Dear Editor,
Guyana’s economy continues its downward descent with no solutions in sight. More so, even getting the economic forecasts approximately correct continues to be an arduous task for the Finance Ministry headed by Mr Jordan – who, it seems, is just an expert juggler trying to mask the economic decline.
In March 2017, Mr Jordan seemed to have had an epiphany when he declared at a press conference, “Very little manufacturing activity takes place in Guyana…the last number I looked at manufacturing, without sugar and rice milling, contribute a mere five per cent to [gross domestic product] GDP, which is very low.” He said that Guyana cannot continue to borrow, which would, in effect, incur debts on generations to come.
“We have to generate the taxes and income from the economy, even as it is growing,” he had said. Mr Jordan concluded that taxes would boost and stabilize the economy. We have seen that the economy is NOT growing, even as taxes keep on increasing.
This view was severely criticised by Mr Shyam Nokta, President of the Guyana Manufacturing & Services Association Limited (GMSA), who warned that several measures implemented by the Government would work against the competitiveness of the local manufacturers in both domestic and overseas markets, and this includes the re-categorizing of zero- and standard-rated items to exempt. We have seen that the VAT on water and electricity has already escalated the production costs of locally produced goods. This result is now evident as exports constrict and imports expand.
The contradiction of the conclusion by Mr Jordan, that ‘taxes will boost and stabilize’ the economy, was manifested by the fact that even though taxes account for G$ 171.2 billion, or 87.9% of total revenue, the growth rate of our economy fell to 2.1 % in 2017! Yet, our balance of payments deficit is getting increasingly bigger.
An important component, which is the Current Account, is showing a deficit increase from US$12.4 million to US$287.4 million. Our imports will continue to increase as we become more dependent of foreign goods and services, while our exports will continue to dwindle because of the harsh taxation on our local manufacturers, making locally manufactured products uncompetitive at home and abroad. Increased taxation has failed to ‘boost and stabilize’ the economy!
In our present situation, increased taxation due to poorly-thought-out strategies has resulted in: insufficient disposal income; increased cost of living; high prices; poor quality products; loss of markets; decline in the productive sector; scarcity and shortages; job losses; foreclosures, and increases in poverty and crime.
The late Sir Winston Churchill, who had been Prime Minister of the United Kingdom, made an astounding statement, which can be quite applicable to our current situation, when he said, “I contend that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift it by the handle.”
What we need are sound monetary and fiscal policies, but after three years in Government, the Coalition’s performance is getting worse. Oil revenue will never be able to correct the mismanagement of our economy; from all indications, it will only get worse.
The late Milton Friedman, an American Economist, once said the Great Depression was caused solely by the Government’s mismanagement of the economy. This is quite applicable to the current progressively declining state of our economy!
Yours sincerely,
Haseef Yusuf
RDC Councillor,
Region 6