our DNA that just makes Administrations practise corruption and that warrants constant vigilance. But as we at Ram & McRae review our Budget commentaries, we note that since 2015, corruption has not been addressed in Commentary and Analysis. That of course is in marked contrast with our stand on the subject under the previous Administration and it was noticeable that in the six years 2006 to 2011, Focus dealt with Corruption in three of the publications.

In the first couple of years since 2015, focus was on forensic audits of the actions of the past Administration and the media and commentators were less interested in pursuing corruption issues even when revealed in the Report of the Auditor General. It seemed reasonable and fair too that the incoming Administration should have been left some room to find their feet and not be subject to accusation without some compelling indications, if not evidence. Transparency Institute Guyana Inc. has noted in one of its earlier columns that there has been a statistically significant improvement in the country’s ranking in the Transparency International Corruption Perception Index which has improved from # 118 in 2015 to # 91 in 2017, although the absolute measure still places the country as very corrupt.

Notwithstanding the statistically significant overall improvement in the country’s ranking, corruption remain a critical matter. On Corruption, like in so many areas of public management, this Administration has delivered much less than it has promised with its failure to establish an Investigative Commission on Corruption within its First Hundred Days an outstanding example. Procurement remains another area of serious concern as the Government has failed to make the necessary legislative changes to the Procurement Act to strengthen the role and effectiveness of the Procurement Commission more effective and to remove the overriding influence of Cabinet in the procurement process. With no changes to the legislative framework, the procurement process remains not only suspect but tainted and facilitative of manipulation and corruption.



The signs that the Government was not as intent on dealing with Corruption as it had promised were there in the wasteful and unaccounted billion dollar expenditure on the construction of a Stadium at Homestretch Avenue. Minister David Patterson who was later assigned responsibility for the Project has not only not been any more successful at providing answers to troubling questions but has himself been the subject of attention and investigation in respect of the Demerara Harbour Bridge by the Special Organised Crime Unit (SOCU) of the Guyana Police Force. That Unit has also received but is yet to pronounce on a complaint about the handling of the US$18 million Signing Bonus by the Minister of Finance.

In the award of security contracts, abuse still abounds but nothing matches the Saffon Street drug bond deal for daring and lawlessness. Which rational, self-respecting Government will lend money to buy a property and then lease back that property at a shocking rental equivalent that pays back the capital cost of the property in months rather than years? President Granger showed his tolerance for such egregious conduct not by calling in the Audit Office but by setting up a sub-committee of his Cabinet which found among other things, that the general terms of the lease were “not altogether unfavourable”! Eventually, the Health Minister Dr. George Norton was made the fall guy and simply transferred to another Ministry with all his benefits intact.

The Ministry and the Georgetown Public Hospital Corporation (GPHC) were again in the news in connection with the purchase of drugs valued at more than one billion dollars in violation of the Procurement Act and long after the Procurement Commission had been in place. But when one member of the Commission went public with his comments, the response of the PPC was a rush to formulate gagging rules on its members.

There has also been an apparent rise in issues of corruption in the regions such as Region 6 where there were nine cases where the Bid price was exactly the same as the Contractor’s estimate even though the estimates are not available to any bidder. And in Region 8, the Audit Office found that one officer had set up a front company to make supplies to the Region’s School Feeding Programme while in Region 2, the accounting rules were twisted to make capital expenditure out of the current allocation.

And to return to the Ministry of Health, the Kaieteur News on the day of the Budget carried a story of a contractor who was paid a significant sum of money on a contract that had hardly begun. That contractor was also the beneficiary of a similar arrangement in another Region.

The fight against poverty and for development goes hand in hand with the fight against corruption since corruption favours individuals with money and connections and those who in one way of the other support the winning Party. Corruption distorts the allocation of economic benefits, deter foreign investment, lower economic growth, bring about a loss of tax revenue, lower the quality of public infrastructure and also affect the composition of government expenditure.

What is particularly troubling is that many of the improper acts involve the Ministry of Health headed by the Chairperson of the major coalition Partner. In his forward in the Coalition’s 2015 elections Manifesto, Prime Minister Moses Nagamootoo promised that an APNU+AFC Administration would “cut out waste and extravagance… strict accountability and zero tolerance for corruption”. The Government has a long way to go if it intends to deliver on that commitment.



