Oil Cash Transfers: “You have to work for it!”

Jan 11, 2024 Letters

Dear Editor,

The Ghanian 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 favoritism,” PNCR political Leader Mr. Aubrey Norton advocates for huge cash grants of $(US)5,000 per household per annum (Demerara Waves: 6/3/23) without evaluating if the NRF could afford this massive payout. I hope that Mr. Aubrey Norton is not deluded by his assertion: “oil wealth is only benefitting PPPC elite, friends and family,” (SN: 1/1/2024) and 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 that would 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 dis-incentive to work; put the economy at risk of overheating with attendant inflationary pressures, as well as, have a high probability of laying down the pre-conditions for the onset of the “Dutch disease,” whose vortex 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 on how huge annual amounts of handouts would be sustained in the medium and long term? 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 111 pb to $US78pb and to &(US) 78 pb in 3rd Qtr. 2023), not only would the risk be too high to consider huge handouts but also such measure would defeat the foundational principles (stated before) of the NRF.

Here are some vital facts for consideration. Oil production commenced on 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 $(US)3.135 billion. The government withdrew a combined 51.3% of this sum in 2022 and 2023 ($US1.609 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 politician 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

Aubrey Norton, Dr Tara Singh, Leader, Mr. George Owusu, Oil Cash Transfers

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