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Guyana Eliminating Payments Imbalances
The third major goal of the ERP was to eliminate internal and
external payments imbalances. In other words, the government was
seeking to eliminate the public sector deficit on the one hand and
the current account deficit on the other. The public sector
deficit--the gap between government revenues and overall government
spending--had reached 52 percent of GDP by 1986. This level was
unsustainable and was an alarming increase over earlier deficits:
an average of 12 percent of GDP during 1975-80 and an average of 2
percent of GDP during 1971-75.
The government attacked the public sector deficit in a
straightforward manner: it cut spending and sought to enhance
revenues. The government halted all monetary transfers to troubled
state-owned enterprises (with the exception of the Guyana
Electricity Corporation). As a longer-term measure, the government
began studying the public enterprises--the heart of the statist
economy--to determine which ones should be privatized (wholly or
partially) and which ones should be closed. By 1990 the government
had plans to allow significant privatization of the sugar and
bauxite industries. In addition, the central government planned to
limit expenditures by delaying salary increases and eliminating
unnecessary civil service positions. Such fiscal austerity was
useful to the economy. Still, the need to service the foreign debt
limited the extent to which the government could cut back on
spending; the government slated half of 1989 expenditures for
interest payments.
The government attempted to raise revenues by absorbing the
parallel economy to broaden the tax base, by improving the
collection of the consumption tax, and by reducing import duty
exemptions. Starting in 1988, the government required companies to
pay taxes on earnings from the current year, rather than the
previous year. This set of expenditure and revenue policies
produced measurable results but failed to eliminate the serious
financial difficulties facing the government.
Data as of January 1992
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