Subverting Democracy and Dark Money It is an often repeated story that a prominent businessman donated the sum of one hundred million dollars to the 2015 elections war chest of the Coalition. That would not have been the only donation made to that group and it is certain that the PPP/C too would have had their own sources of financing to their campaign. Observers would have noted the huge sums being spent on all forms of expenditure including hiring foreign pollsters and consultants. Sheepishly, we the voters never for one moment seem to think that funding and their sources matter to the democratic process. As Guyana rushes into becoming a petro-state with billions of dollars circulating annually, no less a person than Minister of Finance Winston Jordan has described, borrowing the term used by the PPP/C in 2015, that the 2020 elections will be the “mother of all elections.” But Mr. Jordan also reassured his political grouping audience, that “we” would keep the thieves away from the resources.” The irony may not have been lost on his audience that in fact, it was the definite “he” that denied that ExxonMobil did in fact pay to his Ministry the sum US$18 million, and that it was on his instructions that the US$18 million was kept far away from the Consolidated Fund. So far in fact that it was held in “foreign”. The accounting for this hundred million has been hidden and guarded from party executives and members and gets no mention in any Treasurer’s Report. Strange but not surprising that it is unlikely that that and other sums were ever reported in any Suspicious Transaction Report to the Financial Intelligence Unit. These grave but not isolated cases indicate that it is time that the Financial Intelligence Unit, GECOM, Civil Society and indeed all of us recognise the serious consequences of unaccounted money and the actions and persons involved. At issue are the money-laundering laws, personal and party accountability, potential for fraudulent conversion and yes, democracy. There are two solutions to these issues: the regulation of political parties and campaign financing. The late Sheila Holder, a founding member of the Alliance for Change had elevated campaign financing as one of the pillars of the AFC. In fact, so committed was that Party to transparency and accountability that it began its existence as a company with all the obligations and requirements imposed by the Companies Act. But despite that Party’s clear understanding of the link between campaign financing transparency and accountability, corruption and the development of the party system, as a major Coalition partner in the current Administration, it has done little to advance that cause. About fourteen years ago, then President Jagdeo he agreed with former US President Jimmy Carter that the Carter Center would “send an expert to help draft comprehensive legislation requiring full disclosure of all contributions made to political parties and how funds are expended.” Yet, his Administration and Party have failed to act. Current President, David Granger has not pronounced on the matter, his style is to encourage donations to his Boat, Bus and Bicycle signature initiative. They both must know that the absence of campaign financing rules allows the worst elements of the business community, and the criminal class, to finance and assist - often with dirty money that appears nowhere in their books – contesting political parties to buy their way into office – often with money that they too do not account for.



It is time that all democratic forces in the country, including the political parties but also Civil Society, the media and important individual voices begin the call for campaign finance rules. It is time too for those Guyanese living abroad who fete our bounty hunters at election time recognise the harm they are doing when they make their contribution. They must stop it. With Guyana now on the international map, it will attract the interest of countries and entities who would have their own preferences on which parties and individuals they would like to see in charge of the oil money and the economy. ExxonMobil, Hess and CNOOC/Nexen all have a huge stake in this country and would be nervous at any hint that the 2016 post-discovery Petroleum Agreement signed with the present Administration will be revisited. But they are not alone. What have come to be known as the ABCE countries – America, Britain, Canada and the European Union – all have rules regulating campaign financing. They should promote no less in this country. It is one of this country’s most dangerous ironies that a political party is subject to less regulation than a trade union is, than a friendly society or that a credit union is. Again, constitutional reform was one of the major promises of the AFC as an individual party and later as a Coalition partner with the APNU in 2015. Like it has with campaign financing, the AFC has exerted absolute no influence over its bigger partner on their commitment to constitutional reform. The words were clear and unambiguous but maybe they need repeating because the country continues to suffer from and is retarded by the absence of constitutional reform. Under the construct that has been practiced for decades, political parties were up to their internal mischief with zero accountability. It is time that political parties are reined in by legislation and it is hoped that civil society will take the lead. Such legislation must provide for the registration of political parties, funding, accounting and accountability, a democratic governance framework and a strong regulatory body. Hopefully, Civil Society can take the initiative on this project. It will be the real test of the maturity and sincerity of our political parties.



CCJ Judges and Decisions

Voting in separate referendums, the Antigua and Barbuda, and Grenada for the second time in two years, have rejected the option of having the Caribbean Court of Justice (CCJ) as their highest (appellate) court and in favour of retaining the Privy Council. It is no consolation that by virtue of legislation on their books and as a requirement for the implementation of the Revised Treaty of Chagauramas, the CCJ has original and sole responsibility for adjudicating on matters pertaining to the Revised Treaty of Chagauramas.

As a result of this rejection, the only countries which subscribe to the appellate jurisdiction of the Court are Barbados, Belize, Guyana and Dominica, thus constituting less than half of the countries of CARICOM, and by population, less than twenty percent. By any measure, this is a depressing record for a court established more than twelve years ago. No doubt the wider refusal of the Caribbean community to support the Court accounts for the nonchalance with which the results of the referendums were greeted.

While the Grenadian Prime Minister Dr. Keith Mitchell, who has a 15-0 majority in that country’s National Assembly, expressed disappointment at the decision by his people, Guyana has considerable interest in the success of the Caribbean court. Guyana recalls how the late Forbes Burnham withdrew from the Privy Council in 1971 making the Guyana Court of Appeal our country’s final court.

That court, while it had several erudite judges, received scathing criticisms if not uniformly for its judgments, certainly for the flag of the PNC being flown outside of the Court of Appeal. The Court was not helped by some of the public pronouncements by Chancellor Victor Crane, including his famous statement that “under socialism, there ought never to be any conflict between the judiciary and the executive if they are pursuing the same goals towards democracy and cooperation.” In other words, according to Chancellor Crane, the bedrock constitutional principles of separation of powers and the independence of the judiciary were no longer applicable or relevant.

It was no surprise then that Guyana was one of the first countries to give unqualified support to the idea of a regional court when it was first discussed from as early as 1972 by a Representative Committee of the Organisation of Commonwealth Caribbean Bar Associations set up to examine and report on the establishment of a Caribbean Court of Appeal.

