Budget 2022 has kept Guyana out of Dutch Disease pathway – Financial Analyst

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Given that Guyana’s 2022 Budget prioritises spending on capital projects as opposed to rapid increases in recurrent expenditure, financial analyst and researcher, Joel Bhagwandin says this is a clear indication that the country is making decisive efforts to steer clear of the Dutch Disease.

In an exclusive interview, Bhagwandin articulated that Budget 2022 contains substantial allocations toward economic diversification – such as investments in agriculture and high-valued crops – and improving the non-oil economic sectors. He contended that this is critical to avoid the paradoxical resource curse and/or Dutch disease which describes the relationship between the increase in the economic development of a specific sector and a decline in other sectors.

Moreover, Bhagwandin highlighted that 40% of the $552.9 billion 2022 budget is allocated towards capital projects—that is, to finance a number of major infrastructure development projects.

Comparing capital expenditure in budget 2022 relative to 2021, Bhagwandin said it is observed that capital expenditure increased by approximately 110% over the previous year. He opined that it is this type of “investment posture” versus reckless spending on recurrent and non-productive expenditure that avoids the resource curse or Dutch disease.

Bhagwandin said, “Budget 2022 laid the foundation for Guyana’s economic transformation. In this regard, several major transformational projects are slated to commence in 2022, such as the gas-to-energy project, coupled with the massive investments in public infrastructure including housing, roads, and bridges, etc.”

He said the outcome in this regard as the mid-year economic report confirmed is that the non-oil economy recorded growth of 8.3%. He said this means that these sectors are recovering from the 7% non-oil shrink in 2020, and that the policies implemented thereafter have yielded the desired outcome.

Some may say the mid-year report confirms that the Dutch disease is already here by citing shrinkages in sectors such as sugar and rice, Bhagwandin explained. But he finds such an argument to be disingenuous, as it ignores the positive outturns in all the other subsectors.

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