Budget 2010: Looking back

The Minister of Finance has announced that he would be presenting the country’s National Budget tomorrow February 8, 2010. This can be considered early, given that the law allows him to present the budget by March 31 of each year, while providing him with the money to run the business of government until the budget is passed. The relative timeliness of the 2010 National Budget is commendable. It is, however, in obvious contrast with his annually late presentation of the mid-year report which goes way, way, beyond the two month deadline, even though as this column has consistently pointed out, the report is routinely misdated. Hopefully, the Minister will tell Parliament how his ministry finds it possible to present the full year accounts five weeks after the end of the year but needs about twenty weeks to present the half-year report.

It is a matter of speculation whether the timing of the budget presentation has anything to do with the education the government would have received about the constitution and the law on the public finances of the country during a recent debate on supplementary funds and the Contingencies Fund, or to pre-empt the publication of another damning audit report on the use and abuse of public funds.

Constitutional deprivation
The Minister has shown that, certainly in relation to the National Budget, he has no time for Article 13 of the constitution which requires that citizens and their organisations be provided with opportunities to participate in the management and decision-making processes of the state and, more specifically, “on those areas of decision-making that directly affect their well-being.” Let us see whether any organisation, trade union, the ubiquitous and loquacious Private Sector Commission, the Guyana Manufacturers’ Association, the multiplicity of Chambers of Commerce, the Consumers’ Association and other private sector bodies will make even a murmur on this constitutional deprivation. If the budget, the principal policy instrument affecting every citizen not incidentally or singly, but in almost every aspect of her/his life is not considered appropriate for, not only consultation on, but meaningful participation in, then Article 13 should be repealed by any constitutional means necessary. If it is so considered, then it is time that this disdain be ended and the constitutional rights of citizens, and the corresponding duty of the government and its ministers, be respected and observed.

Today’s Business Page, barring a few minor comments, will not attempt a preview of the 2010 budget, but instead look back at some of the main issues Ram & McRae had raised in their Focus on the 2009 Budget, and offer a preview of some of the issues which the firm will be raising in its review of the 2010 one. Having examined three budgets and speeches from this once promising Minister, witnessed his utter lack of imagination and his passion for long and expensive spending lists, and been overcome by the tedium of increasingly partisan political rhetoric, I no longer expect much from Dr Singh’s budget speeches. That prevents any disappointment and allows for pleasant surprises.

The state of statistics
One thing I will certainly hope for and that is that the Minister will put to rest the confusion he and the Bank of Guyana caused when, in their respective half-year reports, one was reporting growth in the economy while the other reported a decline – both using the same source, the Bureau of Statistics. It will be fascinating to see what the Minister announces as the 2009 growth (decline) and inflation rates to be, which no doubt will be attributed to the same Bureau of Statistics. In this regard, the Minister will be ahead of the bureau, which up to three days ago had posted on its website inflation data only to September 30. It would be unfortunate if, soon after the Minister announces his number, the information on the website is updated. If it were, that would do little for the integrity, independence and professionalism of the bureau. If we cannot rely on the quality and integrity of the official statistics or the competence of the Audit Office, it is near impossible to engage in any meaningful analysis of or discussion on the country’s economy or finances.

Flood and drought
Last year, the Minister of Agriculture Robert Persaud, responding to public disquiet over the delay in addressing the flood problem, announced that the government was treating the construction of a $3B Hope Relief Channel as “a priority,” a decision that met with dismay from a number of professionals who raised several questions, including the source of the technical study and advice on which the multibillion dollar investment was being made. Even though the country is now experiencing a drought, the debate on the budget should at least answer those questions. For if the critics are right, then not only will we have wasted three billion dollars, but we will have lost valuable time and done little to remove the danger of a recurrence.

