GCCI commends gov’t on Budget 2021
The Georgetown Chamber of Commerce & Industry (GCCI) wishes to commend and congratulate the Minister, Dr. Ashni Kumar Singh, Senior Minister within the Office of the President with responsibility for Finance for his presentation of National Budget for the year 2021.
The GCCI also wishes to recognize the diligent work of the staff of the Ministry of Finance, who have done great service to the nation through the preparation of two national budgets within six (6) months.
By way of invitation of the Government of Guyana, the GCCI was invited to provide input in a consultative process in the preparation of the national budget, to which we participated. In line with its mandate of representation of the private sector, the GCCI provided input to the consultation which broadly aligned with private sector development and, improvement of the business environment.
Context of Budget 2021
During 2020, Guyana’s economy grew by 43.5 percent which was registered on account of the commencement of oil production. However, the non-oil economy during 2020 contracted by 7.3 percent – the largest contraction in economic growth for Guyana. The effects of the novel Coronavirus (COVID-19), the political impasse related to the General and Regional Elections (GRE) 2020, and the signals of the dictatorship through the subversion of the will of the people, resulted in slowed investment, halted expansion and thwarted confidence in the Guyanese economy.
It is with this in mind that the GCCI recognizes and commends the Government for its effort, through its fiscal programme, in ensuring that the much-needed restart to the economy is provided by way of the largest national budget in the history of Guyana. This is particularly welcomed by the members of the Chamber, and indeed the wider private sector especially in light of the fact that enterprises, investors and the Guyanese public continue to navigate the unchartered waters of COVID-19, facing tremendous hurdles and challenges never experienced before.
By way of sectoral priorities, the Government is expending approximately $172.4B, or 45 percent of its $383.1B on education, public infrastructure and healthcare. These sectoral priorities, from the perspective of the GCCI, are extremely important for ensuring the broad-based economic development of Guyana. The expenditure of $60.7B, or 15.8 percent of the national budget on education, ensures that the Guyanese people, the country’s most precious resource, are further developed, trained, retrained and upskilled for an evolving labour market. This sectoral priority, the largest of the three, can be seen as the backbone of a government’s programme for economic development.
A total sum of $58.2B of planned expenditure on public infrastructure is the second largest component of the government’s fiscal programme. This provides the financial grounding for the buildout of the country’s infrastructure and the basis for re-starting economic growth. Construction, the sector with one of the highest multiplier effects in the economy, is anticipated to provide employment and spinoff effects to catalyze economic growth. The GCCI anticipates full utilization of this sum by way of efficient management of the Public Sector Investment Programme (PSIP) as this will go a long way to spurring private sector activity and re-starting a virtuous cycle of growth during this year.
The $53.5B on the healthcare sector, or approximately 14 percent of the national budget, can well resonate with the people of Guyana and needs no gloss as to why this is important, particularly in this year. It is anticipated that this expenditure will help to keep the Guyanese population safe and provide the resources for navigation of the challenges on the health sector which COVID-19 has inflicted.
Government’s expenditure of $22.6B in agriculture represents an increase over previous years in Guyana. With the production of oil and gas and continued discourse on the threat of the Dutch Disease, this programme to support the development of the agriculture sector is a laudable initiative.
This is particularly in light of the reduced support for the sector through shrinking sums of sectoral allocation in previous budgets. The expenditure of $13.2B in housing, water and sanitation and $6.2B toward the justice system, provides the resources upon which the Government’s social sector development can occur. This can be seen as a step in the right direction for ensuring welfare improvements for the Guyanese people.
The key measures of Budget 2021 are listed below:
- Zero-rating of Construction and Home Ownership (building materials)
- Reduction of duty on industrial cement from 15% to 5%
- Increase in low-income mortgage ceiling from $10 million to $12 million
- Removal of VAT on mobile data for residential and individual use
- Removal of duty from ATVs for use in hinterland
- Reinstating of the capital gains tax whereby the sale of assets that were owned for more than 25 years will not attract capital gains tax will not attract capital gains on their disposal
- Restoring VAT zero rate on basic food items and household necessities
The zero-rating of construction and home ownership materials, the reduction of duty on industrial cement, the increase in low-income mortgage ceiling and the restoration of zero-rated VAT on basic food items and household necessities can be seen as measures which directly support the development of the construction sector, reduce the cost of home ownership and place monies back directly into the hands of households.
These measures directly support the vision of His Excellency, the President of 50,000 homes in 5 years and represent another marker in the realization of the President’s vision for Guyana. Compounded by the budgeted sum of $10B for revision of wages and salaries for 2021, once economic activity is restarted in the economic sectors, the virtuous cycle of growth can then be supported by these increases during the latter half of 2021.
As has been mentioned before, the construction sector has the potential to restart the economy, create jobs, provide an impetus to other sectors and drive economic growth. The measures which have been taken in Budget 2021 must be recognized as targeting the sector with the greatest potential to restart the economy and benefit Guyanese households. Recognition of this by the leadership of the Government and enacting of this in the national budget will ensure that economic recovery ensues this year.
Overall, the Georgetown Chamber of Commerce & Industry is positive that Budget 2021 has the potential to stimulate economic growth, restore investor’s confidence, sends the right signals to enterprise and has the potential to chart Guyana’s development, guided by the vision of the leadership of our nation. The leadership and members of the Chamber of Commerce remain supportive as partners in national development and will continue to work with government to chart a higher growth trajectory for Guyana.