Guyanese government can’t afford higher salary increases – financial analyst – Demerara Waves Online News – Guyana

Updated on Sunday, December 5, 2021 at 3:10 p.m. by Denis Chabrol

Joel Bhagwandin

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

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

M. noted that it is not recommended that the cost of employment for businesses and governments exceed 15-30% of total income. Basing his calculation on data taken from various annual reports, he said that in 2019, the cost of central government employment accounted for 33.21% of total revenue.

“Even if, in the current situation, all things being equal, the 20% increase in the salaries of civil servants could potentially lead to inflation of 25% which will effectively have the effect of reducing 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 takes away 25% of the currency’s purchasing power,” Mr. Bhagwandin said in his 4 December 2021 “A contextual analysis of wage increases in the public sector”.

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

Mr Bhagwandin also disagrees with a 20% increase in wages and salaries because big companies and countries cannot continue to pay 50% 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 most rich people of the world,” said Mr. Bhagwandin, an academic. from French Guiana lecturer in economics.

With 90% of current government revenue 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 pays more taxes then there would be enough funds.

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

Mr Bhagwandin disagreed with those who argue that Guyana’s oil revenues, so far amounting to more than US$500 million, could be used to pay higher wages and salaries. Pointing out that oil prices are volatile and that there is a global campaign to switch to renewable energy, he said the money should be spent on improving physical and social infrastructure for Guyana’s long-term development.

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