Focus 2009 constructed what the firm referred to as the expectation gap – the difference between the growth rate set out in the Economic Recovery Programme – 4% – and the actual growth rate. The Guyana economy performed better than many of the more open economies which are only now recovering from some steep declines. The Minister would of course, be reluctant and disappointed to announce that for the first time under his stewardship, the economy recorded a decline, particularly after projecting growth in real GDP of 4.7%. The graph will be updated in Focus 2010.

Oversized government
Last year Focus examined the explosion of the size of government, including the huge increases in the number of ministries, corresponding with a large growth in the number of statutory bodies. Space constraints do not allow for the table presented last year showing how from eleven ministries in 1992, the number has increased by 50% in 2009, with many of the ministries now having two ministers, dozens of ex-ministers, scores of advisors, and hundreds of contract employees. Budget Focus will tabulate some of the more shocking cases of contract employees, noting that the concern is not about the concept, as much as about the numbers and who some of those advisors are.

We recalled last year that the 2003 budget speech had reported that an IDB-financed Public Service Modernisation Programme was expected to be concluded and the consultant’s final report would be used as input into the design of a major modernisation project. We recommended that the IDB financed report be tabled and considered in the National Assembly and its recommendations critically reviewed with a view to implementation. That recommendation was clearly ignored by the government which seems more concerned to provide jobs for members of the ruling party, and increasingly their children.

Meanwhile the obviously over-financed IDB, the EU and others, continue to make further billions available for the government to spend, sometimes in the most wasteful manner, even as large segments of the population live in poverty.

The regulatory environment
In regulatory matters, last year belonged to Clico – the insurance company that represented perhaps the worst case of regulatory failure this country has ever witnessed. Focus 2009 identified and discussed the level of effectiveness of the multiple regulatory bodies, with most of them not equipped with adequate in-house, full-time analytical skills or legal expertise, and each operating well below what can be considered a moderate level of effectiveness. It recommended the establishment of a Financial Services Commission (FSC) under which is brought the supervisory functions of the Bank of Guyana, Securities Council and the Office of the Commissioner of Insurance. It further recommended that the Financial Intelligence Unit be placed within the Bank of Guyana or under the FSC.

Despite the colossal failure of the Office of the Commissioner of Insurance, the only action taken by the government in 2009 was to bring that office under the Bank of Guyana, which itself was at fault in Clico’s collapse. One particular statement by that unit, responding to a press statement about Clico, signalled an unacceptably harsh tone from an otherwise moderate institution.

Meanwhile the policy-holders and depositors of Clico find themselves in legal limbo even as the Bank of Guyana holds more than three billion dollars in funds available to pay them.

Other issues
Some of the other issues addressed in Focus 2009 were sugar, about which we continued to hear much almost throughout the year, debt management which has continued its inexorable rise during 2009 and for which Ram & McRae has recommended a statutory borrowing cap. Focus 2009 touched too on tax reform which has assumed the status of an annual, obligatory promise. The GRA recently announced that it had substantially exceeded its 2009 collections budget, even as the hugely expensive and much touted TRIPS was cheated to the tune of more than $300 million. I doubt whether the Minister would even bother to mention this, the largest single cash fraud ever to have been perpetrated on a state institution in Guyana.

Focus 2010 will revisit, as appropriate, some of these matters but will look at others as well. It will examine in some detail the serial violations of the constitutional and legal provisions governing receipts and expenditure, supplementary appropriations, and the Contingencies Fund. We will look as well at the abuse of the contracts to undermine the self-undermined Public Service Commission, the abuse of the Public Corporations Act to divert proceeds of privatisation from the Consolidated Fund to the politically controlled NICIL, whose executive head is Mr Winston Brassington himself at the centre of the QAII deal, and who secured funds from NIS and NBS for the Berbice Bridge Company.

We will touch too, the debate on the LCDS that was probably the biggest issue in 2009, the limitations, conflicts and performance of the Audit Office, the allocation and distribution of the national sports budget, and take another look at the Companies Act 1991, and the Deeds Registry.

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