Since its inception, the CCJ has had three Presidents – Michael de la Bastide from Trinidad and Tobago, Sir Dennis Byron from St. Kitts and Nevis and the current holder Adrian Saunders of St. Vincent and the Grenadines. It must be disappointing that none of these persons could persuade their own country to join the CCJ and in the case of Trinidad and Tobago being the host country of the CCJ with all the benefits accruing therefrom.

Another of the ironies is that some of the most famous decisions made by the CCJ in its twelve years of operation, were brought by countries which did not subscribe to the Court’s appellate jurisdiction. One of these was in favour of a Jamaican national Shnique Myrie against Barbados, one of the four appellate members. Guyana, another appellate member, has been on the wrong side of a number of decisions the Court rendered in its original jurisdiction, including one by Suriname in respect of the environmental tax and another by Trinidad and Tobago in the CET on cement imported extra-regionally. Of course, that is a credit both to the Court’s independence and courage and to Guyana



and Barbados which respected the decisions. The Court also deserves credit for its judgment in the landmark Death Penalty case Boyce and Joseph vs. the Attorney General of Barbados.

But there are as well cases where the Court has either stumbled or could have done a much better job. In no particular order the three are: the Cross dressing case decided recently by the Court, the Guyana Stores tax case and the Ocampa case.

In the cross-dressing case, there are concerns over two particular issues, one procedural and the other substantive. The objection on the procedural issue is that the President of the Court had previously expressed an opinion on an aspect of the case, not by himself in some unauthoritative forum, but in a leading regional textbook which he co-authored with Mr. Tracy Robinson, and Dr. Arif Bulkan who represented the successful parties in the case before the CCJ. The risk of bias, not in the sense of independence but partiality, was therefore evident particularly since Justice Saunders presided over the case and delivered the leading judgment on behalf of three of the six judges.

On the substantive issue, the ruled that the section which seeks to criminalise cross dressing for an improper purpose offended the rule of law requires legislation which is hopelessly vague must be struck down as unconstitutional. In fact, the authorities suggest that a broad term may be either static, i.e. of constant meaning, or mobile, that is shifting its meaning according either to the time when, or the place in which it is applied or both. A leading authority advises that “It is not for the court to lay down a definition of a broad term which Parliament has chosen not to define” and that ‘The Courts have repeatedly warned against the dangers of taking an inherently imprecise word, and by redefining it, thrusting on it a spurious degree of precision”.

The central issue in what is referred to in legal shorthand as the O’Campo case1, a very fundamental issue was whether a statutory appeal procedure trumps judicial review, a matter of considerable import in tax cases. Precedent from a number of jurisdictions generally is that the appeal procedures must first be exhausted before embarking on judicial review. It seems not only wrong that the Parliament can circumvent or displace a constitutional right to have addressed an issue of law by a statutory power that is more often relevant to a matter of fact.

The third case is a tax case with elements of statutory appeal versus judicial review. While on the facts, there is little to argue against the final decision, the emotive language used by the judge who delivered the judgment causes some discomfort.

If the CCJ is to live up to expectations for the development of a truly Caribbean jurisprudence, it would have been good to see the Court addressing the asymmetry in the relationship between the tax administrator and the taxpayer. The language of the Judge delivering the Court’s judgment appeared prejudicial in the particular context.

One of the basic principles of the new Civil Procedure Rules is one of equality. It would have been good if the Court could have applied its wisdom to suggesting how the parties in a tax matter can be placed on a fair footing when the tax office can take as long as it likes to make an assessment which it deems a prerequisite to a refund. Or when the law imposes heavy penalties and exorbitant interest on the taxpayer in any normal situation but who pays no damages and only paltry interest when the matter is in favour of the taxpayer.

1 Medical Council of Guyana v Jose O’Campo CCJ Appeal No GY CV 2018/OO1 Ram & McRae 58 November 2018 Chartered Accountants


The CCJ must realise that its acceptance and reputation will be determined partly by the quality of its decisions as seen by the people of the Region. The existence of the Court’s appellate jurisdiction may very well be unsustainable if the number of countries subscribe to it does increase. The judges themselves must be mindful of this and help, even indirectly, to the widening of its remit.



