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Govt. banking on future oil money to pay off loans being borrowed to develop country
By Shervin Belgrave
Kaieteur News – Firm in its decision to not renegotiate a better deal for the lucrative Stabroek Block with ExxonMobil, the government is banking on future oil revenues to pay off loans being burrowed to develop the country.
This was explained by Vice President, Dr. Bharrat Jagdeo, during a press conference at Freedom House.
Kaieteur News had asked the VP to explain how his government plans to develop Guyana with the “meager” revenues it is currently receiving from its vast oil resources.
Guyana’s Vice President, Dr. Bharrat Jagdeo
In his response, the Vice President agreed that indeed the oil money is “not much at this time” before highlighting that the government plans to borrow now for development and pay back later when it has the “capacity to do so”.
“…So it’s a combination of spending what we have, and a judicious set of borrowing, where we know based on future capacity we can repay”, Jagdeo said.
Although the former President repeatedly agreed that the contract is not favourable to Guyana, he believes that by allowing ExxonMobil to quickly ramp up production, the country will in the future have a huge spike in oil revenues.
He anticipates that the spike could occur as early as 2027. While this may be true, it should be noted that the anticipated increase in oil revenues from the Stabroek Block is only because ExxonMobil will be producing more oil in 2027 than it is producing now. In otherwords, Guyana’s take from the Stabroek Block remains meager if the contract is not changed.
Apart from banking on the future spike in revenues from the Stabroek Block to help pay off some of the country’s loans, Jagdeo might also be hoping that more money can be raked in from better terms his government has placed in new contracts for oil blocks that are still to be auctioned and explored. The government might be hoping too that the investment it is making through loans to diversify Guyana’s economy can bring in profitable returns.
With regard to loans being borrowed to develop the country Jagdeo at the press conference said that his government will be investing in key areas such as infrastructure, health care, education and the social wellbeing of the country.
“So you would agree with me that healthcare is very important for people and all of our people quality health care that is why we are investing… Soon you will have free university education in Guyana which we promise in our manifesto but we are investing a lot in scholarships…We are investing back in children.”
“You heard I said so at the beginning-over 3000 people have seen substantial increases in their disposable income since we got into office – the pensioners the young kids etc. We are investing in the long term infrastructure projects’’, Jagdeo explained while adding that his government’s borrowing plan is “a combination of putting in place, the infrastructure for future social services and the economic areas that would create future wealth.
As the government takes this route towards development, Guyana should take warning from Ghana’s current situation.
On Sunday Kaieteur News reported that despite having a vibrant oil sector, the country was still forced to beg the International Monetary Fund (IMF) for a US$3B bailout.
The IMF Executive Board approved a 36-month Extended Credit Facility (ECF) arrangement for Ghana in May, totalling about US$3 billion.
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