The 2025 Budget: A Vision for Progress or a Missed Opportunity?

Talking Dollars & Making Sense

The 2025 Budget: A Vision for Progress or a Missed Opportunity?

By

Rennie Parris, MBA

Welcome back to Talking Dollars & Making Sense. Today, we’re diving into the highlights of Guyana’s 2025 Budget Speech, titled “A Secure, Prosperous, and Sustainable Guyana.” This article offers a quick overview of key elements of the budget and a breakdown of what it means for the average Guyanese citizen and the broader economy. Let’s get into it.

Key Takeaways

Capital Expenditure: Bigger Budgets, Same Old Challenges

• 2025 Budget Surge: The government increased capital expenditure by $92 billion, setting the 2025 allocation at $738 billion, despite ongoing deficiencies in project execution.
• Quantity Over Quality: The focus remains on increasing budgets without addressing the need for improved quality and efficiency in spending.
• Outdated Management Tactics: Instead of adopting strategic financial management, the government relies on the ineffective “buse-out” approach, leaving human capital deficiencies unresolved.

Tax Reforms: Marginal Gains, Missed Opportunities

• Relief for Workers: The 30% increase in the tax threshold to $130,000 and reduction of the personal tax rate from 28% to 25% provide marginal benefits to the working class.
• Broader Tax Base Needed: Effective tax reforms require increased investment in income tax enforcement, ensuring more taxpayers are brought into the system.
• Path to Meaningful Tax Cuts: A broader tax base would enable the government to further increase the tax threshold and reduce both personal and business income tax rates.

2025 Budget: Private Sector Growth Without Transparency

• Private Sector on the Rise: The 2025 Budget showcases the expansion of Guyana’s private sector, signaling economic progress.
• Inclusive Growth Questioned: The true inclusive growth remains unclear without detailed data segmentation.
• SMEs vs. Large Businesses: Disaggregating economic data to distinguish between small and medium enterprises (SMEs) and large corporations is crucial to understanding who truly benefits.

 

Capital Expenditure: Bigger Budgets, Same Old Challenges

The 2025 Budget has reached an unprecedented size, totaling $1.4 trillion, marking a 17% increase compared to the $1.2 trillion budget of 2024. The budget allocates a record-breaking $738 billion to capital expenditure, a bold move aimed at transforming infrastructure across the country. Projects range from improving transportation networks to upgrading educational and healthcare facilities. Yet, despite the lofty numbers, the same issues from previous years remain unresolved: delays, inefficiencies, and questionable quality in execution.

One glaring problem is the government’s reliance on a “buse-out” strategy – publicly reprimanding contractors – as a solution for poor project performance. This approach fails to address the underlying issues of capacity and expertise. Instead, a strategic Build, Borrow, Buy (BBB) framework could pave the way for sustainable progress. By hiring global talent – buy, leveraging expert consultants – borrow, and using world class experts to develop local talent – build, the government can create a foundation for better project management and execution.

The urgency to fix these systemic issues is heightened as Guyana’s infrastructure ambitions grow. According to the IMF Public Investment Management Assessment (PIMA), 41% of all capital expenditures are wasted due to inefficiencies, highlighting the critical need for structural reforms to prevent further waste and maximize the impact of these investments.

Reintroducing Free Tertiary Education

After removing free tertiary education three decades ago, the government has reinstated this critical policy, providing funding to the University of Guyana and technical and vocational institutions. This change makes higher education accessible to all, a welcome step that could empower more citizens to pursue opportunities previously out of reach.

While this policy shift is commendable, it must be accompanied by increased funding for these institutions. By hiring world-class instructors and enhancing research and development initiatives, the University of Guyana and other institutions can enhance its global profile and deliver impactful education. Free education is not just a cost but an investment in human capital that will yield long-term socioeconomic benefits.

Tax Reforms: Marginal Gains, Missed Opportunities

Tax changes in the 2025 Budget aim to bring relief to workers by increasing the income tax threshold to $130,000 and lowering the lower-end tax rate to 25%. These measures are expected to provide modest financial relief for the working class, but the benefits could have been much greater if a more comprehensive approach were taken.