Conclusion The annual drumbeat of bigger Budgets has appeared to have some inherent virtue. The size of the Budget has increased from $221 billion in the Coalition’s first year in office to $300 billion in Budget 2019, an increase of 36%. There has no doubt been many benefits from these vast sums which it must be remembered are contributed to a large extent by the people themselves. Unfortunately, perhaps forced by the nature of a Coalition, Guyana has the largest number of Ministers per capita of any country in this Region. Large Government are usually expensive, bureaucratic and inefficient. It is a huge cost to impose on the people. By its nature too, it is virtually impossible to sanction any Minister when there is no possibility of replacement since some members of the Coalition are miniscule. President Granger too seems to have a preference for large governments with ministries with unrecognizable names and undefined purposes, and a particular liking for the Army of which he was once in the leadership. Persons landed with important Ministries are clearly not up to the job, having had no training or experience in management. It is simply illogical that someone whose only experience is heading an office of a handful of persons heads a ministry with thousands of persons overseeing the spending of millions of dollars. Under this Administration, that is not particularly exceptional. The preference for the political and the loyal rather than the professional and the competent can encourage bad and very expensive decisions - with the Administration’s handling of the petroleum sector being a critical example – and often leaves little room to correct them, let alone sanction misconduct. Many of the initiatives or inheritances of the Administration have been too inefficient and too costly, the CJIA being a prime example. Even as the project moves to completion, there should be a post-audit review to identify what went right and what went wrong. That should be standard practice. This Budget sends important signals by the Government and potentially by the Opposition as well. A Budget of this size and complexity that dazzles with details requires competent and careful examination. The dangers are in the details and in the 1500 plus pages comprising the three Volumes of the Estimates and the Budget Speeches. The opportunities for graft, corruption and cronyism are multitude and beyond the capacity of the Permanent Secretaries, the Accountant General and the Audit Office. The Fiscal Management and Accounting Act requires all agencies to have Internal Audit capabilities. They need to be activated and made to work. In this, our 29th, Budget Focus we have identified many weaknesses, some small but others very large. It just seems unbelievable that the Minister can feel confident enough not only about ignoring the law but on announcing it. On a technical issue, Minister Jordan must be honest and open about whether VAT in any form should be embedded in exports. And whether the unambiguous commitments made in Budget Speeches 2017 and 2018 still stand. Here is what he said: Budget Speech 2017 paragraph 6.12 item (v), “I propose to expand the list of exempt items and eliminate all zero-rated items, with the exception of those pertaining to exports and manufacturing inputs...”



Budget Speech 2018 paragraph 6.25, “… in Budget 2017, a suite of amendments were introduced to the VAT Act and Schedules…it is recognised that additional amendments would be necessary to correct errors and omissions… None of these proposed amendments will negatively affect any individual or business.” If he wishes to make Guyana the only country covered in a recent international survey not to give credits for all VAT paid on inputs, then he should state so. The political backdrop against which the budget will be executed however cannot be ignored. Constitutional reform, governance and leadership are pivotal to economic success and are undermined when the Opposition and the Government engage in mutual demonisation and tit-for-tat politics. The past Administration was the subject of serious allegations of corruption and the recipient of adverse comments by this Publication. Unfortunately, allegations against this Administration are increasing. This is not a good omen as Guyana approaches First Oil. The health of the President and his ability to carry out extensive tasks and responsibilities will assume greater significance as the country moves towards general elections in less than two years. Ministers need direction, guidance and oversight, Ram & McRae hopes that the President is well enough to lead his supersized Government in a positive direction. Leadership counts – now more than ever. Ram & McRae, Chartered Accountants, Waterloo Street, Georgetown. 30 November 2018



Epilogue Ms. Volda Lawrence, chairperson of the PNC/R, a cabinet member and the leading partner in the Coalition Government, is quoted in the Stabroek News as telling a PNC/R Conference: “… the only friends I got is PNC, so the only people I could give work to is PNC.”

Forget for a moment that Ms. Lawrence ignores the Reform component of her Party and recognise only that a Senior Cabinet Minister of the APNU+AFC Government publicly admits that at least sections of this Administration is openly admitting discriminatory employment with an undisguised hint of ethnic preferences. This is unconstitutional, shocking and disgraceful.

Ms. Lawrence’s Ministry of Public Health is allocated a total sum of $25,223 million in the 2019 Budget. We note too that her Ministry has already been implicated in a number of tainted procurements amounting to hundreds of millions of dollars, in violation of the law. This raises the serious possibility that the 2019 Budget, potentially the last full year Budget before the 2020 elections, will be used for discriminatory employment practices and other spending, not only in Ms. Lawrence’s Ministry but in the Government as a whole. It therefore raises the further question about the extent to which this Budget may contain disguised political spending.

With the major political parties each having a strong ethnic base, the statement reinforces the public racism narrative, and leaves the most apolitical, objective observer in Guyana with little option but to question whether this is an embedded policy among party leaders.

Five days after this disgraceful statement, neither the President, her Cabinet colleagues nor any of the leaders of the Coalition Parties have found this egregiously offensive declaration objectionable to them. This is ominous and may set the stage for one of the most confrontational campaigns for what her colleague Minister described as the “mother of all elections.”


Focus Guyana’s National Budget 2019 Appendix A1

Acts Passed in 2017/2018

Act No. & Title Description Date Passed Date of Assent Bill 22 of 2017 Supplementary Appropriation (No. 3 for 2017) Act 2017

Provides for additional sums from the Consolidated Fund of $519.935,258 under the Current Budget and $2,456,302,168 under the Capital Budget. See comment 2 of Ram & McRae’s comments under section - Legislation.

November 17, 2017 November 27, 2017 14 of 2017

23 of 2017 Appropriation Act 2017

Authorises the issue from the Consolidated Fund the sum of $243,375,288,000 as the Budget for 2018 made up of $183,672,865,000 for Current Expenditure and $59,702,423,000 for Capital Expenditure.

December 15, 2017 December 22, , 2017 15 of 2017.

1 of 2018 Motor Vehicles & Road Traffic (Amendment) Act 2018

1. Inserts a new section 28 to treat excavators, bulldozers and similar vehicles used in construction as motor vehicles in their weight category for purposes of registration under the Act.

2. Exempts from payment licence fees of motor buses operating in certain specified hinterland areas.

2 of 2018 Value Added Tax (Amendment) Act 2018

Introduces electronic filing of VAT returns, but deemed to be done on the day of its acknowledgement, instead of the actual date of filing.

