A. Growth Rate and Production
5.1 Mr. Speaker, I am pleased to inform this House that, after declining
in 2000, real growth is set to return in 2001. Real GDP is expected to
grow by 2.8 percent and this is premised on strong growth in both the traditional
and non-traditional sectors.
5.2 Sugar output is expected to increase by 6.9 percent to 292,297
tonnes. This performance would be as a result of better weather conditions,
which would improve planting and reaping of the canes. Rice production
is projected to increase by 20 percent to 350,000 tonnes, after falling
to around 292,000 tonnes in 2000. Other agricultural activities are targeted
to grow as follows: other crops, 2 percent; livestock, 4 percent; fishing,
4 percent. On the other hand, forestry is again projected to decline; this
time by 7.7 percent, reflecting the continuing difficulties being faced
by operators in this sub sector.
5.3 The targets for the industrial sector reflect the mixed performance
expected by the sub sectors. In the mining and quarrying, total production
of bauxite is projected to decline by 3.5 percent to 2,594,000 tonnes,
in part because of problems being experienced by Bermine. Gold output is
expected to increase by 4.6 percent to 498,196 ounces. A very small increase
in output is being projected for diamonds.
5.4 The engineering and construction sub sector is expected to increase
by 4 percent, in keeping with the large public sector investment programme,
the expanded housing drive and increased lending for construction of and
improvement to homes.
5.5 Financial services should rise by 3.5 percent, in line with the
increased demand for credit by the private sector. Other services are expected
to grow by 4 percent.
B. Inflation and Monetary Policy
5.6 Mr. Speaker, an inflation rate of 6 percent is targeted for 2001.
This rate is in line with that achieved in 2000 and is consistent with
the very low rates returned for the first five months of the year and the
projections over the next seven months.
2. Monetary Policy
5.7 The Government will continue to pursue a monetary policy that
is aimed at mopping up excess liquidity in the system, maintaining price
stability, protecting the balance of payments, and promoting private sector
expansion in the economy. Also, monetary policy will be supportive of the
projected growth in the economy. In this regard, we intend to maintain
gross international reserves at about four months of imports. Private sector
credit is projected to grow faster than nominal income growth.
C. Balance of Payments
5.8 Mr. Speaker, the international economic environment has always
had an impact on the terms of trade, investment, income and growth in Guyana.
This has become stark over the past three years, in the wake of globalisation
and liberalisation. Thus, even though the volume of exports is projected
to grow appreciably, earnings from the export of merchandise are expected
to increase less slowly to US$515 million. On the other hand, imports of
merchandise are projected to increase to US$605 million, with fuel accounting
for 21.5 percent of imports. Net Services are projected to grow by US$4.8
million while transfers should increase by US$1 million.
5.9 The anticipated developments in exports and imports will result
in a current account deficit of US$127 million. The capital account is
projected at US$122 million. The overall deficit of the balance of payments
is targeted at US$5 million in 2001.
D. Fiscal Targets
1. Central Government
5.10 Mr. Speaker, the developments on the international front, which
are adversely affecting export earnings, and those locally, especially
in the aftermath of the general elections, have forced the Government to
adopt a cautious stance in its projections. Thus, current revenue of the
Central Government (net of rice levy) is projected to grow by 6.5 percent
to $44 billion.
5.11 Current expenditure (net of rice levy) is budgeted to grow
by 6.8 percent to $45.8 billion. The largest increase of 15 percent occurs
in the “Other Goods and Services” category, in part because of the additional
expenditures incurred in holding the General Elections and the projected
increase in spending as a result of the HIPC and Enhanced HIPC relief.
An amount has been set aside to meet increases in wages and salaries, and
pension. Projected interest payments, on an accrued basis is $12.3 billion,
slightly less than the revised 2000 figure. However, cash interest payment
is budgeted at $9.1 billion, down from $9.9 billion in 2000.
5.12 The primary balance of the Central Government is projected to
decline by 2.7 percent to $10.5 billion while the current balance is expected
to deteriorate by $229 million. Capital expenditure should grow by 9.7
percent to $18.7 billion. As a result, the overall deficit before grants
should increase by $1.9 billion to $20.4 billion. However, a 57 percent
increase in HIPC relief to $8.9 billion, which more than offsets the decline
in project and balance of payments grants, facilitated an improvement in
the overall deficit after grants from $8.5 billion (6.6 percent of GDP)
to $7.4 billion (5.3 percent of GDP).
5.13 Mr. Speaker, in spite of the lateness of the budget and the relative
flatness of the revenue projections, this budget is bigger than last year’s.
Total expenditure is estimated at $64.7 billion, 4 percent more than the
$62.2 billion budgeted in 2000.
2. Public Enterprises
5.14 Mr Speaker, largely because of setbacks at Bermine and a projected
fall in Guysuco’s revenue, the receipts of the enterprises are budgeted
to decline by 3.2 percent to $44 billion. However, total non-interest expenditure
should grow marginally by 1.3 percent to $42.8 billion. Total operating
expenses should reach $46.2 billion, reflecting the growth in the capital
programme to $3.3 billion, from $2.1 billion last year. The overall
balance of the enterprises is expected to decline from a surplus of $975
million (0.8 percent of GDP) to a deficit of $2.2 billion (1.6 percent
3. Consolidated Balance
5.15 Mr Speaker, the anticipated improvement in the operations of
the Central Government will not be sufficient to off set the deterioration
in the performance of the public enterprises. As a consequence, the overall
deficit of the non-financial public sector is targeted to decline from
4.9 percent of GDP in 2000 to 6.7 percent of GDP in 2001. However, the
disbursement of over $15 billion in external inflows, which have been programmed,
will allow the Government to achieve its objective of repaying the banking
system, thus allowing the private sector access to more credit.