The third major goal of the ERP was to eliminate internal and external payments imbalances. In other words, the government was seeking to eliminate the public sector deficit on the one hand and the current account deficit on the other. The public sector deficit--the gap between government revenues and overall government spending--had reached 52 percent of GDP by 1986. This level was unsustainable and was an alarming increase over earlier deficits: an average of 12 percent of GDP during 1975-80 and an average of 2 percent of GDP during 1971-75.
The government attacked the public sector deficit in a straightforward manner: it cut spending and sought to enhance revenues. The government halted all monetary transfers to troubled state-owned enterprises (with the exception of the Guyana Electricity Corporation). As a longer-term measure, the government began studying the public enterprises--the heart of the statist economy--to determine which ones should be privatized (wholly or partially) and which ones should be closed. By 1990 the government had plans to allow significant privatization of the sugar and bauxite industries. In addition, the central government planned to limit expenditures by delaying salary increases and eliminating unnecessary civil service positions. Such fiscal austerity was useful to the economy. Still, the need to service the foreign debt limited the extent to which the government could cut back on spending; the government slated half of 1989 expenditures for interest payments.
The government attempted to raise revenues by absorbing the parallel economy to broaden the tax base, by improving the collection of the consumption tax, and by reducing import duty exemptions. Starting in 1988, the government required companies to pay taxes on earnings from the current year, rather than the previous year. This set of expenditure and revenue policies produced measurable results but failed to eliminate the serious financial difficulties facing the government.
Data as of January 1992