GUYANA'S 2007 BUDGET: THE VIEW THROUGH ROSE-TINTED

UNCLAS GEORGETOWN 000175 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV ECON EAID GY SUBJECT: GUYANA'S 2007 BUDGET: THE VIEW THROUGH ROSE-TINTED LENSES ¶1. (SBU) Summary: Minister of Finance Ashni Singh presented the GoG's 2007 budget to parliament on February 2 under the banner of "Building a Modern and Prosperous Guyana." He said spending would hit US$500 million, or about 2.9 less than last year. At the same time, he forecast GDP growth at 4.9 percent, led by sugar, rice, mining and expected revenues from hosting several international events. The package included beefed-up spending in education, health, security and infrastructure. The assumptions underlying Singh's relative optimism have not been tested and may not be entirely valid. End Summary. ¶2. (U) Finance Minister Ashni Singh unveiled the GoG's 2007 spending plan on February 2 to a standing room only parliament. Calling it a blueprint for "Building a Modern and Prosperous Guyana," Singh said the GoG will spend US$500 million (GY$ 100 billion),or about 2.9 percent less than last year. Reduced capital transfers to the parastatal sugar company GUYSUCO explain the difference. At the same time, Singh signaled that the GDP likely will grow 4.9 percent in 2007, led by a 9.8 increase in sugar production, a 4.6 percent increase in rice output, and a 5 percent climb in forestry products. He added that the moribund mining industry--bauxite, gold and diamonds--will regain strength and grow by a collective 3.6 percent. Finally, Singh predicted an inflation rate of 5.2 percent. ¶3. (U) Singh also projected significant revenues associated with the Rio Summit, the Cricket World Cup, and the Commonwealth Finance Ministers Conference, all slated for Guyana in 2007. New hotels, roads and a stadium pushed construction productivity up by about 5 percent, and the GoG is counting on Georgetown's new shine and a just passed casino gambling bill to attract more tourists. ¶4. (U) The budget also anticipates revenues of about US$324.5 million (GY$64.9 billion),a spike of 4 percent over last year. Due to debt relief, the capital account is likely to see an inflow of US$235 million and a hoped-for increase in foreign direct investment, principally in mining, forestry and telecommunications. Singh said customs and trade taxes are slated to earn US$29 million and earnings from the VAT and excise taxes should reach US$124 million. Guyana expects to see a US$41 million surplus in balance of payments. ¶5. (U) The spending plan invests heavily in education, health and public assistance programs, including US$78 million for developing a new primary and secondary school curriculum, teacher training, and school construction. The health sector will receive US$50 million, including US$1.67 million for HIV/AIDS programs. The GoG increased the personal income tax allowance from US$1,500 to US$1,700 per year, which will relieve approximately 16,000 from paying the tax. The police and defense budget, including programs to fight narcotics, arms smuggling and trafficking in persons, is funded at US$46.5 million, a modest increase. Crime in Guyana is one of the biggest obstacles to attracting private investment. ¶6. (SBU) Comment: Singh left parliamentarians with a sunny forecast, and he probably overstated the case. So far, ticket sales for Cricket World Cup are sluggish and neither the Rio Summit nor the Commonwealth Finance Ministers Conference are likely to bring in as many participants as the GoG would like. At the same time, inflation is ooutpacing growth, casino gambling will attract only a local crowd, and traditional agriculture is struggling, particularly rice and sugar. Darkening those storm clouds, Singh and his budget failed to offer any incentives to foreign investment or to collapse well-known barriers to doing business with Guyana. The 2007 budget is more likely to keep Guyana limping along in its present state than to maneuver it toward a modern and prosperous future. End Comment. Robinson