President of Guyana, Dr. Mohamed Irfaan Ali strongly disagrees with suggestions that the country’s windfall revenues from oil production should be distributed to households, across the board. He made this clear during a press conference in Georgetown on Tuesday.
The President explained that doling out cash in that manner would be one of the worst things the government could do, and the quickest way to afflict Guyana with the dreaded Dutch Disease.
Ali was responding to questions about whether Guyana is already facing the resource curse, since its oil economy is leading overall economic growth. Finance Minister Dr. Ashni Singh had said Monday that the oil sector grew 124.8% and that the non-oil economy grew 11.5% in 2022. This resulted in overall economic growth of 62.3% for Guyana last year.
The President argued that the growth of the economy, even when oil is not counted, is still world leading in the prevailing global circumstances. He noted that the prosperity in the oil and gas sector has helped to stimulate non-oil growth. He gave the example of the construction sector, which grew by 26.3% in 2022. The sector is undergoing a boom, so much that production of construction material in-country is insufficient. The government has encouraged locals to ramp up production of aggregate; and plans to continue importing to meet demand.
Ali asserted that the Dutch Disease is not about the growth of the oil sector, but rather, how windfall revenues are disbursed. The President has said that the government would not fall prey to populist narratives that encourage spending of oil revenues for short term gratification. Rather than dole out large cash transfers, the government has said it will prioritise investments in projects with lasting impacts.
“The revenue that comes from the oil sector has nothing to do with the Dutch Disease. It is what do you do with that revenue,” Ali said. “How do you use that revenue in the building out of the economy? How do you use that revenue in building prosperity in the country? How do you use that revenue in building out infrastructure, building up the social sector, health care, education? How do you use that revenue in building a diversified economy that functions on a broad economic platform that supports growth, that supports revenue streams that are much larger?”
Guyana has received more than US$2 billion in oil revenue since production started in December 2019. Projected revenues are expected to balloon further as projects are added offshore every year.
The government has proposed a budget for the fiscal year 2023 to the tune of GY$781.9 billion – oil will fund 26.7%. According to Budget 2023, GY$136.1 billion has been earmarked for the upgrade of thousands of roads and bridges. The construction of the Gas-to-Energy plants has been assigned GY$43.3 billion. Together, these projects account for almost a quarter of the national budget.
On the other hand, the finance minister said that the measures meant to ease cost of living pressures, such as reduced taxes and targeted cash transfers, will amount to GY$50 billion.