‘Chokehold of oil on Guyana’s economy spells trouble for country’s climbing debt’- Former Finance Minister

Jan 21, 2025 News

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Kaieteur News-  While Guyana’s debt continues to rise, the country’s heavy reliance on the resources from oil to service its loan obligations is a cause for major concerns, Former Minister of Finance, Winston Jordan, has said.

He made the comments when he appeared as a guest on the People’s National Congress Reform programme, “Nation Watch” on Sunday. Using data comprised in this year’s National Budget, Jordan pointed out that the oil and gas sector contributes to an overwhelming portion of export earnings- well over 50%.

Comparing this to Guyana’s debt which now stands around US$6B, the former Finance Minister said there is no prudent management of the economy. “It can never (be prudent) and don’t matter what they say about economy is expanding, allowing room for borrowing and so on, listen, here is a fact- oil is dominating Guyana’s economy. In fact…in 2019 our merchandise export was US$1,567million of which oil (was) zero because oil had not yet come in,” Jordan said.

Guyana commenced oil production in December 2019 with the start-up of the Liza Destiny Floating Production Storage and Offloading (FPSO) vessel.  The former minister went on to point out, “In 2024, our merchandise exports was US$19,792 million of which oil was US$17,993 million, representing 91% of our merchandise exports. That is how oil has a chokehold on the economy- 91% in 2024!”

Jordan argued that while there is chatter about the growth in the non-oil sector and expenditure on agriculture and production output from bauxite, this year’s Budget projects exports at US$19,782 million of which oil is US$17,609 million or a massive 89%. To this end, he maintained, “The chokehold is there.” The country’s Gross Domestic Product (GDP) recorded 43.6% growth in 2024, with the non-oil economy also recording growth of 13.1%.  Meanwhile, GDP is projected to grow by 10.6% this year, with growth in the non-oil sector projected at 13.8% for 2025.

The former Finance Minister pointed out that the Opposition previously warned against a drop in oil prices, but this was disputed by Vice President Bharrat Jagdeo at a press conference. He however, noted that in this year’s Budget, the Finance Minister, Dr. Ashni Singh, has revealed that price for the commodity is expected to come down.

In his presentation, Dr. Singh said, “Crude oil prices are forecasted to decline by a further 10.9 per cent to US$71.9 per barrel, with global supply expected to exceed demand.”  Jordan believes that this predicted decrease in the price of oil could be greater than anticipated, should tensions calm in Gaza and the U.S administration manages to strike an agreement with Russia.

“Without these events, they have budgeted for a less price and therefore a less amount going into the Natural Resource Fund,” he stated. To this end, Jordan predicted that there will be “rainy days” ahead which could last a prolonged period.

Consequently, the former minister reasoned, “So if you now are spending out the money on dubious infrastructure – because that is what you are doing – you have put no infrastructure in place using this money, that adds value to anything that you are doing since 2020. You don’t have no value-added in sugar, you don’t have no value-added in bauxite, you don’t have no refinery refining gold, you got one in Suriname I believe but you have none here. You have no canning factory and you selling people dust in the dessert…”

On Monday, this newspaper reported that the GoG has grown the country’s debt by a significant US$4.2B between the period 2020 and 2024. In 2019, the country’s debt was US$1.8B; according to Annual Reports from the Bank of Guyana (BoG), the nation’s debt grew by 46.7% in 2020 to US$2.6B. In 2021, the debt surged to US$3.1B, and in 2022, this trend continued with the total stock of debt climbing to US$3.7B.

In 2023, debt increased further by 23.4% to US$4.5B while this grew to a massive US$6B at the end of 2024, as indicated by Dr. Ashni Singh last week. The Irfaan Ali-led administration has often touted the low GDP to debt service ratio, meaning that the country’s Gross Domestic Product (GDP) far outweighs the country’s annual payment repayment on loans.

It should be noted that the country’s growth GDP, while largely reflective of exports from the petroleum sector, is not the real value that the country received from the sector. For instance, Kaieteur News reported that exports from the oil and gas sector totalled US$18B, while Guyana only received US$2.6B in 2024 in the Natural Resource Fund (NRF).

(‘Chokehold of oil on Guyana’s economy spells trouble for country’s climbing debt’- Former Finance Minister)

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• chokehold, Debt, economy, Jordan, oil

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