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Joel Bhagwandin, a self-proclaimed financial analyst, criticized Nigel Hughes’ analysis of the central government’s regional budgetary allocation. In Mr. Bhagwandin’s letter to the editor entitled “Exposing the flawed analysis by Nigel Hughes,” published in yesterday’s Guyana Chronicle, he made the conclusion that since Region Four’s budgetary spending is the highest per Km2 amongst all the regions, the regional government is adequately spending on the Region 4 residents. For a second, I thought I was reading a comedic article but tragically this was no joke.
Every self-respected global publication measure spending per capita, which means spending per person living within the country. That’s why we use GDP per capita, healthcare spending per capita, infrastructure spending per capita, budgetary spending per capita etc. Governments measure spending per capita to determine how much resources is being spent per resident. In addition, it allows us to compare spending across many countries with different population sizes.
For the sake of argument, let’s explore Mr. Bhagwandin’s analysis. In the letter to the editor, Mr. Bhagwandin states “Region Three, which has a population density of 29 persons per Km2 with a size of 3,755 Km2, the capital allocation of $898 million represents $239,000 per Km2.”
“Region Four, on the other hand, is the smallest administrative region with only 2,232 Km2 and the highest population density of 140 persons per Km2. As such, the capital allocation for Region Four per Km2 represents $350,000 per Km2.”
“Region Six is the third largest Administrative Region of the ten regions, with a low population density of three persons per Km2 and the lowest capital allocation per Km2 relative to Region Four, Region Six represents $27,000 per Km2.”
Mr. Bhagwandin concludes “the capital projects for Region Four is the highest per Km2 considering as well that Region Four has the highest population density relative to all the other Administrative Regions.”
In Mr. Bhagwandin’s hocus-pocus economics, he failed to account for population density. Region Four’s population density is 4.8x that of Region Three’s (140 persons per Km2 / 29 persons per Km2) and 46.7x that of Region Six’s (140 persons per Km2 / 3 persons per Km2). Using the density size difference between Region Four and that of Region Three, the spending per Km2 for Region Four should have been $1,147,000 per Km2 (4.8 x $239,000 per Km2). This means that when compared to Region Three, Region Four’s total budget allocation should have been $2.6 billion instead of $782 million.
Using the density size difference between Region Four and that of Region Six, the spending per Km2 for Region Four should have been $1,261,000 per Km2 (46.7 x $27,000 per Km2). This means that went compared to Region Six, Region Four’s budget allocation should have been $2.8 billion) instead of $782 million.
Mr. Bhagwandin goes on to state that since the central government spends a lot of money in Region Four, the region four’s government doesn’t need more in budgetary allocation. Who in their right mind believe this hogwash? I don’t even think Mr. Bhagwandin believes this Nancy story. The regional government is an autonomous government and needs adequate resources to service its Constituents. Region Four has the lion’s share of the country’s people and naturally will need the most resources to service its residents.
After reading Mr. Bhagwandin’s sophomoric analysis, I’m inclined to take everything he says with a grain of salt.
Rennie Parris, CFA