Guyana intends to invest billions of dollars in oil revenues in the country’s capital projects to build capacity and transform infrastructure. According to the Vice President, Dr. Bharrat Jagdeo, this is “absolutely necessary” to get the most out of the country’s most lucrative sector.
At a recent Guyana Manufacturing and Services Association (GMSA) dinner, the VP emphasized that “capital expenditure is vital for the growth of any business.”
The official has, time and time again, argued against using the oil revenues for cash transfers across the board to households. The government has said it prefers a more targeted approach to assist the most vulnerable.
Dr. Jagdeo said government will not engage in the “unproductive splurge” of its oil revenues.
The VP reminded that from 2015, when the previous administration (now opposition) took office, the country’s capital budget dwindled up until 2020.
“That was a neglect of productive capacity and the infrastructure necessary for future growth. We are not going to fall into that trap where we splurge on the current side of the budget and avoid spending on the capital side,” he outlined.
Guyana’s first withdrawal from its Natural Resource Fund (NRF) is being used to support a capital-heavy 2022 budget, which places significant focus on capacity building and infrastructural transformation, in line with government’s plans.
The Vice President had said government is steering clear from making the mistakes of other oil-producing countries that embarked on unsustainable spending and then faced challenges because of a downturn in oil revenues.
Countries like Trinidad and Tobago experienced this.
The Inter-American Development Bank had examined T&T’s case in its 2018 report, The Dutch Disease Phenomenon and Lessons for Guyana: Trinidad and Tobago’s Experience.
According to the IDB, T&T’s then administration increased transfers and subsidies tenfold in 15 years. Out of TT$284.1 billion in fiscal revenues collected between 1999 and 2015, the government spent TT$283.9 billion on transfers and subsidies alone, The IDB wrote, calling it “hand-to-mouth” spending.