January 10, 2017 January 24, 2018 17 of 2017

3 of 2018 Income Tax (Amendment) Act 2018

To give effect to the tax measures announced in the 2018 Budget Speech. See comment 4 of Ram & McRae’s comments under section - Legislation.


4 of 2018 Customs (Amendment) Act 2018

To amend the Fifth Schedule to the Customs Act to allow the Commissioner General to substitute the value of a competent value, where a customs value was not properly determined.




Act No. & Title Description Date Passed Date of Assent Bill 5 of 2018 Protected Disclosures Act 2018

To encourage and protect disclosure by persons of improper conduct by his employer or by other persons in respect of improper conduct by Members of Parliament, government officials and the establishment of a Protected Disclosure Commission.

January 18, 2017 February 12, 2018 12 of 2017

6 of 2018 Supplementary Appropriation Act 2018

Provides for further sums from the Consolidated Fund of $1,931,000,000 under the Current Budget for 2018.


7 of 2018 Witness Protection Act 2018

Provides for the establishment of a Witness Protection Programme and of three agencies (an Administrative Centre, an Investigative Agency and a Protective Agency) to administer the programme.

January 19, 2017 February 12, 2018 13 of 2017

8 of 2018 Juvenile Justice Act 2018

Amends and consolidates the law in relation to criminal justice for juveniles, including the establishment of facilities for the custody, education and rehabilitation of juvenile offenders. This Act repeals the Juvenile Offenders Act and the Training Schools Act and amends a number of other Acts.

April 26, 2018 June 7, 2018 2 of 2018

9 of 2018 Supplementary Appropriation (2for 2018) Act 2018

Provides for further sums from the Consolidated Fund of $1,388,049,000 under the Current Budget and $1,138,544,240 under the Capital Budget for the year 2018.

May 11, 2018 May 18, 2018 8 of 2018

10 of 2018 Local Authority (Elections) (Amendment) Act 2018

Amend the Municipal and District Councils Act to harmonise the term of office of Mayors and Deputy Mayors with that for the Chairmen and Deputy Chairmen of NDC’s.

June 25, 2018 July 10, 2018 9 of 2018

11 of 2018 Insurance (Amendment) Act 2018

Amends the Insurance Act 2016, by the insertion of three new Parts (XX, XXI and XXII).

July 12, 2018 September 28, 2018 3 of 2018



Act No. & Title Description Date Passed Date of Assent Bill 12 of 2018 Financial Institution (Amendment) Act 2018

Gives extensive powers to the Bank of Guyana to revoke the licence of any Financial Institution to issue orders and directions and to implement penalties for improper conduct, and to appoint a controller with a view to preserving or restoring the financial position of a licenced financial institution.


13 of 2018 National Payments System Act 2018

Introduces legislation for the establishment, regulation and oversight of a National Payments System.

July 13, 2018 August 13, 2018 4 of 2018

14 of 2018 Bank of Guyana (Amendment) Act 2018

Authorises the Bank to: provide liquidity assistance to deposit taking financial institutions; deal in marketable instruments and precious metals; and to conduct credit operations with banks and other licensed financial institutions.


15 of 2018 Deposit Insurance Act 2018

Establishes a Deposit Insurance Corporation and a Deposit Insurance Scheme insuring deposits up to a limit of $2 million at a premium ranging from 0.2% to 1.5%. All depositors to be paid in Guyana Dollars.

July 13, 2018 August 13, 2018 7 of 2018

16 of 2018 Cyber Crime Act 2018

Seeks to combat cybercrime by creating offences related to cybercrime; to provide for penalties, investigation and prosecution of offences.

July 20, 2018 August 13, 2018 17 of 2016

17 of 2018 Anti-Money Laundering and Countering the Finance of Terrorism (Amendment) Act 2018

Amends twenty-three sections of the principal Act as well as three other Acts – the Gold Board Act, the Companies Act and the Money Transfer Agencies (Licensing) Acts.




Act No. & Title Description Date Passed Date of Assent Bill 18 of 2018 Animal Welfare Act 2016

New legislation containing extensive provisions for the welfare of animals, their protection and health. Also provides for the establishment of an Animal Welfare Commission.


19 of 2018 Tax (Amendment) 2018

Amends section 71 of the Tax Act authorising the Commissioner General to issue provisional licence for business premises of smaller operators.

August 8, 2018 September 7, 2018 11 of 2018

20 of 2018 Supplementary Appropriation (3 for 2018) Act 2018

Provides for the year ended 31 December 2018 further sums from the Consolidated Fund of $4,099,347,146 under the Current Budget and $3,484,927,342 under the Capital Budget a total of 7,584,274,488.

October 31, 2018 November 9, 2018 12 of 2018



Regulations Issued in 2017/2018

Regulation No. & Title Principal Legislation Description Date 2 of 2017 The Excise Tax (Amendment) Regulations 2017.

Excise Tax Act, Cap. 82:03.

Provides exemption from Excise Tax from certain vehicles used in the tourism sector and those vehicles using LPG Gas coaches, buses and mini-buses, 4 years old and over in Regions 1, 7, 8 and 9.

December 13, 2017.

