MODELS OF EMPLOYING OIL REVENUES

Feb 04, 2024 Consumer Concerns, Features / Columnists, News, Waterfalls Magazine

By Pat Dial

Waterfalls Magazine – In the past, this column had considered the issue of how the Oil Revenues should be spent. The issue was one of the themes of the recent Budget Debate in Parliament and this fact together with the issue still being regarded as undecided by a body of local opinion, have constrained us to revisit it. If there is full national consensus on the issue, programmes of national development would be more focused.

There are two main models of utilizing the Oil Revenues which have been presented to the population by the intellectual community and the politicians: The first is rather simplistic and populist and advocates that the levels of social and economic budgetary spending remain as they were in 2018 or 2019 but with a slight increase in social spending. The main thrust would however be to distribute the Oil Revenue funds to every family, each being given one million dollars per month. It is envisaged that people would be able to buy whatever goods and services they wish and that the standard of living of the population would instantaneously be raised to almost First World standards. This model, though attractive to many people, is fraught with dangers: In the first place, the revenues would not be able to cover even the first year’s expenditure and it would be several years away that such expenditure could be possible. Even if it were possible, it would result in steep inflation with goods and services becoming more expensive and imports vastly expanding. With the regular large grants of money, the work force would be disinclined to work and the present industries of the country would eventually collapse, leaving the population dependent solely on Oil Revenues. When oil reserves become exhausted as they inevitably will be, or the world prices of oil fall or a country is unable to export oil, the population would fall into severe poverty and want as has happened to Venezuela, once one of the richest countries in the world.

The other model is to deploy the revenues into three areas: The first is to accumulate part of the revenue funds as a reserve for use of future generations; the second to spend money on social services; and the third is to spend on Economic Development other than oil. Since the Government of Guyana has already decided to employ the second model, it would be academic to discuss the second model in the abstract. Accordingly, we shall briefly attempt to describe and analyse how this second model is operating:

Every payment of oil revenue received is deposited in the main Reserve Bank in the United States with an interest rate of approximately 5%. All deposits are placed in a National Revenue Fund (NRF) and are publicized and made known to Parliament and all withdrawals and their use are subject to Parliamentary approval and must be publicised. Part of the deposit is always accumulated in the National Revenue Fund (NRF) for the benefit of future generations. The establishment of the NRF had been inspired by the example of Norway and guards against the misuse of funds and corruption.

The part of the oil revenues to be deployed on social services is mainly on the health services where new hospitals would be built, doctors and nurses trained, hospital equipment modernized and all drugs and even the most expensive procedures be available free to patients. Health Centres would be upgraded and spread more widely over the country. More funds would be deployed to the educational services including upgrading of schools with better equipment and training of teachers and building of new schools in districts where they were long needed.

Education at the University of Guyana would be free and thousands of online scholarships at foreign universities in a variety of disciplines supplement the University of Guyana’s offerings. Pensions and Public Service salaries and wages are being increased annually at levels which would ensure sustainability and grants are given to various categories such as school feeding, school uniforms, Caribbean examination fees, fishermen, social organizations, sports and on institutions such as museums and archives. And finally, house lots and houses are made available to the population at prices far below the market.

The third area on which the oil revenues are being deployed is on Economic Development. For two centuries, Guyana remained comparatively backward, since though it was blessed with abundant resources of many kinds, nothing could be done to convert these resources into valuable assets to uplift the quality and standard of life of the population simply because there was no capital to invest in so doing. With the oil revenues, the possibility of radical economic development is now possible and four or five Ministers of State have formed themselves into a vanguard of achieving this. The country’s infrastructure is being revolutionized – new roads are being built to connect the Coast with the Interior, farm to market roads are being constructed wherever needed and the village and city roads are being renewed. This new connectivity is giving the country a tighter unity and an immeasurable push to quicker economic development. Creation of really big industries is not possible because of the lack of sufficient power and the high cost of electricity. Sustained efforts are however made to stimulate small industries by training entrepreneurs, giving of loans and grants and exhibitions and fairs. The massive Gas-to-Shore and Hydropower projects will provide cheap and abundant electricity and allow for an industrial take-off within two years.

Agriculture has been the mainstay of the country’s economy until the Oil discoveries. The traditional sugar, rice, coconuts, ground provisions, vegetables, fish, dairy and chicken and meat animal farming are being upgraded by several inputs such as new agricultural machines and improved species of plants and animals. New crops such as corn, soya, millet and tropical wheat have shown promising results. There is a ready CARICOM market of over US$5 billion to absorb Guyana’s entire agricultural surplus. Guyana will avoid the ‘Dutch Disease’ or ‘Resource Curse’ and the policies it has been pursuing have been praised by informed opinion worldwide. In Guyana, however, there is a notable body of opinion which is advocating increases in the quantum of the grants and the revision of the Inflation figure which is claimed to be an underestimate and the State and policy makers should seriously analyse these complaints.

budgetary, CONSUMER CONCERNS, Economic, Oil revenues, population

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