Oil cash transfers: “You have to work for it!”

Dear Editor,
Ghanaian oil expert Mr George Owusu rejects the idea of cash grants, and contends: “I do not believe in subsidies and giving people cash. You have to work for it. I would rather spend the money on training, so that their income level will go up.”
Notwithstanding, there is a feeling/perception among many Guyanese, including Opposition politicians, that oil money is spilling over the country’s treasury, and they therefore wonder why a substantial portion of the wealth is not being shared among Guyanese.
Despite claiming that cash handouts “promote corruption and political favouritism,” PNCR political Leader Mr. Aubrey Norton advocates that huge cash grants of US$5,000 per annum be given per household (6/3/23), without evaluating whether the NRF could afford this massive payout. I hope Mr. Aubrey Norton is not deluded by his assertion: “oil wealth is only benefitting PPPC elite, friends and family,” (1/1/2024) and is seeking comfort in Reuters News Agency’s hype: “Oil money is flooding into Guyana.” (8/29/22).
If Mr. Norton’s dream should ever see the light of day, that would lead to a huge depletion of the NRF account in the sum of US$1.2 billion annually (an amount equal to 37.1% of Guyana’s 2023 budget); but, more significantly, it would throw into disarray the purpose of the NRF account by torpedoing its foundational principles that ascribe funds to be used for budget support, inter-generational equity, and national emergencies.
Also, huge cash transfers would serve as a disincentive to work; put the economy at risk of overheating, with attendant inflationary pressures; as well as have a high probability of laying down the preconditions for the onset of the “Dutch disease”, the vortex of which is waiting to gobble up the spoils.
The Opposition forces believe that hefty cash handouts should take precedence over the implementation of transformative development projects in education, health, agriculture, transport, and other sectors. Additionally, do they really care how huge annual amounts of handouts would be sustained in the medium and long terms? Given the narrow window of opportunity to exploit this oil resource, combined with price volatility of crude oil (between 2020-2023, oil prices fluctuated from US$70pb to US$111pb to US$78pb and to US$78pb in 3rd Qtr of 2023), not only would the risk be too high to consider huge handouts, but also such a measure would defeat the foundational principles (stated before) of the NRF.
Here are some vital facts for consideration. Oil production commenced in the Stabroek block on December 19, 2019. From then to September 30, 2023, Lisa Destiny FPSO and Lisa Unity FPSO produced 283,209,117 barrels of crude oil. The total inflows (royalty and profit oil plus interest) for the period (12/19/2019-9/30/2023) were US$3.135 billion. The Government withdrew a combined 51.3% of this sum in 2022 and 2023 (US$1.609 billion) for budget support in 2022 and 2023 in accordance with the First Schedule and Section IV, paragraph 16(2) of the NRF Act 19 of 2021. The balance of US$1.525 billion, as of September 30, 2023, is in the NRF account, and not in any politicians’ pockets, as recklessly asserted by some critics.
Finally, I observe that oil production tends to vary with the price movements of Brent crude oil. A Pearson ‘r’ was calculated, and there exists a positive moderate correlation between production and price levels (r = 0. 658) which is significant at the p<.05 level.

Sincerely,
Dr Tara Singh