1 of 2018 Insurance Regulations 2018

The Insurance Act 2016 (Act No. 17 of 2016)

Facilitates the operations of the Insurance Act passed in 2016.

April 9, 2018

2 of 2018 Forest Regulations 2018

The Forest Act (No. 6 of 2009)

Facilitates the operations of the Forest Act. May 7, 2018

3 of 2018 Fisheries Regulations 2018

The Fisheries Act (Cap. 71:08)

Repeals the Fisheries Regulations 1957 and sets out the legal framework for the licencing and operations of foreign fishing vessels, the application for permits and the protection of turtles. See comment 9 of Ram & McRae’s comments under section - Legislation.

May 18, 2018

4 of 2018 Tobacco Products Packaging and Handling Regulations 2018

Tobacco Control Act 2017

To set out the, requirements labelling health warning and manufacturing dates.

May 26, 2018

5 of 2018 Income Tax (Special Provisions) Regulations

Income Tax Act (Cap. 81:01)

Exempts from income tax the retroactive percentage increase in salaries for employees/public servants, and public officers for the period January 01, 2018 to and ending December 31, 2018.

November 23, 2018



Orders Made in 2017/2018

Order No. & Title Principal Legislation Nature of Order Date of Order 39 of 2017 The Customs (Amendment Schedule) Order 2017

The Customs Act Cap. 82:01

Amends Part III B (i) of the First Schedule by inserting item 16 Machinery and Equipment.

December 11, 2017

40 of 2017 Value-Added Tax (Amendment of Schedules) Order 2017

The Value-Added Tax Act Cap. 81:05

Amends Schedules 1 Zero Rated and 2 Exempt Items to the Act.

December 11, 2017

41 of 2017 Constitutional Offices (Remuneration of Holders) Order 2017

The Constitutional Offices (Remuneration of Holders) Act Cap. 27:11

Increases w.e.f. 1st January 2017 salaries of constitutional office holders by 0.5% to 8% as at 31st December 2016.

December 12, 2017

42 of 2017 Prospecting Permit Medium Scale (PPMS) Exemption Order 2017

The Mining Act (Act No. 20 of 1989)

11th day of December 2017 sets as the effective date of the Prospecting Permit Medium Scale (PPMS) Exemption Order 2017.

December 11, 2017

43 of 2017 Motor Vehicles Insurance (Third Party Risks) (Agreement between Guyana and Brazil) Order 2017

Motor Vehicles Insurance (Third Party Risks) Act (Cap. 51:03)

Amends the 2003 Agreement between the Governments of Guyana and Brazil for passengers and goods.

December 13, 2017

44 of 2017 Tobacco Control Order (Commencement) Order 2017

Tobacco Control Act 2017 (Act No. 17 of 2017)

11th day of December 2017 sets as the commencement date of the Tobacco Control Act.

December 14, 2017

45 of 2017 Guyana Sugar Corporation Inc. (Transfer of Property) Order 207

Public Corporations Act Cap. 19.05

Transfers all Transported, Lease and Licensed movable and immovable property at Skeldon, Wales, Enmore and Rosehall Estates, and All Shares issued by GUYSUCO to NICIL.

December 29, 2017

1 of 2018 Telecommunications Order 2016 (Commencement) Order 2018.

Telecommunications Act 2016 (Act 18 of 2016))

19th day of January 2018 sets as the commencement date of certain provisions of the Act.

January 19, 2018



Order No. & Title Principal Legislation Nature of Order Date of Order 5 of 2018 Guyana Geology and Mines Commission (to conduct geological and geophysical survey Lithium, Tantalum, Niobium, Rare Earth Elements, Gemstones, Chromium, Nickel and Cobalt) Reservation Order 2018

The Mining Act (No. 20 of 1989)

Reservation of State land located in the Cuyuni Mining District No. 4 for prospecting operations by the GGMC.

February 7, 2018

6 of 2018 Insurance Act 2016 (Commencement) Order 2018.

Insurance Act 2016 (Act No. 17 of 2016)

16th day of April 2018 sets as the commencement date of the Act except for sections 59, 60, 61, 62, 63(f), (g), (h), (i) and (j), and 64 which shall come into force one year after the 16th day of April 2018.

April 9, 2018

25 of 2018 Customs (Amendment of First Schedule) Order 2018

The Customs Act (Cap. 82:01)

Amends Part I of the First Schedule to the Customs Act, Cap. 82:0l, to increase the Common External Tariff to 40% on Pine Wood and Pine Wood Products for the period beginning from the 1st day of January 2018 to the 31st day of December 2019.

July 19, 2018

26 of 2018 Petroleum (Exploration and Production) (Tax Laws) (Mid-Atlantic Oil &Gas Inc.)Order 2018.

The Petroleum (exploration and Production) ACT 1986

To give effect to the tax provisions of the Agreement as required under section 51 (2) of the Act.

July 30, 2018

30 of 2018 Judicial Review (Commencement) Order 2018

Judicial Review Act (Cap 3:06)

31st day of July 2017 sets as the Commencement date for the Act and replaces Commencement Order No. 28 of 2018.

August 27, 2018


The Mining Act (20 of 1989) 2nd day of October 2018 set as the commencement date of the Order.

October 2, 2018


The Mining Act (20 of 1989) 2nd day of October 2018 set as the commencement date of the Order.

