The government of Guyana understands its responsibility to ensure that it does not manage the economy in a manner that will cause it to overheat. However, the government is also aware that it is important to prepare the nation for the next stage of development.
The need to find the delicate balance was recently explained by Vice President Dr. Bharrat Jagdeo.
At his most recent press conference, Dr. Jagdeo reminded that long before the release of recent reports which highlight the importance of avoiding the overheating of the economy, the government was cognizant of its responsibility.
He said, “we stated that we were concerned about two things, the Dutch Disease, that can harm countries like ours that have windfall: and, overheating of the economy. They are separate but people confuse them.”
The Vice President went on to explain that the Dutch disease has to do with the change in relative prices that structurally makes non-oil or traditional sectors uncompetitive. He said that the government’s focus on diversification, building the non-oil economy, investing in human capability that can help avoid the Dutch disease, are all testimony to the fact that it knows what it is doing in this regard.
On the overheating side of things, Dr. Jagdeo said that the government is aware of all the great global inflationary pressures, “the view is that if you spend too much you also strengthen those inflationary pressures, and it affects poor people.” He said with that in mind, the government is watching its spending. However, while watching its spending, the government cannot neglect key responsibilities.
Dr. Jagdeo said, “There is a big demand to spend on everything, but we have to also keep the balance. We are trying to keep the economy from overheating but at the same time building the things that would be crucial to the next stage of development. The power plants, the highways, schools, hospitals, sea defence, drainage and irrigation systems, the farm-to-market roads, the service industry, those are crucial investments you have to make which cannot wait forever.”
The Vice President said that all those investments are necessary in preparation for growth and expansion “when the oil goes.”
Guyana expects significant inflows of oil revenues over the next few years. This comes with the ramp-up in oil production in the offshore Stabroek Block, where ExxonMobil has discovered nearly 11 billion oil-equivalent barrels.