Dear Editor,
Some civil society groups and individuals have been asserting with uncontrollable zest that Guyana will become another economic miracle as Abu Dhabi or Singapore with the advent of its new petroleum sector. And cliches are literally spreading like wildfire so that some Guyanese now speak loftily as “their journey to prosperity;” “no one would be left behind;” “there could be no better time than now to live in Guyana;” while others say; “the per capita GDP of $US) 7,000 would double in 3 years’ time;” “Guyana will record the highest growth rate in the world in 2022;” and “Guyana would become the richest country in the Caribbean and Latin America.” Nothing is wrong in expressing such strong feelings, but restraint must tame one’s exuberance.
To say that Guyana would have a growth rate of 58.7% in 2022 is a quantitative statement that obscures the existing qualitative conditions. For example, how does a growth rate of 58.7% translate into alleviating poverty whose level of 30% would not be reduced significantly in the short term? However, with several government and private sector projects, like job creation, housing starts, education, quality healthcare, agri-diversification and expansion, being put in place covering all 10 administrative regions, Guyana could, within 3-4 years, reduce the poverty level by 50% or even more.
But the notion that Guyana is flooded with oil money is misleading, and this has the unintended consequence of creating exaggerated expectations, which could feed into frustration and anger. The data indicate that oil wealth so far has only tangentially touched Guyanese. It is trickling down and would begin to flow in 2025. Currently, of the total amount of $(US) 1.244 billion in profit oil (from December 2019 to date) received by Guyana, a sum of $(US) 607.45 million has been approved by Parliament for 2022 budget support. Assuming that this full amount has been withdrawn during 2022, the uncommitted balance in the NRF as of today would be $(US) 637.277 million. By year end, when Guyana would have received the 5 remaining lifts, the total amount of profit oil in the NRF balance is projected at $(US) 1.012 billion, assuming $(US) 75 per barrel for the next 5 lifts in 2022).
When Payara and Yellowtail projects are brought into production (in 2024/2025), then Guyana’s share of profit oil/royalties could reach an average of $(US) 5 billion per year in the current decade (assuming production of 810,000 bpd and a price of $(US) 60 per barrel), according to Financial Analyst JC Bhagwandin. When the other economically viable oil blocks like Orinduik, Kanuka, and Corentyne are put into production, then profit oil would expand appreciably. A major challenge for the government, however, is to keep in check the growing expectations.
The focus here is not over the concerns of a lopsided contract (that has been well documented), but on how observers/critics/groups view and articulate the revenue stream that flows into the national Treasury. The thought of oil money floating around has been creating exaggerated expectations by Guyanese who have begun to show impatience and want their years-long nagging problems, fixed almost immediately. The Parliamentary motion by the opposition political parties seeking a handout of $(G) 200,000 per quarter, per adult, for example, has not been properly conceived.
Even if one assumes that the existing balance of $(US) 637.277 (as of August 15, 2022) in the NR is dedicated to handouts, this works out to $(US) 1,180 per adult. What the motion seeks is a handout of $(US) 3,902 per adult per year that is 3 times more than the total existing balance in the NRF.
The Ghanaian oil expert that visited Guyana to review and advise on the local content law stated categorically that oil money should not be given out as handouts. Many observers share this view that oil funds would benefit Guyanese not in the form of handouts but rather directly and indirectly, through quality education, subsidized housing, jobs, state of the art healthcare system, neighborhood revitalization, rescuing NIS, human resource development, agriculture expansion and diversification, development of agro-processing facilities, improvement in the services sector, public safety, better roads/bridges/airports, hinterland development, and social welfare systems.
Also, unconditional handouts could empower people but only for brief periods. When the funds are exhausted, recipients might still be in the same place. What is defensible is limited conditional cash grants for the creation of jobs, business startups, home renovation, housing starts, and education development. These are what empower people for the rest of their lives and not just for fleeting moments. And of vital importance is the role of work in people’s lives. It is work that gives people a sense of self-worth or self-esteem. Unconditional handouts produce the opposite result and could lead to a culture of dependency. Guyana must avoid this.
Sincerely,
Dr. Tara Singh
