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Oil chokehold
Editorial…
Kaieteur News- The PPPC Government and its leaders go to great lengths to emphasize how Guyana is a diversified economy. Someone is either playing the fool, or trying to fool Guyanese, with that stretch of how local circumstances are. It is that they are burying their heads in the sand, feigning ignorance. Oil is the driving force behind Guyana’s economic numbers, and everybody knows that across the globe. Yet, there is this pretense that Guyana is a diversified economy. As circumstances emphasize, oil now has a chokehold and controlling presence in this country’s life, including its political, social and, most of all, economic arenas. This causes much concern, especially with a government leadership that has made borrowing the spearhead of its economic visions and practices.
Oil prices take a dip, a small one in the 10% range, and everything changes in this country. It doesn’t grind to a halt, with economic slowdown adding to the fears of citizens. But it changes many things, and the ways certain actions of the government have been taken as the norm, nothing to worry about. Annual national budgets, which have been on a record creating spree, would be among the first areas that feel the pressure of constriction. The rich stream of borrowings from countries and financial institutions all too willing to lend huge sums to Guyana will not seize up, but will have to slow down and take a breath. Debt serving the huge amount that has to be prioritized to repay interest and principal on loans, cannot be wished away, but must continue, notwithstanding changed local circumstances.
Debt serving is then a huge strain on the economy, and all those billions of American dollars borrowed so irresponsibly and hastily transform into a nasty hangover that will not go away quickly nor easily. The US$6B debt binge then comes back to torment. Part of the problem is that ordinary citizens feel the squeeze of changing oil circumstances the most, are the ones who pay the stiffest prices. With oil now having such a dominant presence in Guyana’s economy, over 50% of export earnings, any downward and sustained blip in the oil markets could wreak havoc in this country. The first thing that governments then talk about is how they have to cutback, how expectations have to be tamped down. When oil prices were up and the money was flowing into the Natural Resource Fund (NRF) in New York, the poor in Guyana did not get anywhere near to a fair nor full taste of their massive wealth. But when oil prices go down, the people are the first candidates to feel its hammer blows.
The fat cats have already had their fat share to cushion them. The mass of citizens, who were left out of the celebrations are then left to carry the load. The PPPC Government loves to highlight about there being no new taxes. What is not given as much exposure is how much they are recklessly and hardheadedly taking on as debt. Oil and its price levels are what serve as the rich collateral that induces lender countries and lending institutions to lend Guyana what it asks for, and to remind this country’s debt-addicted leaders to come back for more, which will be readily approved. In contrast, when the oil markets undergo a correction, then the debt spigot tightens, and the lenders wait to be repaid. They may be sympathetic, but they are not forgiving. With less money flowing into the treasury, this is when debt serving changes into the beginning of a long nightmare. At the end of 2024, debt serving charges totaled US$196.1M, (almost a billion Guyana dollars) which is not an insignificant amount for a country like Guyana trying to make poverty for its people a thing of the past.
Guyana could find itself trapped in the jaws of tightening circumstances. Borrowing is harder, with the rates higher, and repayment terms harder. Less money goes into the NRF, less can be withdrawn from it, since so much already drained from it by this PPPC Government. For emphasis, with oil’s chokehold on Guyana’s economy, one small price drop and big ripples are felt everywhere. Ordinary citizens feel the shockwaves the most.
(Oil chokehold)
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