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.

1. Agriculture

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.

2. Industry

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.
3. Services

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

 1. Inflation

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 of GDP).

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.