October 2, 2018



Order No. & Title Principal Legislation Nature of Order Date of Order 35 of 2018 Juvenile Justice (Commencement) Order 2018

Juvenile Justice Act 10th October of 2018 sets as the commencement date of the Order.

October 9, 2018

42 of 2018 Berbice River Bridge (Public Safety) Toll Order 2018.

Berbice Bridge Act Cap. 51:06)

Authorises the Government to maintain and operate the function of the Bridge.

November 1, 2018

43 of 2018 Declaration of Public Road (Mandela Avenue) Order 2018

The Road Act Cap. 51:01 Amends the Schedule of Act by adding to list of Public Roads under the heading “City of Georgetown”.

July 20, 2018



Appendix B: Selected Socio - Economic Indicators

2018 2017 2016 2015 20141 National Accounts Aggregates Forecast Revised1.1 Growth Rate of Real GDP (New Series) 3.40 2.10 2.60 3.20 3.80 1.2 GDP at current basic prices (US$M) (New Series) 3,109.00 3,068.00 3,045.80 2,775.90 2,676.50 1.3 GNP at current basic prices (US$M) at 2006 Base 3,154.00 3,080.00 3,050.40 2,751.20 3,649.80 1.4 Per Capita GDP (US$) at 2006 Base 4,121.00 4,127.00 4,096.60 3,741.20 3,594.70 1.5 Per Capita GNP (US$) at 2006 Base 4,181.00 4,142.00 4,102.80 3,707.90 3,558.90 1.6 Gross National Disposable Income (US$M) at 2006 Base 3,443.00 3,361.00 3,370.80 2,940.10 2,870.20

1.7Private Consumption as % of Gross Domestic Expenditure at 2006 Base 48.00 59.00 57.00 65.90 64.40

1.8Public Consumption as % of Gross Domestic Expenditure at 2006 Base 15.00 15.00 15.70 14.30 13.20

2 External Trade and Finance (US$M)2.1 Bal of Payments Current Account Balance (464.00) (297.00) 13.00 (149.80) (385.20) 2.2 Imports of Goods and Non- Factor Services (G&NFS) (2,220.00) (2,178.00) (1,909.10) (1,900.30) (2,217.50) 2.3 Exports of Goods and Non- Factor Services (G&NFS) 1,512.00 1,610.00 1,606.40 1,306.20 1,348.40 2.4 Resource balance (708.00) (567.00) (302.80) (548.90) (869.50) 2.5 Imports of G&NFS/GDP(%) at 2006 Base 71.00 71.00 62.70 68.80 82.60 2.7 Exports of G&NFS/ GDP (%) at 2006 Base 49.00 52.00 52.70 47.30 50.20 2.8 Net International Reserves of Bank of Guyana 477.00 581.00 596.70 594.70 652.20 2.9 External Public Debt Outstanding 1,297.00 1,241.00 1,162.50 1,143.01 1,216.40

3 Prices, Wages and Output3.1 Rate of Inflation (% change in CPI)1 2.00 1.50 1.30 (1.80) 1.20 3.2 Public Sector Monthly Minimum Wage in G$ (e.g) 64,200.00 60,000.00 55,000.00 50,000.00 42,703.00 3.3 % Growth Rate 7.00 9.10 10.00 17.10 8.00 3.4 Electricity Generation (in MWH) 818.10 859.50 790.30 750.70 716.70

4 Population & Vital Statistics4.1 Mid- Year Population ('000) 745.00 741.40 743.50 742.00 744.60 4.2 Population Growth Rate (e.o.p) (1.20) (2.80) (2.00) (3.50) (3.10) 4.3 Net Migration ('000) (17.20) (18.50) (18.50) (4.50) (12.70) 4.4 Visitor Arrivals ('000) 281.90 247.30 235.30 206.80 205.80 4.5 Crude Birth Rate (per 1,000 persons) 16.10 16.80 19.90 17.60 19.80 4.6 Crude Death Rate (per 1,000 persons) 6.70 6.60 6.90 6.80 7.30 4.7 Crude Marriage Rate (per 1,000 persons) 5.60 5.40 6.00 6.50 6.50 4.8 Infant Mortality Rate (per 1,000 live births) NA 19.90 23.40 22.90 23.30 4.9 Under 5 Mortality Rate (per 1,000 live births) NA 21.50 25.10 24.30 23.90

5 Health and Education5.1 Public Expenditure on:5.1.1 Education as % of National Budget NA 17.20 17.50 16.00 14.80 5.1.2 Health as % of National Budget NA 12.50 11.90 9.50 9.90 5.2 Number of Physicians Per Ten Thousand Population 13.50 11.30 11.20 14.10 13.30 5.3 Number of Nurses per Ten Thousand Population 36.90 37.80 36.20 31.40 30.50 5.4 Number of Hospitals Beds per Ten Thousand Population 23.80 23.80 25.40 25.40 25.40 5.5 Low birth-weight babies (<2,500g.) as a % of live births 9.00 10.00 7.40 11.90 11.70 5.6 Severely Malnourished 0.40 0.90 0.50 0.60 0.60 5.7 Moderately Malnourished 1.40 2.20 2.50 2.20 2.10 5.8 Overweight (%) 1.00 1.10 1.20 1.20 1.20

