Govt’s reserves at BoG have always been positive
January 16 2020
Dear Editor,
The Ministry of Finance notes with alarm the comments of former President of the Georgetown Chamber of Commerce and Industry, Deodat Indar, at a roadside meeting, recently. We are quite appalled at his interpretations of economic issues, and are, equally, flummoxed at his wild allegations and fear mongering on critical aspects of the economy. To the less informed, his ramblings would have been sure to cause anxiety.
It appears that we are indeed, in the ‘silly season’, but this does not give any person the licence to make unfounded pronouncements and believe that those pronouncements will go uncontested. It is for this reason that the Ministry of Finance would like to add context to, or refute outright, the allegations made by him.
Mr. Indar claims the following:
That the government has spent all the monies and sold all of the gold held in reserves at the Central Bank. FACT: A cursory check with the Bank of Guyana will confirm that our reserves have always been positive. Additionally, reserves of the Bank are held distinctly and separately from the Consolidated Fund, the latter of which is used by Government for expenditure.
That Guyana is unable to pay its import bill because the government has spent it all. FACT: The reserves of the Bank of Guyana are used, principally, to pay for the imports of fuel and the servicing of Guyana’s external debts. All other imports are financed through the commercial banks, foreign currency accounts retained by approved persons and/or foreign direct investment. The Central Bank’s reserves are adequate enough to meet the identified imports. All of the reports from the international financial institutions on Guyana’s economy including the most recent IMF Article IV Country Report never commented negatively on the state of Guyana’s reserves. In fact, these reports have lauded government’s efforts to avoid the presource curse and its management of the economy.
That the introduction of VAT on forestry products caused imported pinewood to be sold cheaper than local woods. FACT: Indar neglected to mention that it is the Minister of Finance who initiated the establish-ment of the Inter-Ministerial Round-table with the Guyana Manufactur-ing and Services Association (GMSA) as a means of addressing challenges within the sector; that this Roundtable included the Ministers of Natural Resources and Business; that it is the government through the Ministry of Finance that sought an increase in the Common External Tariff from 5% to 40% on imported pinewood and pinewood products as a means of ensuring that local wood and wood products become more competitive; that it is the government through the Minister of Natural Resources that stipulated import permits for importers of pine wood as another means of managing its importation and ensuring that it cannot be sold cheaper than local wood products; that $120 million was set aside to begin a forest inventory; that logs and rough lumber for the saw milling industry became VAT exempt from January 1, 2018; that $50 million was allocated for the establishment of a dimension stockyard. Though sadly, the stockyard was never realised as an agreement could not be reached on a preferred model.
That the government has increased taxes. FACT: Indar has fallen into the mantra peddled by his political party that the government instituted 200 taxes since coming to office. However, neither he nor his fellow peddlers have been able to list these taxes simply because it is a lie. The truth is, this government has implemented tax reform that is unrivalled by any previous govern-ment at a similar stage. Among the progressive measures were sub-stantial movement in the income tax threshold, from $600,000 to $780,000 or 1/3 of gross income, whichever is higher; lowering of personal income tax to 28% on the first $180,000 of chargeable income per month; removal of income tax on employees’ NIS contributions; lowering of company income tax to 25%; lowering of VAT to 14%; increase in VAT threshold to $15 million; and increase in the number of zero rated and VAT exempt items. Indeed, more than 100 reform measures were instituted that benefitted businesses and indivi-duals. In addition, the Guyana Revenue Authority, which now enjoys real autonomy, has strengthened its monitoring and enforcement which has resulted in substantial expansion of the revenue base and facilitated the massive increase in workers’ wages and development across the country. More persons and businesses are now paying their true and correct taxes as a result. Mr. Indar may have also missed the news that the economy is growing and therefore, it naturally follows that the tax base will grow and, by extension, so will the amount of tax revenues collected.
That the government has spent 1.2 trillion dollars and cannot account for it. FACT: This unmitigated lie is really not worth a response; however, the Ministry of Finance has made public all of government’s spending through the publication of the annual budget, the Mid-year report and similar reports and publications from the National Tender Board and Administration. In addition to infrastructural, social, educational and other projects, government has had to repay billions of dollars in judgements won against the former government by local and overseas investors and businesses, bail out GuySuCo to the tune of nearly $50 billion, and subsidised the tolls for citizens using the Berbice Bridge.
That investors in the oil and gas sector are the only beneficiaries of concessions; that local investors do not receive the same benefits. FACT: This is palpably false; it has been debunked on several occasions by the Minister of Finance and the Commissioner General. The investment agreement signed between the government and operators in the oil and gas sector states very clearly that the operators and their subcontractors will benefit from the same concessions, no matter their nationality. It is common knowledge that the oil and gas industry requires significant technical expertise and it would be naïve, unreasonable and downright callous to suggest that Guyanese were deprived of the opportunity for concessions as there are no Guyanese-born oil and gas companies of significant experience. However, again, subcontractors will benefit, regardless of their origin.
That the government has said it will give five thousand United States dollars to each citizen. FACT: It is Professor Clive Thomas who has been championing what he refers to as the ‘Buxton Proposal – Cash transfers to households’ and the People’s Progressive Party that endorsed it soon after (See Demerara Waves report of October 3rd, 2019). There is no record of the government saying that it will be handing out unconditional cash transfers to citizens. In fact, the government is on record that while it will consider avenues to provide incentives to citizens through the revenues gained from the energy sector, those incentives must be sustainable.
That the government has no plans for the oil and gas revenues that it will earn and that there is no local content policy. FACT: The Ministry of Finance successfully presented a Green Paper on Guyana’s sovereign wealth fund – the Natural Resource Fund (NRF) – which was fully legislated. As a result, the NRF is a solid piece of legislation that provides for the mechanism that will govern how revenues earned from our natural resources will be saved, spent or invested with full Parliamentary and public over-sight. Further, the government remains committed to managing these revenues according to best practices, including the Santiago Principles, as demonstrated by Guyana’s recent acceptance as an associate member of the International Forum of Sovereign Wealth Funds (ISFWF). Additionally, the Green State Development Strategy sets out the priorities of the country, and revenues from oil will be utilised within the context of this national development plan. It should be noted that the GCCI, which Mr. Indar served, was invited to participate as part of the GSDS Expert Groups to ensure that the vision being elaborated was inclusive and representative of all facets of Guyanese society. Additionally, we wish to remind Mr. Indar that he is on record endorsing the draft local content policy spearheaded by the Department of Energy, which makes his criticisms about the local content policy disingenuous.
In closing, we would like to remind Mr. Indar that he has a duty to be honest with the people of this country whose votes he seeks. We hope he takes the time to remedy his uneven understanding of the economy and how it functions so as to ensure that when he speaks at events, the public is consuming factual and accurate information so that they may make informed and unbiased decisions. Voter persuasion through the peddling of distorted information is tantamount to abuse of public trust and calls into question one’s suitability for public office.
The Ministry urges the public to conduct its own due diligence and research, and to reject misinformation.
Yours faithfully,
Winston Jordan
Minister of Finance
