There’s no money to give out in early years of oil production

There’s no money to give out in early years of oil production – Jagdeo warns

Aug 17, 2018 News

Opposition Leader, Bharrat Jagdeo

There is no need to build people’s expectations unnecessarily about the monies Guyana will earn once oil production starts in 2020.
This is according to Opposition Leader, Bharrat Jagdeo.
He said given the expenses to be repaid to ExxonMobil for oil production, along with the need to service the Natural Resource Fund, there will be no money to give out in the early years of production
In recent weeks, debate has erupted over a suggestion by political economist Professor Clive Thomas, that government use revenues from oil and gas to give direct cash transfers to every household in Guyana.
Jagdeo, a former Finance Minister, said that it could take as much as five years before Guyana starts to see major earnings when oil production starts in 2020. He explained that this is based on projections that 75% of revenues will cover most of the cost of production, including a US$460M pre-contract cost.
“That’s why most people believe we are not getting big bucks until 2025. That’s when you start getting more money. Not 2020. I pointed this out already and I am so unhappy that we have shifted – many people – the debate to how much we are giving out, rather than whether we have money to give out from 2020,” Jagdeo said at his press conference yesterday.
Jagdeo noted that in the early years, Guyana is projected to collect US$300M.
He rubbished the view that Professor Thomas’ proposal of US$5,000 per household covered only 2 -5% of revenues. Jagdeo noted that US$5,000 per year per household at 200,000 households equates to US$1B.
“That is over 300% of what we are collecting. How could US$1B be 2-5% of total revenue? And that is in the newspaper and nobody challenges it. It is just like people are just saying these weird things and it passes off for analysis and good economics; and there is a whole debate surrounding it. Just look at the numbers,” Jagdeo urged.
He spoke of the growing debt that has to be serviced and pointed to two cases that total $131B – the $100B overdraft and the $31B Guyana Sugar Corporation (GuySuCo) bond.
“If you had to repay that in full that is more than two years of total oil revenue gone. Just gone. Nothing to give out,” Jagdeo noted.
He also pointed out that the Government in its Green Paper on the management of oil revenues has indicated plans to split earnings between the stabilization fund, saving fund and a transformational infrastructure fund.
“If you are going to get US$300M per year for the first three years and that money goes to pay debt, and you put most of it in the Sovereign Wealth Fund, what’s there to give out?” Jagdeo questioned.
He stated that while Government waits on oil revenues, Guyana would have lost 30,000 jobs. According to Jagdeo, sugar production is decreased significantly, while Bauxite would have serious trouble from October if United States sanctions on RUSAL go through. This, Jagdeo estimated, will result in the loss of some 1000 jobs in the sector.
“What are we going to do between 2020 and 2025 unless you manage things tightly? They are setting us up for desperation; starvation basically, in this country, if you go down this road and build people’s expectations unnecessarily. There is no money to give out,” Jagdeo maintained.
He shared the view that Government should utilize revenues to help stimulate activity such as doubling the $10,000 school uniform voucher.

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