Dear Editor,
Over the past two weeks, several Guyanese have been complaining that they do not know what is happening to the oil money. They say, for example, “Guyana will become rich with oil money but we have not gotten any of that money or benefit yet.” They want to know what the Government is doing with “all the countless millions of oil money!”
Ever since Professor Clive Thomas stated that the Government should give each household an astronomical sum of US$5000 from oil revenues (costing US$1.05 billion or G$215 billion, or 56 per cent of 2021 budget), Guyanese have also been continually bombarded with such extravagant notions as “Guyana is on the cusp of being another Dubai,” or of “becoming the next Singapore,” or “Guyana will become one of the richest developing countries.” While untamed exuberance might be responsible for these startling statements, they do not reflect social reality. Creating exaggerated expectations could lead to exasperation and frustration whose expression could be unsettling. It seems that public education on the possible disposition of oil revenue is essential to allay any further misgiving.
An expectation of a coherent movement towards equity tends to generate greater expectation of equity. Professor Clive Thomas’ assertion of hefty oil cash grants keeps resonating in many Guyanese minds and feeds into their concept of fairness and equity. Additionally, the recent cash grants delivered by the Government lend support to the thesis of greater expectation of equity. As examples of movement towards equity, the Guyana Government has either reduced or removed taxes from several items that has led to an increase of G$9 billion in disposable incomes.
To supplement the tax relief, the Government has made cash grants (COVID-19 pandemic, flood, one-time payment to pensioners and public assistance recipients, front line workers) and increased the child education grants, the old age pension and public assistance payments, thus increasing consumers’ disposable income by another G$19.6 billion (5.1 per cent of national budget). If the amount released through the tax measures are combined with the new/increased grants, the total increase into the economy of disposable income is G$28.6 billion (7.5 per cent of national budget).
There is a perception that the source of the several types of grants given out by the Government is oil revenue. The Government has repeatedly stated that no money has been taken out from the oil revenue to fund any programme. The current net proceed from profit oil is US$436 million which sit in the Federal Reserve Bank in New York. However, measured, this does not constitute the massive oil wealth that is reported sometimes in the media. It should be noted that the annual remittances (US$484 million) of Guyanese abroad are more than the combined oil revenues thus far.
The oil revenue would increase gradually until the next 3 years. After then, it would take off to higher levels of return as oil production begins to expand. By 2026 Guyana may be able get more than US$500 million per annum. What is particularly important to know is that the Government states it will not touch the oil revenue until the Petroleum Act is revised, the Petroleum Commission is established, and the Natural Resources Fund (referred to as Sovereign Wealth Fund) is modified.
Once these actions are completed, oil revenues would be utilised to fund infrastructure projects (roads, bridges, airports, communications), education, health, poverty reduction, agriculture expansion, neighbourhood revitalisation, etc that would have been integral to the Government’s economic development strategy. The Government expects that the implementation of these categories of projects would bring Guyana fully into the 21st century. A substantial portion of oil revenues (20 per cent-25 per cent) could be placed into the SWF for future generations’ benefit.
There is no plan to use a portion of oil revenue as direct cash grants to households as suggested by Professor Thomas and his APNU operatives. However, should the need arise, the Government might consider further cash grants to be taken from general revenues but that such grants be utilised on targeted household projects such as home improvement, skill enhancement, business start-up, etc. These should be “conditional” cash grants that must be used for the intended purpose and where accountability is necessary.
As indicated before, an expectation of creating equity would tend to generate higher expectation of equity. Guyana must be careful, therefore, not to allow this frenzy to continue but to develop strategies to either halt or mitigate it in order to avoid the creation of an entitlement society. The Guyana Government must continue to educate people on the disposition of oil revenues, work to reduce unemployment and poverty, as well as, encourage the boosting of the productive capacity of labour and capital. It is work, more than anything else, that gives dignity and self-worth to people.
Sincerely,
Dr Tara Singh
