Whither Development Planning:
A Critical Missing Link In The
Macroeconomic Management Of Guyana By Richard Rambarran.
A brief inquiry should be made into a critical
development tool which is missing in the area
of macroeconomic management in Guyana. In
Guyana’s current landscape, much intellectual efforts
are being expended on the development of the oil and
gas sector. In this regard, efforts are not misguided as the
private and social benefits which accrue from this sector
are transformative – culturally, economically and socially.
However, with intellectual efforts being captured in
and around the development of oil and gas and our apt
preparation for its coming, there are still critical tools absent
from our toolbox of macroeconomic management, which
are a necessary condition for the benefits of the sector to
assimilate to the Guyanese people at an acceptable rate,
foremost of which is the development planning. Particularly
the weakened state of development planning, especially
medium-term planning, should be an area for concern in
macroeconomic management of Guyana.
Since the dismantling of the State Planning Secretariat
and the expiration of the National Development Strategy,
both coinciding with the early part of this decade, Guyana
has been faced with two main developments in its growth
story which accentuate the need for the reintroduction of
development planning:
i. The graduation of Guyana’s income classification to
an upper middle-income country, and;
ii. The discovery and reasonable expectation of oil and
gas revenue.
Since the former speaks about the increased scarcity of
financial resources and the latter is oriented to an increase
in the availability of financial resources, they may, prima
facie, seem counterintuitive. Further investigation would
make it pellucid that they are not.
With infrastructural deficit in Guyana, it will be
necessary for the government of the day to expend on
physical infrastructure – capital expenditure which, in the
parlance of development planning, has a long gestation
period. Though the spending rules of oil revenues have not
yet been legislated through the Sovereign Wealth Fund,
there will exist limits to the revenue which government
can access for spending purposes. This should reinforce the
importance of resource allocation.
So as to finance more infrastructural spending, the
government of the day will have to borrow. With Guyana
being classified as an upper middle-income country, we
will be forced to borrow on non-concessional terms, which
means that the cost of accessing these resources will be
greater.
Since physical infrastructure has a long gestation
period, catalytic growth from government investment in
infrastructure can only be realized if the public spending
possesses three characteristics which are mutually
reinforcing:
i. Complementarities;
ii. Inducement to private entities to invest;
iii. External economies.
The characteristic of complementarities means that
they facilitate the investment and buildup of demand for
other goods and services. This will create an inducement
to invest for private entities which will create the key to
economic growth in the form of the multiplier effect. In
dynamic consideration, this should lower the cost of goods
and services.
This consideration for development planning had been
advanced by scholars such as Albert Hirschman, Paul
Streeten and Hans Singer in a doctrine forgotten in the
Latin American & Caribbean region known as Unbalanced
Growth.
It is important for the requisite infrastructure which
have these characteristics and can facilitate backward
and forward linkages. These infrastructural areas need to
be identified and invested in a synergistic manner since
capital expenditure is lumpy and will require the complete
package to catalyze growth. A deliberate effort is required
on the part of government to programme annual economic
spending around the identified facilitating infrastructure,
and have the capital expenditure programme for each year’s
budget feed into the programmed medium-term target. So,
as long as the infrastructural investment facilitates direct
productive economic activity, the rate of growth will be
catalyzed.
Identification of the infrastructure, the financing
mechanism, financial programming and target setting
should be undertaken by the development planning
institute.
A hidden benefit which will be invaluable to a holistic
By Richard Rambarran
Whither Development Planning:
A Critical Missing Link In The
Macroeconomic Management Of Guyana
32 Guyana Inc. 35th Edition
economic development will be the signals to private
investors that a development plan will exude as it relates to
stability and predictability. Foreign and local investors who
can reasonably anticipate government’s policy will find it
less risky to invest as a pattern of consistent fiscal policy to
a programmed target is identified and published and will
incentivize investment in sectors which are periphery to
oil and gas. This may also act as a tool to gain purchase
and mobilize financial resources, since a menu of mutually
reinforcing, synergistic projects are offered. The absence of
a signal of a stable fiscal policy, particularly in an economy
where state is a large spender, can dampen investors’
confidence and damage development peripheral to the oil
and gas sector.
Without a proper functioning development plan
executed by a strong, stable, well-managed organization,
Guyana will not achieve the level of growth which could
potentially be realized, especially if the current course of
crafting fiscal policy is followed.
Whilst the revenue which will accrue from the oil and
gas sector will induce growth higher than the levels we
currently enjoy, Guyana will not realize its potential growth
rate as the underlying deficits in the financial programming
and execution continue to plague.
Ideally, Guyana would benefit from the introduction
of the rubric of indicative planning, where a five-year
development plan can be crafted with specific medium-term
targets. Each annual budget then feeds into the mediumterm target through financial programming and continuity
in a general policy direction is facilitated. This will allow
each year’s national budget to feed into a broader policy
direction broken into programme objectives.
Continuing along the current ad-hoc public budgeting
which we employ will lead to counterproductive, nonsynergistic fiscal policy irrespective of revenue amassed
from the oil and gas sector.
While Guyana commits to the Sustainable
Development Goals (SDGs) and continues to craft its
Green State Development Strategy, these SDGs should
be seen as prescriptive in guiding policy direction and
not be a substitute for development planning and sound
macroeconomic programming.
About the Author:
Richard Rambarran is a development thinker and finance
specialist. He holds a Masters of Arts in Economics and
several certificates from the IMF, Commonwealth and
the United Nations in Macroeconometrics, Financial
Programming, Sustainable Development and other areas.
He is also a lecturer in the Department of Economics at
the University of Guyana and is currently the Executive
Director of the Georgetown Chamber of Commerce &
Industry (GCCI).
