From windfall to downfall

Oct 01, 2018 Features / Columnists, Peeping Tom

Winning the lottery is not always a windfall. It can prove to be a downfall.
Yesterday, ‘Dem boys’ recounted a true story about the man who used to ride a bicycle and weed and mow people’s laws. One day he bought a lottery ticket and landed the jackpot – $ 105 million.
In those days that was plenty money that people believed you could not finish spending. The man never saw a million dollars in his life, now had to contend with one hundred times that amount.
This man who had very little friends suddenly found that everybody wanted to be his friend. One businessman turned up outside the lotto winner house and told him that he came to give him some advice and invited the man to a drink.
The lotto winner used to drink white rum. The businessman told him that he had to drink whisky. The businessman told him that he had to move out from the shack he was living in since people would kidnap him.
The lotto winner ended up buying an expensive property. He ended up buying an expensive sports car. In no time at all, he had blown all his winnings. He is back to weeding and mowing lawns. Dem boys talk the full story yesterday.
Winning the lottery is therefore no windfall. If that money is not properly utilized it can end up being your downfall. This is what Chatam House is trying to warn Guyana about.
The Guyanese people believe that the oil discovery is like winning the lotto and that Guyana will become rich. But what Chatam House is saying to us is that if we do not utilize this money properly, we could end up squandering every cent.
The Guyana government, according to the Kaieteur News has signaled its intention to use oil revenues for infrastructural development. However, the country has a serious problem with its absorptive capacity.
The economy cannot absorb more than two or three major projects at a time; the government has problems with the implementation ratio of the public service investment programme because of this very problem.
So if US$300 is poured into the economy come 2021 as expected, what is to happen to this money? The capacity to spend this additional sum does not exist
Chatam House has warned that even though infrastructure spending can contribute to economic growth, the problems with absorptive capacity should caution emerging economies to moderate increases in public investment and to build public investment management capacity.
Chatam House pointed to the dangers of cost overruns and delays in infrastructural projects, pointing out that in more than half of the cases it had reviewed, there were problems in these areas.
Guyana therefore has to be wary of an overemphasis on infrastructure projects. It may end up building a whole set of white elephants like was done in Trinidad and Tobago which, like Venezuela, is now reeling from a failure to diversify its economy.
Trinidad’s oil has run out. Its gas is running low. The economy is in dire straits. There is not much to fall back on because when the oil money was flowing, the Trinidadians made the same mistake which Guyanese seems to be headed for. It decided to invest heavily in infrastructure.
With the collapse of the oil economy, Trinidad is now looking to Guyana for help. If the situation in the twin-island continues to deteriorate, then Guyana will end up facing a gush of refugees from that country.
Guyana, therefore, has to take note of what Chatam House is saying. It should not rush headlong into massive infrastructure projects which can end up heavily indebting the country and forcing it into financial default.
Like the man who won the biggest lotto jackpot in Guyana, the oil wealth can all be gone faster than we think.

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