Dear Editor,
In consequence of the discovery of 13.5 billion barrels of oil reserves, some Guyanese dream of Guyana becoming an ‘Abu Dhabi’ of the West; some hail it as the ‘next Singapore,’ while others prefer to be cautiously optimistic and embrace instead the evolution of the ‘One Guyana’ concept.
The prospect of huge oil wealth has triggered uncontrollable exuberance among Guyanese, many of whom have been clamouring for cash grants. However, while this emotional elixir is understandable, it has not necessarily been nourished with accurate data and realistic expectations.
On the contrary, expectations of immediate benefits have been exaggerated, while oil- related data are often misunderstood or distorted. From December 2019 to February 2022 (2 years, 3 months), Guyana’s share of oil revenues, for example, was just US$637 million, which works out at an average of US$283 million annually thus far. This is not a windfall. Juxtapose this sum with the annual remittances of Guyanese for the same period, which was US$384 million annually. No one expresses any excitement about this level of remittances, even though it exceeded our oil revenues for at least two years.
The government is constrained by the NRF Act on the amount of funds it could withdraw in 2022. Any consideration of cash grants must therefore revolve around general revenues. Some critics say that Guyanese have not yet benefited from oil revenues. This is not true, as numerous businesses have been established and thousands of Guyanese employed in the oil sector. If they refer to benefits flowing from Government oil revenues, these will find expression, both directly and indirectly, in several physical and social infrastructure projects.
The point is that while Guyana is poised to earn much more in oil revenues from 2022 onwards, the exhortations of the Guyanese people and politicians and demands for disposition of oil funds must be measured, especially taking into consideration the substantial amounts of oil revenues that will be dedicated to the transformative physical and social infrastructure projects during 2022-2025 and subsequently, as well as to the Sovereign Wealth Fund to secure inter-generational equity.
To emphasise the significance of transformative (capital) projects, the Government has allocated 39% of Budget 2022 for this purpose, and this capital expenditure represents an increase of 109% over the 2021 amount. Withdrawal of US$600+ million from the NRF represents 23% of total 2022 budget.
The WPA party, which is part of the APNU Opposition party, for example, issued this proclamation on Emancipation Day 2021: “We have to stress that the oil wealth, however depleted, must be equitably distributed among all groups. For us in the WPA, this is non-negotiable, and we are prepared to fight tooth and nail for this outcome.” Other states, like Alaska, make annual direct cash grants of US$1,600 per resident from oil revenues, why not Guyana?
But Guyana is not Alaska, which is already highly developed and affluent.
Nevertheless, the case is advanced by proponents of cash grants that several decades of development programmes have failed to lead to any significant reduction of poverty (which is at 32%) and inequality, and they wonder whether this should not be the opportune time to pursue an alternative path of empowerment! And as a short-term measure, therefore, what could be more appealing than cash grants that go directly to people?
Others caution that direct cash grants would only temporarily mitigate poverty and inequality; what is needed instead is the creation of empowerment programmes like skills training, education advancement, job creation, etc.
A Ghanian oil expert, Mr. George Owusu, observes: “I do not believe in subsidies and giving people cash. You have to work for it.” Guyana’s Vice President Dr Bharrat Jagdeo notes “how other countries have splurged their windfall on current expenses, to such an extent that they could not sustain them when their oil windfall ended.” To illustrate this position, he cited the example of Trinidad & Tobago, which spent “99 per cent of its fiscal revenues between 1999 and 2015 to increase transfers and subsidies,” a condition which the country could not maintain.
Any consideration of cash grants for 2022 would come from general revenues, as the US$600+ million NR Fund has already been allocated for 2022 budget. Noteworthy is the social dislocation caused by the COVID-19 pandemic and the related rising cost of living that are building a compelling case for another COVID-19-like Household Cash Grant.
Sincerely,
Dr Tara Singh
