Finance Minister defends Government’s management of finances
Senior Minister in the Office of the President with responsibility for Finance, Hon. Dr. Ashni Singh has defended the Government’s spending during the five months since taking office.
The Finance Minister was responding to questions posed by Opposition Member of Parliament, Hon. Annette Ferguson on the overdraft of the Consolidated Fund during Monday’s sitting of the National Assembly at the Arthur Chung Conference Centre (ACCC).
MP Ferguson asked the Finance Minister to explain the overdraft balance of the Consolidated Fund as at December 31, 2020, compared to the balance as at August 2, 2020, when the Coalition left office.
Dr. Singh said the overdraft at the end of 2020 stood at $116.6 billion, compared to an overdraft of $78.7 billion as at August 2, 2020, representing a deterioration of some $37.9 billion.
“The change in the balance is attributed to a number of factors. First of all, there was in fact a stock of cheques that were issued by the APNU+AFC government that had not yet hit the bank balance. That in fact amounted to approximately $5.2 billion,” he told the National Assembly.
He said the PPP/C Government also inherited liabilities which it had to address. These included a $12 billion debt owed to Guyana Power and Light, which Government managed to cut in half early in its term.
“In addition to that, it would be recalled that when we assumed office, there was no plan in place to respond to COVID-19. No support had been provided to the people of Guyana.”
Dr. Singh said the Government had to quickly prepare the health sector to deal with the pandemic; finances to ramp up testing, purchase drugs and medical supplies, provide COVID-19 relief to households, and support frontline and public sector workers.
The Minister added that in the 2020 Emergency Budget, the Government introduced an extensive list of measures to remove burdensome taxes on the public.
“All of those measures had a fiscal impact which contributed to the movement in the balance on the Consolidated Fund.”
The Minister turned to the management of the APNU+AFC Government. He said that if one were to take account of all bank accounts at the Central Bank at the time the PPP/C demitted office in April 2015, they would find that Government was a net depositor in the Central Bank, with $16 billion in aggregate deposits. This is the opposite of an overdraft.
Dr. Singh explained that the APNU+AFC spent so wastefully during its term, that Government moved to a net overdraft position of $93 billion by the end of July 2020. He said that overdraft as at the end of 2020 was $128 billion.
The Finance Minister noted that on several occasions, domestic and international agencies such as the International Monetary Fund had flagged the accumulation of the overdraft balance on the Consolidated Fund, reflecting that the APNU+AFC Government was conducting fiscal operations without mobilising appropriate financing.
He explained that if one were to aggregate the overdraft inherited at August 2, 2020 with all of Government’s debts, the Government would have been in violation of the statutory ceiling on debts. This led the PPP/C Government to seek a swift adjustment of the debt ceiling in the National Assembly to avoid such a violation.
That APNU+AFC deteriorated Guyana’s financial position so dramatically, is a matter Dr. Singh found to be significant, as the former Government had steeply increased the tax burden on the Guyanese public while eliminating critical social programmes.
“One would have expected that all of these initiatives would have resulted in an improved fiscal situation and would have alleviated the need for the incurrence of this overdraft,” he said.
The Minister said the Government plans to retire the overdraft using debentures, a debt instrument of varying tenors.
“We have now initiated action to extinguish the overdraft by replacing it with the debentures to which I just referred, and that process is in fact underway and will be completed before the end of June…”