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World Bank urges Guyana to be wary of environmental consequences, overheating the economy – as Exxon ramps up production
Kaieteur News – Given ExxonMobil’s aggressive approach towards unlocking more oil in the Stabroek Block which already holds almost 11 billion barrels of oil equivalent resources, the World Bank is now warning Guyana to be wary of the environmental and economic consequences that come with an accelerated pace of development.
The financial institution has been one of the nation’s key development partners since the discovery of oil back in May 2015. Over the years, it has spoken glowingly about the nation’s potential to be a model State with oil and gas as well as the significant revenues that will come. In 2019, under the David Granger administration, it had provided the nation with a US$20M loan to put the right systems in place that would help with effective management of the oil bonanza. But since assuming office, the PPP/C administration has placed a hold on the funds. The new government said it will reassess how funds have been spent already and determine a new agenda that is in line with its approach and goals for the sector.
In an updated economic review of the nation, the World Bank said Guyana, the country that is poised to be the fastest growing economy in the world fuelled primarily by the expansion of oil output, must be mindful of its approach to managing the sector.
The World Bank was keen to note that the real challenge will be for Guyana to transform this new found oil boom into a better standard of living for citizens.
In this regard, the financial institution said poverty reduction will depend on the performance of the non-oil economy through job creation, including those linked to public investment projects and local content for the oil sector, as well as the redistribution of resource revenues.
The bank said, “For long-term pro-poor growth, and in line with the country’s new national development strategy, more efficient and effective public service delivery is essential. This is particularly the case in areas like health, education, and digital connectivity, which improve human capital.”
It added, “Sound and transparent management of oil revenues will be critical to avoid increased polarisation and further erosion of already weak institutions and governance. Reforms to support private sector growth are also critical…”
The lending agency further stressed that Guyana must, now more than ever, be mindful that it is highly vulnerable to oil-related shocks, both to price and output.
As regards spending of the oil money, the World Bank said the two-year-old oil producer needs to be wary of overheating the economy. It said there will be great temptation for increased spending as the money flows in. The bank cautioned that the nation must spend according to the effectiveness of its systems to monitor and control wastage and ensure efficiencies.
In parallel, it said Guyana must be aware of the fact that increased production brings a high-risk of devastating environmental consequences. These include massive oil spills and flaring which releases toxic chemicals into the environment.
In closing, the financial institution said the nation has to demonstrate that it is making decisions with these risks in mind, especially as the world moves rapidly into a transition from fossil fuels.
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