ITEM



Source: Bureau of Statistics, Ministry of Finance, Ministry of Public Security, Ministry of Public Health, Guyana Tourism Authority and Bank Of Guyana Statistics as at September 2018

2018 2017 2016 2015 20146 Immunisation Coverage Forecast Revised6.1 1 year olds Immunised against DPT/(Pentavalent) (%) 98.00 97.00 97.00 96.00 98.00 6.2 1 year olds Immunised against MMR, Yellow Fever (%) 100.00 100.00 100.00 90.60 100.00 6.3 1 year olds Immunised against Polio (%) 98.00 94.00 94.00 96.00 97.00 6.4 1 year olds Immunised against TB, BCG (%) 98.00 97.00 95.00 90.00 99.00

7 Crime7.1 Reported Serious Crimes2 2,571.00 3,030.00 2,894.00 3,925.00 3,688.00 7.2 of which: Murder 102.00 116.00 142.00 149.00 147.00

8 Exchange Rates8.1 G$ to US$ 208.50 206.50 206.50 206.50 206.50

9 Interest Rates9.1 Commercial Banks' Lending Rate3 10.11 10.55 10.71 10.63 10.869.2 Small Savings Deposit 1.04 1.11 1.26 1.26 1.239.3 Three Months Time Deposits 0.98 1.01 1.17 1.13 1.109.4 Treasury Bill Rate (91 days) 1.54 1.54 1.85 1.92 1.67

10 Debt 430,927.80 342,335.70 330,092.32 317,722.57 329,620.47 10.1 External Public Debt (G$M)4 350,280.00 253,995.00 239,352.09 236,031.57 251,182.47 10.2 Public Domestic Debt (G$M) 80,647.80 88,340.70 90,740.23 81,691.00 78,438.00

1: Revisions were done for indicators 4.8-4.9 & 5.6-5.8 for 2013-2016 and 5.2 for 2016, Series of data presentation is stated.

2: The category 'Reported Serious Crimes' now includes the reclassification of certain offences.

3: The average prime lending rate actually used by commercial banks applicable to loans and advances.

4: Amount denoted in US$ - converted using exchange rate in 8.1

5: Item numbers 8 to 10 are stated as at September 30, 2018.

ITEM


Focus Guyana’s National Budget 2019 Appendix C

Table 1.1 – Sectoral Performance

Budget Revised Budget Actual2019 2018 2018 2017

% % % %Agriculture, Fishing and Forestry 3.46 1.08 (0.86) 0.40 Sugar 10.21 (28.63) (15.92) (25.17) Rice 2.66 0.24 (2.11) 17.91 Other Crops 4.00 5.00 2.30 2.40 Livestock 2.34 21.12 9.57 (2.83) Fishing 1.90 (1.86) 2.30 1.04 Forestry 1.87 0.21 (8.19) 9.14

Mining and Quarrying 3.71 (2.31) 13.02 (8.84) Bauxite 8.59 26.27 20.67 (0.10) Gold 2.47 (13.09) 12.59 (8.28) Other 5.32 46.61 10.02 (17.55)

Manufacturing 3.92 0.87 (0.51) 4.19 Sugar 10.18 (28.61) (15.92) (25.16) Rice 2.65 0.25 (2.02) 17.89 Other Manufacturing 4.00 5.20 2.41 3.10

Electricity and Water 3.22 1.99 6.83 2.79 Construction 10.50 12.00 17.22 11.35 Wholesale and Retail Trade 5.00 6.22 (4.12) 8.71 Transportation and Storage 3.50 2.35 5.30 3.86 Information and Communication 2.00 (40.50) (39.84) 75.16 Financial and Insurance Activities 6.00 1.91 13.07 (2.03) Public Administration 1.50 1.30 1.30 1.30 Education 2.50 2.44 2.44 2.00 Health and Social Services 2.51 2.42 2.42 2.49 Real Estate Activities 5.01 7.50 2.96 5.03 Other Service Activities 5.00 15.00 3.40 3.50

INDUSTRY

Ram & McRae 73 November 2018

Focus Guyana’s National Budget 2019 Appendix C

Table 1.2 - Review 2018

Budget Revised Budget2019 2018 2018 $ %

Current Revenue 238,323 216,872 201,860 15,012 7 Guyana Revenue Authority 223,582 199,491 181,371 18,120 10 Internal Revenue 99,025 87,850 80,437 7,413 9 Customs & Trade 24,890 22,515 19,364 3,151 16 Value Added and Excise Taxes 99,669 89,126 81,570 7,556 9 Corporation Taxes 36,344 32,228 28,239 3,990 14 Income Tax 52,331 45,571 43,408 2,163 5 VAT 54,465 48,649 43,165 5,484 13 Excise Duty 54,465 40,477 38,406 2,071 5 Personal Emoluments 70,151 58,938 58,952 (14) (0) Other Goods and Services 59,843 52,600 52,685 (86) (0) Transfer Payments 83,108 81,874 76,742 5,132 7 Interest Expenditure 6,204 5,851 6,740 (889) (13)

ParticularsChange

Ram & McRae 74 November 2018

Focus on Guyana’s National Budget 2019 - Caribbean...

Documents

Transcript of Focus on Guyana’s National Budget 2019 - Caribbean...