THE APNU+AFC’s spokesperson on finance in the National Assembly contends that the PPP/C government will add some $5.9 million in debt per household. First off, her calculation is incorrect, which is dealt with hereunder.
It is important to note that the increase in debt burden per household would only be realised in a real sense if the increase in debt is accompanied by increase in taxes. However, this has not been the case. In fact, the PPP/C government has been offsetting the increase in debt burden per household with tax reliefs and both direct and indirect subsidies per household.
Secondly, in my calculation, I chose 2021 as the base year and not 2020. Reason being, the total public debt stock was unlawfully understated by the APNU+AFC between 2015-2020 by over $100 billion, inter alia, the Bank of Guyana overdraft.
In 2021, the PPP/C government remedied this financial illegality by converting the overdraft into treasury bills, which was then added to the total stock of debt. As such, the total public debt is projected to increase by $1.163 trillion by the end of 2025 from where it was in 2021. Therefore, with a total household of approximately 300k, the increase in the debt burden per household works out to $3.9 million albeit in nominal terms. This means that the opposition finance spokesperson overstated her estimate by $2 million.
As established earlier, the increase in the debt burden is in nominal terms per household, which is offset in real terms by tax reliefs, subsidies and indirect subsidies as well as measures to increase disposable household income by the PPP/C government, vis-à-vis, reduction in taxes. To this end, net disposable income is projected to increase by $288.8 billion by the end of 2025 to reach an estimated $415.7 billion from $126.9 billion in 2020 (calculations are based on the personal income tax data and the effective tax rate).
Additionally, the indirect Cost of Living (CoL) measures aggregate to an estimated $324 billion, giving rise to a combined total of $612.8 billion increase in household income, coupled with household direct and indirect subsidies.
The 50 per cent anticipated reduction in electricity costs by the end of the year when the gas-to-energy (GtE) project is realized, will add another $20 billion in savings, adding to disposable income at the household level. Altogether, these measures translate to approximately $2.1 million per household.
In summary, the increased debt per household as alluded to by the opposition spokesperson amounts to $3.9 million per household and not $5.9 million. Be that as it may, this is a nominal increase in the sense that it is not actually realised such that the tax burden per household has not increased to service the national debt.
The fact is that the PPP/C government has reduced taxes, which means that each household will benefit from tax reliefs per household of approximately $2.1 million in real terms.
(Note: This demonstration was merely to show that the fiscal measures in the budget together with the strategic investments in the various sectors and projects: how these would translate to net household benefit, offsetting nominal household debt. There is a menu of other measures and other factors excluded from this analysis, which would significantly add to the net household benefit.)