Where Is Guyana’s Oil Money Going?

Jan 26, 2025 Features / Columnists, News, Waterfalls Magazine

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Talking Dollars & Making Sense…

By Rennie Parris

Kaieteur News-Welcome back to Talking Dollars & Making Sense. Today, we’re diving into the pressing question: Where is Guyana’s oil money going? Over the past five years, Guyana has earned US$6.5 billion from oil revenues, but the country could have received US$13 billion if the 2016 Petroleum Agreement had been more balanced. Let’s unpack where the money has gone, how it’s been managed, and whether it’s being used effectively for national development.

How Much Money Are We Talking About?

From 2020 to 2024, Guyana’s total capital into the Natural Resource Fund (NRF) were approximately US$6.5 billion, including US$246 million from investment income. Over the last three years, about 50% of these funds—or US$3.2 billion—has been spent by the government. However, despite this significant expenditure, it’s challenging to identify a single major national development project directly funded by these resources. So, where has all that money gone?

The Gas to Energy Project: A Case Study

One potential use of the NRF funds could have been the Gas to Energy project, a transformative initiative that could reduce electricity costs and boost industrial activity. The US$527 million loan provided by Exim Bank is funding part of this project; however, there’s no explicit allocation from the NRF to cover the rest of the project. This raises serious questions about how the NRF is being utilized.

Funding Other National Projects

Looking at other significant development projects, it becomes evident that loans, rather than NRF funds, are financing them. Here are some examples:

• New Demerara Bridge: US$260 million loan from China.
• Linden-Soesdyke Highway: US$200 million loan from the Islamic Development Bank.
• Wismar-Mackenzie Bridge: US$50 million from the Saudi Fund for Development (SFD).
• Housing Sector Project: US$100 million loan from SFD.
• Phase 2 of East Coast Road Project: US$192 million loan from China.
• East Bank-East Coast Demerara Road Linkage: US$50 million loan from India.
• Linden-Mabura Road Project: US$112 million loan from the Caribbean Development Bank.
• Paediatric and Maternity Hospital: US$165 million loan from UK Export Finance
• Strengthen Healthcare Network: US$97 million loan from Inter-American Development Bank (IDB)

Together, these loans amount to about US$1.8 billion. If loans are funding these vital projects, what exactly is the NRF money being used for?

What Does the NRF Act 2021 Say?

The NRF Act 2021, specifically Section 16(2), mandates that withdrawals from the fund must be for national development priorities identified in the annual budget and approved by Parliament. This provision ensures that spending aligns with strategic goals and is transparent. However, the lack of clarity about how US$3.2 billion has been allocated suggests a deviation from this requirement. Public trust depends on clear, tangible outcomes that align with the law’s intent.

Another issue that complicates transparency is the commingling of NRF funds with other inflows, such as tax revenue, into the nation’s consolidated fund. This practice makes it virtually impossible to determine what the NRF funds are specifically funding, which directly violates Section 9(f) of the NRF Act 2021. The Act emphasizes the need for clear and identifiable use of these funds to ensure they are used for the benefit of all Guyanese. Without this clarity, the purpose of the NRF is undermined, raising serious concerns about fiscal accountability.

Investment Returns: Falling Short

Let’s also look at the NRF’s investment returns. Section 9(f) of the NRF Act requires a real investment return in US dollars of 3% annually. Yet, over the past five years, the fund’s average nominal return was 2.3%. After accounting for U.S. inflation—3.6% as measured by the Personal Consumption Expenditures (PCE) price index—the real return was -1.3%. Falling 4.3% short of the required rate indicates poor financial management that could erode the fund’s value over time. Additionally, Section 23(2) of the Act limits the NRF’s investment options to bank deposits if the fund’s balance is less than three times the amount the government withdraws annually. Although the fund’s balance exceeds US$500 million, its size relative to government withdrawals restricts it to low-yield bank deposits. At this pace, the NRF is unlikely to diversify into higher-yield investments until 2030, further compounding the issue of low returns.

The Bigger Picture

Guyana’s oil revenue has immense potential to transform the country, but only if managed wisely. Transparency, accountability, and strategic investments are essential to ensure these funds benefit all Guyanese. Adhering to the NRF Act’s provisions is crucial to achieving this vision.

Looking Ahead

In the upcoming columns, I’ll unveil my Comprehensive National Development Plan for inclusive, long-term growth.

Feel free to share your thoughts, questions, or suggestions by reaching out to [email protected]. Let’s continue this important conversation together.

Until next time, let’s keep Talking Dollars & Making Sense.

(Where Is Guyana’s Oil Money Going?)

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• Gas-to-Energy project, Guyana’s oil money, Natural Resource Fund, Rennie Parris

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