By Vishani Ragobeer
A massive $552.9 billion national budget was presented to the National Assembly on Wednesday and though spending has increased, economist Richard Rambarran says that the low debt maintained is fiscally responsible move.
During the News Room’s post-budget forum on Wednesday, Rambarran said it was “impressive” that the government has managed to keep the country’s fiscal deficit at about seven per cent of the country’s Gross Domestic Product (GDP).
What does this mean exactly?
GDP simply refers to the economic activity of a country calculated from the total value of the goods and services produced in the country in one year. It is through that economic activity that the government is able to generate money used to invest in projects and programmes.
A fiscal deficit occurs when the government spends more than it earns. And though the country does have a seven per cent fiscal deficit – or a debt – Rambarran argued that this is a reasonable level.
“It is very important that the government has been able to craft this budget in a fiscally responsible way so as to not pressure the future generations,” the economist said.
In Budget 2022, the government proposes to spend nearly 50 per cent more money than it spent through the 2021 budget. Rambarran pointed out that this increased spending will be in much-needed areas such as infrastructure, developing human capacity and social services.
The government also plans to provide more disposable income to people through increased cash grants and the removal of more taxes. This all means that the government is spending more and earning less.
With this massive increase in spending, however, that means that the government would have to find more money- potentially leading to a greater debt.
But Rambarran explained that the government is tapping into the oil revenues stored in the Natural Resource Fund (NRF) and not necessarily engaging in greater or unsustainable borrowing.
There is currently US $607 million, or just less than GY $127 billion, in the NRF. And during his budget presentation, Finance Minister Dr. Ashni Singh said the government intends to withdraw the entire sum to help offset the greater spending it intends on engaging in, as detailed in budget 2022.
“This ensures that the accelerated development agenda outlined in this budget, the critical investments proposed, as well as the measures still to be announced, can be financed without excessive borrowing or the introduction of any new taxes,” the Finance Minister stated.
Rambarran, who is also the Executive Director of the Georgetown Chamber of Commerce and Industry (GCCI), pointed out that the accumulation of new revenues could entice countries into exorbitant spending.
In fact, he posited, “… it is very easy to have expenditures outstripping income so that you end up with a large deficit.”
Still, he believed that the government efforts to finance the budget through the use of the NRF, taxes collected and some amount of borrowing is a “fiscally responsible approach”.
And generally, he said that he believes that some of the measures of the budget will be able to spur economic activity.
