Guyana’s oil bonanza is being squandered by poor economic management

May 14, 2025 Features / Columnists, Peeping Tom

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Peeping Tom…

Kaieteur News- Guyana today finds itself standing on a golden precipice. With a torrent of oil revenue flowing into the state’s coffers and GDP growth numbers that dazzle, one would think the country has struck the development motherlode.

But beneath this lies a disturbing reality: the management of Guyana’s economy, despite its promise, is slipping into the familiar abyss of short-sightedness, complacency, and institutional frailty. What could become a tale of sustainable transformation risks becoming yet another tale of squandered potential.

The International Monetary Fund (IMF), in its 2025 Article IV Consultation, offered plenty but measured praise. But it also pulled back the curtain on Guyana’s economic management failures.  Five glaring deficiencies—overheating risks, transparency gaps, monetary policy limitations, inefficiency in social spending, and a lack of fiscal anchoring—must be confronted if Guyana is to avoid replicating the tragic errors of other resource-rich nations.

First, there is the reckless flirtation with overheating. The IMF warns that Guyana’s fiscal expansion is outpacing its economic absorptive capacity. Public capital spending, now galloping ahead on the back of increased Natural Resource Fund (NRF) withdrawals, threatens to flood the non-oil economy with inflationary pressures. Already, wages are rising in double digits. Skills shortages are evident. Real estate prices are ballooning. Yet, the government barrels forward as if the laws of economics do not apply to Guyana.

The country’s leadership seems oblivious to the fact that throwing money at projects faster than the economy can handle is not a necessarily smart economics. But perhaps they do not know better.  This kind of excess breeds waste, bottlenecks, and eventually, backlash. It corrodes the competitiveness of the non-oil sector and undermines the very diversification that the government claims to be pursuing. The question is not whether Guyana is overheating—it is how badly it will crash if nothing changes.

Second, the persistent opacity of public finances and extractive sector management. The IMF’s polite phrasing—“there is scope to further enhance fiscal transparency”—masks a more troubling truth. The lack of transparency is of real concern. The public does not know enough, cannot see enough, and is asked to trust too much.

Guyana’s oil belongs to its people, not to a political elite or a coterie of technocrats. The lack of comprehensive, timely, and accessible data  and information  is in contradiction to democratic accountability. When decisions are made in shadows, corruption flourishes, inefficiency is shielded and development is derailed.

Third, a central bank without a compass. The Bank of Guyana is being asked to manage a macroeconomic transformation of historic proportions with outdated instruments and a shallow financial market. Its toolkit remains limited to reserve requirements and modest foreign exchange interventions. As capital inflows and domestic liquidity surge, the monetary authorities are struggling to keep up. The exchange rate is increasingly misaligned. The real economy is at risk of price spirals, and the central bank lacks the means to intervene decisively. This institutional fragility is not a technical glitch; it is a failure of statecraft. In an oil-rich economy undergoing structural transformation, a weak central bank is a recipe for volatility. Without stronger monetary tools and a more flexible exchange rate regime, Guyana is sowing the seeds of macroeconomic instability.

Fourth, the inefficiency and misdirection of social spending. A one-off cash transfer of GY$100,000 to all adults may seem generous. It is also wildly irresponsible. Blanket giveaways, absent targeting, exacerbate inequality, erode fiscal discipline, and produce negligible long-term benefit. The IMF diplomatically suggests that such measures be “integrated into a medium-term fiscal framework.” In reality, the cash grants represent an ad hoc approach to poverty alleviation that smacks of political expediency, not sound economic planning.

Guyana urgently needs a modern, data-driven, and targeted social protection system. But that will require household surveys, expenditure tracking, and policymaking rooted in evidence, not populism. The poor deserve more than token handouts—they deserve opportunities and a reliable safety net. Finally, the failure to commit to a fiscal anchor. Perhaps the most damning critique buried in the IMF report is the absence of a medium-term fiscal framework with a clear fiscal rule. This is not the first time that the IMF has raised this issue. The fact that it has to be repeated may suggest that the PPPC lacks the wherewithal to design such an anchor.

A fiscal anchor is a rule or set of rules that governments adopt to guide their spending, borrowing, and saving over time. It serves as a constraint on fiscal policy to ensure that public finances remain sustainable, even when revenues fluctuate—such as during commodity booms or busts. A well-designed fiscal anchor might limit the size of the deficit, cap public debt relative to GDP, or tie spending growth to long-term revenue expectations. In the case of resource-rich countries like Guyana, a fiscal anchor is especially critical. It prevents the temptation to overspend when oil prices are high and ensures that enough savings are preserved for future generations. It is a reflection of the pauperization of economic planning that the PPPC lacks both a depletion policy and a fiscal anchor.

While the government promises to eliminate the fiscal deficit by 2031, it does so without a legislated path, without binding constraints, and without operational targets. This leaves the door open to profligacy, opportunism, and ad hocism—precisely the behavior that squanders resource wealth. Guyana is not fated to fail. It has the wealth and the potential to prosper. But as the IMF’s measured warnings reveal, that future is far from guaranteed. Without urgent course correction, Guyana risks becoming the latest victim of the resource curse—a textbook case not of what oil can build, but of what bad governance can destroy. What Guyana needs is economic leadership. That leadership is lacking, and with it comes the risk of Guyana squandering its oil riches.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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