Even as it lauded the Finance Ministry for implementing some of its recommendations in the 2019 $300.7 billion Budget, the Georgetown Chamber of Commerce and Industry (GCCI) Wednesday afternoon raised some concerns.
In a statement, the Chamber said it was disappointed that there was no adjustment to the tax regime in relation to fuel prices or no stimulus to recover job losses in certain critical sectors.
The GCCI was also concerned about the Government’s macroeconomic policy and slow rate of implementation of the Public Sector Investment Programme (PSIP).
See full statement below:
The Georgetown Chamber of Commerce & Industry (GCCI) wishes to commend the Minister of Finance and the staff at the Ministry of Finance on the preparation of Budget 2019. The National Budget remains pivotal in charting the country’s development path and as such, its policy measures are important.
During the 2019 Budget consultations, the GCCI, in meeting with the Ministry of Finance, made a number of recommendations based on discourse with its members, empirical and policy analysis. The Chamber of Commerce is pleased to see that some of the recommendations which were advanced to the Minister were well-received and taken on-board.
Specifically, the Chamber of Commerce has noted that its requests to review the taxes on pesticides and limestone used in the agriculture sector, has resulted in exemptions being granted from Custom Duty and Value Added Tax (VAT).
The GCCI is also pleased that its suggestions in the aviation industry have resulted in the VAT exemption of aircraft engines and main components/parts. In addition, the GCCI welcomes a sectoral-targeted reduction in corporation tax and views this reduction as a step in the right direction for the facilitation and promotion of private sector development.
Concern about Fuel
However, it must be registered that the GCCI is particularly disappointed that there has been no adjustment to the tax regime of fuel despite its suggestion. It should be noted that in 2018, the price of fuel had a disastrous effect on the private sector earnings as costs skyrocketed and continues to affect every aspect of private sector operations, from manufacturing to distribution.
Macroeconomic Concerns
Of more worry, is the macroeconomic dynamics of the fiscal sector, where, Budget 2019 indicates the Government’s intention to finance about 80 percent of the sizable fiscal deficit ($32.84B of the $41.49B) from borrowing from the domestic economy; compounding this is the concern that there is a projected increase in taxation by 9.9 percent, in an economy which is projected to expand by 4.6 percent.
This outstripping worries us We also remain concerned with issues of slow rate of implementation of the Public Sector Investment Programme (PSIP) and the long gestation period of capital expenditure; this is likely to create a drag on the economy as money is withdrawn faster than it can be injected. In the external sector, the large drawdown on the net foreign assets of the Bank of Guyana of US$104.1 million remains of concern; the sustenance of which is critical to external viability and the preservation of macroeconomic stability of the country.
Job Creation and Consumer Spending
We noted that 2018 is expected to recorded marginal increases in labour intensive sectors such as agriculture, fisheries, with forestry expected to grow 1.1 percent. Additionally, the mining and quarrying industries are expected to decline in year 2018. Given the dismal economic performance in these labour-intensive sectors, we are disappointed that the required stimulus needed to recover job losses were not adequately addressed in Budget 2019.
Further, with a decline in spending on the Agriculture sector from $19.4B to $17.1B (from 7.1 percent of the Budget to 5.7 percent of the total Budget), the Chamber of Commerce believes that the dismal performance in the sector, unfortunately, is likely to continue. This is expected to have a negative impact on consumer spending in 2019.