Guyana’s tax system remains heavily dependent on a narrow base. By strengthening tax enforcement and incorporating more taxpayers, the government could generate additional revenue to fund larger tax cuts. For instance, raising the minimum wage for public servants to align with the tax threshold would benefit employees without children and would give all public servant parents the opportunity to benefit from the monthly child tax exemption. In the subsequent budget, the monthly tax threshold should be raised to between $160,000 to $200,000. Similarly, introducing a child tax credit for low-income families who work in the private sector and make less than the tax threshold would directly address financial strain on those who need it most.

A broader tax base coupled with efficient spending could allow for more significant reductions in personal and corporate tax rates, spurring economic growth.

Private Sector Growth Without Transparency

Guyana’s private sector continues to expand, driven by increasing investments and opportunities. While this is a promising sign of economic progress, it raises questions about who truly benefits from this growth. Without clear data distinguishing the performance of small and medium enterprises (SMEs) versus large corporations, the narrative of inclusive growth remains unconvincing.

SMEs are crucial for fostering economic resilience and local job creation. However, many SMEs face barriers such as limited access to financing and regulatory hurdles.

Transparent reporting and data segmentation would enable policymakers to craft better interventions, ensuring that the private sector thrives equitably.

Borrowing and Resource Management

A key element of the 2025 Budget is its heavy reliance on the National Resource Fund (NRF). The government plans to withdraw the full US$2.5 billion allowed this year, bringing total withdrawals to approximately 62% of the fund’s inflows since its inception. While the NRF provides vital financial resources, this level of spending raises questions about sustainability.

The NRF was established to ensure that Guyana’s oil wealth benefits both present and future generations. However, spending such a substantial portion of its inflows within a few years risks depleting a crucial safety net. Without prudent fiscal discipline, the country could face challenges if oil revenues decline or if economic conditions shift unexpectedly.

Borrowing, when used prudently, can drive long-term economic growth by financing critical investments in infrastructure, human capital, and technology. However, inefficiencies in spending and project execution dilute the potential benefits.

The government must prioritize projects with high socioeconomic returns and implement stronger oversight mechanisms. Investments in human capital development can deliver sustainable growth.

As of the end of 2025, the national debt is projected to be US$7.6 billion. The rapid accumulation of national debt – up 4.3 times since 2020 – further underscores the need for a disciplined approach to fiscal management. Guyana’s oil wealth is a unique opportunity, but its benefits can only be realized through strategic and efficient use.

 

Final Thoughts

The 2025 Budget illustrates the government’s vision with significant spending in infrastructure, tax initiatives and one-off measures. However, execution and efficiency challenges remain starkly evident.

Notably, on the backdrop of an election year, the growth rate for non-interest current expenditure has outpaced that of capital expenditures for the first time in this government’s 4 ½ year tenure. This shift reflects measures such as the $100,000 one-off cash grant for Guyanese adults and the $10 billion one-off grant for senior citizens who do not qualify for old-age pensions. While these programs provide immediate relief, they highlight the increasing focus on short-term measures rather than long-term, transformative investments.

With oil wealth serving as a catalyst for development, this is Guyana’s moment to build a prosperous and inclusive future. Success will require bold decision-making, accountability, and a focus on empowering all citizens – especially those who are most vulnerable.

Let’s continue this conversation. Share your thoughts at talkingdollarsgy@gmail.com. In the subsequent articles, I will lay-out my comprehensive national development plan for inclusive growth.

 

Rennie Parris (CFA) is a Wharton MBA graduate and former investment strategist at APG Asset Management and JP Morgan. He writes monthly on Guyana’s economic transformation for the Guyana Business Journal.

Please share your thoughts and questions as we explore how to maximize our nation’s wealth. Until next time, please keep thinking critically about Guyana’s economic future. This column is part of our ongoing coverage of Guyana’s oil sector development. Please support the Guyana Business Journal and Magazine.