Guyanese government cannot afford higher pay increases – financial analyst – Demerara Waves Online News- Guyana



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Last updated on Sunday 5 December 2021, 15:10 by Denis Chabrol

Joel bhagwandin

Guyanese government cannot afford a 20% wage and salary increase because the public sector wage bill is already high and such a wage increase will reduce purchasing power by more dollars in pocket, analyst said. banking and finance.

He argued that the 7 percent wage and salary increase retroactive to January 1, 2020 is decent, among other reasons, because it was higher than mid-year inflation of 5.6 percent. “The total cost of employment for civil servants is in the highest bracket that can be fiscally permitted compared to current state revenues,” said Mr. Joel Bhagwandin.

M. noted that the cost of employment for businesses and governments is not recommended to exceed 15 to 30 percent of total income. Based on his calculations from data taken from various annual reports, he said that in 2019, the central government employment cost was 33.21% of total income.

“Even if, in the current situation, provided that all other things being equal, the increase in the wages of 20% of civil servants could potentially lead to an inflation of 25% which will have effectively reduced the purchasing power of the currency by 25%. %. From a different perspective, the 20% increase would not have been a sensible long-term fiscal policy decision, if it potentially took 25% of the purchasing power of the currency, ”Bhagwandin said in his speech. Accessed December 4, 2021. A Contextual Analysis of Public Sector Salary Increases ”.

He further explained that the only way for a 20 percent increase in wages and salaries not to affect purchasing power would be for it to be saved rather than spent on consumption or invested in entrepreneurial ventures that would also lead to consumer spending.

Mr. Bhagwandin also disagrees with a 20 percent increase in wages and salaries because large companies and countries cannot continue to pay 50 percent or more of their income in employment costs. The call for a 20% increase cannot be met simply because the total cost of employment above 30% and in this case above 50% is not financially and fiscally sustainable, even in the poorest countries. richest people in the world, ”said Bhagwandin, an academic. from Guyana, lecturer in economics.

With 90 percent of current government revenues coming from taxes, the banking and finance expert estimated that only if Guyana’s private sector becomes more competitive, attracts foreign direct investment, and stimulates and enables the business environment. and pay more taxes than there would be enough funds.

He noted that in Trinidad and Tobago, in 2011, the total cost of employment was 15% of current income, which increased to 27% in 2020, remaining lower than Guyana in 2011 with 26% of income. current which rose to 33.21% in 2021.

Mr Bhagwandin disagreed with those who argue that Guyana’s oil revenues, which so far stand at over US $ 500 million, could be used to pay higher wages and salaries . Stressing that oil prices are volatile and that there is a global campaign to switch to renewables, he said the money should be spent to improve physical and social infrastructure for Guyana’s long-term development.

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