Monday, February 6, 2023

Guyana will invest half of its oil earnings in major projects over next four years

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Guyana plans to spend a little over 50% of its oil windfall revenues over the years 2023-2026, on national development priorities heavily geared toward modernising public infrastructure and improving vital social services.

The expenditure projections are included in the government’s 2023 budget proposal, which was tabled in the Guyana Parliament las Monday by Minister of Finance, Dr. Ashni Singh.

The budget the Minister tabled is valued at GY$781.9 billion, of which 26.7% (US$1 billion) will come from Guyana’s oil fund. This makes for the second year of spending of oil revenues, after US$607 million supported the 2022 budget.

Table shows actual and projected Natural Resource Fund inflows and withdrawals

The government expects to receive US$1.66 billion from oil sales, royalties, and interest in 2023. Expected inflows into the Natural Resource Fund will increase gradually to US$2.16 billion in 2024, US$2.47 billion in 2025, and US$2.78 billion in 2026.

The formula that is used to calculate allowable withdrawals in any given year, allows for significant savings. As spending increases, there will be a corresponding increase in savings through 2026. The government expects to withdraw US$1.16 billion in 2024, US$1.26 billion in 2025, and US$1.27 billion in 2026. The savings balance in the fund by the end of 2026 is projected to be US$5.65 billion. By this time, total spending from the Fund since the first withdrawal in 2022 is projected to be US$5.29 billion.

Authorities have emphasized a policy of investing revenues in capital projects while rejecting calls by some sections of the society for cash transfers to be made to every household. Just Tuesday, President Dr. Mohamed Irfaan Ali said that that is the worst thing the government can do for the country, and that it would be the quickest way to afflict Guyana with the Dutch Disease.

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